After months of gradual regression, the gold price regained $US85 last week amid signs of cooling US inflation.
According to the World Gold Council (WGC), spot gold was trading at $US1759 ($2624) per ounce (oz) on November 11, which is markedly higher than the $US1674 ($2497)/oz price on November 4.
As inflation prospects improved in the US, this bolstered bets that the Federal Reserve would be less hawkish on interest rate increases going forward.
While inflation is still higher than normal, there are indications it could be turning a corner. The US consumer price index (CPI) slowed to a 7.7 per cent gain in the year through October, down from the 8.2 per cent gain recorded in the year through September.
This is the lowest CPI gain since January, when a 7.5 per cent rise was recorded across the year prior. The CPI recently peaked at 9.1 per cent in the year through June.
The softer CPI figures coincided with a new two-month low for the US dollar, further supporting the dollar-denominated gold.
“Yesterday’s weaker than expected CPI number has shifted the narrative when it comes to yields, along with the notable shift we’ve seen from recent Fed speakers,” Michael Hewson, chief market analyst at CMC Markets UK, told Reuters.
“Along with a technical break above the October highs, the likelihood of gold reaching $US1800 has become much more likely.”
Some analysts have posited outflows from Bitcoin into gold, after the cryptocurrency plummeted from above $US20,000 to below $US16,000 last week.
“There’s no hard data to corroborate fund flows from crypto into gold now but I’d be surprised if that isn’t happening,” Phillip Streible, chief market strategist at Blue Line Futures in Chicago, said.
“Normally, it’s the other way round as gold seldom finds love from the crypto crowd. But gold looks relatively safer now than digital currencies and imagine it has gained new respect that could mean higher allocations that may have been meant for crypto.”