Gold Price Rises to New Daily High Amid Weaker Risk Appetite, Upside Appears Capped

Gold prices have seen an uptick, reaching a new daily high as a cautious mood in the market tempers risk appetite, suggesting a limited potential for further increases. On Thursday, gold (XAU/USD) halted its pullback from highs around the $1,975-1.976 mark seen earlier in the week. Weaker U.S. equity futures have been contributing to the metal’s allure, with the perception that the Federal Reserve may have concluded its interest rate hikes adding to its appeal.

Concurrently, the U.S. Dollar’s recovery, spurred by lower-than-expected U.S. consumer inflation figures, may curb gold’s upward trajectory. Despite retail sales in the U.S. dropping for the first time in seven months in October, the decrease was less severe than forecasted, and a revision of September’s figures indicated stronger performance, which in turn spurred a rebound in U.S. Treasury bond yields, offering the Dollar some support.

Market dynamics continue to be influenced by various economic indicators. The U.S. Producer Price Index (PPI) saw its most significant drop since April 2020, falling by 0.5% in October, with revisions also showing a smaller increase for September than initially reported. Additionally, the Consumer Price Index (CPI) report revealed a faster cooling of inflation than expected, reinforcing the belief that the Fed’s rate hikes might be over.

Fed President Mary Daly’s comments to the Financial Times highlighted the uncertainty surrounding the central bank’s inflation control measures. This uncertainty muddies the timeline for potential rate cuts by the Fed, which is viewed as a factor that could restrain significant gains for gold.

Investors are now anticipating the U.S. economic docket, which includes Weekly Initial Jobless Claims, the Philly Fed Manufacturing Index, and Industrial Production figures, for new directional cues. Upcoming speeches by key Fed officials will also be closely watched for insights into the near-term policy direction, potentially impacting short-term trading strategies for gold.