Gold Resumes Rise as 3 Factors Support Forecasts Above $4,100

Gold prices returned to gains after three consecutive sessions of declines, as spot prices rose more than 1% in trading on October 15 and continued to consolidate near their high levels the following day. Analysts attribute this rebound mainly to the rapid slowdown in US rate hike expectations.

US inflation data had initially boosted rate hike bets this month, after the producer price index in September recorded its largest increase in four and a half years, and the consumer price index rose driven by gasoline prices. However, cautious remarks from the President of the San Francisco Federal Reserve and the Vice Chair for Supervision indicated no need for immediate action, quickly shifting the outlook. Data from the CME Group's FedWatch Tool shows that the probability of a rate hike this month stands at about 29%, while the probability of keeping rates unchanged rose to about 73%.

A weaker dollar also helped support gold, as the US Dollar Index pulled back from its 18-month highs to around 101.98, while the yield on the 10-year US Treasury note fell by more than 10 basis points to 5.089%, its lowest level since late September. A decline in semiconductor stocks led to capital flows into US Treasuries seeking safety, at a time when geopolitical tensions remain an additional support for safe-haven assets.

An analysis published on the Xinhua Finance platform concluded that short-term bullish momentum is currently prevailing. Wang Shenghao, senior analyst at Zhongzhou Futures, believes gold could consolidate its gains above $4,100 per ounce if dollar pressure persists and bond yields decline, while warning of a potential correction if inflation data exceeds expectations or if the Federal Reserve leans hawkish.

What Do These Terms Mean?

Basis Points: A small unit of measurement for interest rates or yields, where every 100 basis points equal 1%. They are used because interest rate changes are often too small to measure directly in percentages.

Dollar Index: An index measuring the value of the US dollar against a basket of major currencies; its decline makes gold cheaper for holders of other currencies.

FedWatch Tool: A tool by the Chicago Mercantile Exchange based on futures prices to estimate the probabilities of rate decisions at Federal Reserve meetings.

Futures Contracts: An agreement to buy or sell a commodity at an agreed price today for execution at a later date, used by investors for hedging or speculation.