Gold Futures Set to Reach Highest Level in a Week

Gold futures are on an upward trajectory as the U.S. dollar and Treasury yields experience a decline following the release of data indicating that the cost of living remained unchanged in October.

Rising Gold Prices

Gold for December delivery on Comex is currently up by $20.90, or 1.1%, reaching $1,971.10 per ounce. If the settlement reaches this level, it would mark the highest for a most-active contract since November 7th, according to FactSet data.

Impact of U.S. Consumer Price Index

The U.S. consumer price index has had a significant impact on rate-rise bets in the Treasury bonds and Fed Funds futures market. Adrian Ash, Director of Research at BullionVault, stated that the reading has “crushed what was left of any rate-rise betting.” Consequently, this has led to a drop in the dollar’s value in the foreign exchange market and an increase in gold prices.

U.S. Inflation Remains Flat

In October, U.S. inflation remained flat due to a 5.3% decrease in gasoline prices. Economists originally predicted a 0.1% increase in the consumer price index.

Dollar and Treasury Yield Decline

Lower inflation rates have resulted in a decline in the dollar and Treasury yields. The ICE U.S. Dollar Index is currently down 1.1%, while the yield on the 10-year Treasury has fallen from 4.631% to 4.456%.

Weakening Dollar Strengthens Gold Prospects

The weakening dollar reduces the opportunity costs for investors considering investing in gold as it becomes a more attractive option compared to other perceived havens. Additionally, lower yields boost gold’s prospects against government bonds.

Anticipated Rate Cuts

The next step for the U.S. Federal Reserve appears to be rate cuts. This move is expected to have a domino effect, influencing the Bank of England and the European Central Bank to follow suit. This development is likely to support the ongoing upward trend in gold as long-term investors find the opportunity cost of holding gold decrease alongside the financing cost for speculative traders.