Commodity Market: Gold set for second weekly gain due to growing inflation concerns

Spot Gold eased on Friday as the US Dollar advanced to highs not seen since July 2020. Still, the yellow metal looked set to register its second straight week of gains, since concerns over rising US CPI inflation added to Gold’s appeal as an inflation hedge.

US consumer prices rose at an annual rate of 6.2% last month, which has been the sharpest rate of increase in 30 years. The data prompted market players to increase bets that the Federal Reserve will hike interest rates sooner than anticipated.

“Until supply chains open up, there’s going to be continued price pressure and this should support gold,” Stephen Innes, managing partner at SPI Asset Management, was quoted as saying by Reuters.

“Gold prices can rise for a while as prolonged supply chain issues might lead to longer-lasting inflation, and interest rate hikes may not keep pace with it,” Innes added.

A cycle of rate hikes should drive Gold prices down, as higher interest rates also increase the precious metal’s opportunity cost.

As of 9:50 GMT on Friday Spot Gold was edging down 0.45% to trade at $1,853.58 per troy ounce. Earlier this week the metal rose as high as $1,868.63 per troy ounce, which has been its strongest price level since June 15th ($1,869.20).

The commodity looked set to register its second consecutive week of gains, while being up 1.97%. The precious metal has risen 3.95% so far in November, following another 1.50% surge in October.

Meanwhile, Gold futures for delivery in December were edging down 0.46% on the day to trade at $1,855.40 per troy ounce, while Silver futures for delivery in December were down 0.94% to trade at $25.062 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.06% to 95.095 on Friday. Earlier in the trading session the DXY went up as high as 95.265, which has been its strongest level since July 22nd 2020 (95.412).

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of November 12th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on December 14th-15th, or unchanged compared to November 11th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,856.98
R1 – $1,871.00
R2 – $1,880.05
R3 – $1,894.08
R4 – $1,908.10

S1 – $1,847.93
S2 – $1,833.90
S3 – $1,824.85
S4 – $1,815.80