Gold Prices Surge Amid Weak U.S. Job Data and Middle East Tensions
On Thursday (October 10), despite U.S. Consumer Price Index (CPI) data coming in slightly higher than expected, poor performance in initial jobless claims led to a sharp decline in the dollar index, which drove gold prices higher. Spot gold experienced significant fluctuations, ultimately closing up $22.13, or 0.85%, at $2,629.84 per ounce. Ongoing tensions in the Middle East further contributed to safe-haven buying, boosting gold's rally.
Following the release of U.S. economic data, traders increased their bets on a 25 basis point rate cut by the Federal Reserve in November, providing additional support for gold's gains. The CME's "Fed Watch" tool now places an 80% probability on a rate cut next month, up from 76% before the latest economic data.
FXStreet analyst Christian Borjon Valencia noted that while U.S. inflation was slightly higher than expected in September, it was offset by weak employment data. The Department of Labor reported that initial jobless claims rose to 258,000 in the week ending October 5, the highest level in over a year, reflecting a weakening labor market.
The September CPI rose 2.4% year-on-year, surpassing the expected 2.3% increase. Core CPI also increased 3.3% year-on-year, up from August's 3.2%. Despite inflation exceeding forecasts, analysts such as Pepperstone's Michael Brown believe that the data is unlikely to significantly alter the Federal Open Market Committee's policy outlook.
Spot gold rebounded after six consecutive sessions of losses, benefiting from the weakening dollar. Gold has become a preferred investment in a rate-cutting environment, as it does not bear interest and is seen as a safe-haven asset. Alex Ebkarian, chief operating officer of Allegiance Gold, commented that while the CPI data was unsurprising, the weak employment figures increased the likelihood of a rate cut, which supported gold prices.
Analyst Carlo Alberto De Casa from Kinesis Money also pointed to expectations of a Fed rate cut and ongoing geopolitical tensions as factors likely to support gold in the long term. Meanwhile, FXStreet's Christian Borjon Valencia indicated that gold prices resumed an upward trend after falling to a one-week low of $2,603 per ounce. However, gold must overcome resistance at $2,653 per ounce to challenge the year-to-date high of $2,685 per ounce.
In addition to the economic data, geopolitical developments in the Middle East added to the bullish sentiment for gold. Reports from Axios suggested that U.S. President Joe Biden and Israeli Prime Minister Benjamin Netanyahu are nearing an agreement on the scope of Israel's planned retaliation against Iran. The Biden administration has acknowledged Israel's plans for a major attack on Iran, though concerns remain that certain actions could dramatically escalate the regional conflict.
Looking ahead, gold traders are focusing on the U.S. Producer Price Index (PPI) and the University of Michigan Consumer Confidence Index, both due out on Friday. The upcoming data could provide further direction for gold prices, depending on the strength of inflation and consumer sentiment indicators.
