Summary of this article
MCX gold futures gained 1.29 per cent to Rs 1,44,400
Lower crude oil prices eased inflation concerns and supported gold
US CPI and PPI data could influence the Fed's December decision
Gold prices rose more than one per cent on November 9 as falling crude oil prices eased inflation concerns. Investors are now awaiting key US inflation data this week to gauge the US Federal Reserve's interest-rate trajectory.
On the Multi Commodity Exchange (MCX), December gold futures gained as much as Rs 1,848, or 1.29 per cent, to hit Rs 1,44,400 per 10 grams.
In the international market, December gold futures on COMEX climbed as much as $68.40, or 1.68 per cent, to $4,143.30 per ounce.
Crude oil prices declined after US President Donald Trump said on Sunday, November 8, that he was highly unlikely to order further attacks on Iran as discussions to end the conflict continued. The comments eased fears of potential disruptions to global oil supplies.
Brent crude oil futures, as of 11:30 AM, traded at $97.39 per barrel, down by nearly a per cent.
Trump had indicated the possibility of renewed attacks on Iran after last week's US midterm elections. However, there has been no indication of a large-scale US military operation so far. Iran, on its part, has warned that it would retaliate by targeting US and Israeli interests.
Lower crude oil prices can help bring down inflation by reducing energy costs. This may reduce the need for central banks to keep interest rates high, making gold a more attractive investment. Gold does not offer any regular income. Its appeal tends to improve when interest rates fall, or expectations of future rate hikes weaken, as the opportunity cost of holding the precious metal declines.
US Inflation Data, Fed Rate Decision In Focus
Meanwhile, US labour market data showed that job growth accelerated in October while the unemployment rate declined to 4.10 per cent. This indicates that the job market remains strong and has raised expectations of another interest-rate hike by the Federal Reserve in December.
According to the CME FedWatch tool, traders are pricing in an 81 per cent probability of a rate hike in December, as against 71 per cent before the release of the payrolls data.
The focus has now shifted to the US Consumer Price Index (CPI) data scheduled for November 10 and the Producer Price Index (PPI) reading due on November 13. Both releases could influence expectations around the Fed's monetary policy.
Stronger-than-expected inflation readings could strengthen the US dollar and increase the likelihood of a December rate hike. This may put pressure on gold prices by raising the opportunity cost of holding the non-yielding asset.
A softer inflation reading, on the other hand, could ease rate concerns and provide further support to bullion.
