HG MARKETS:

The price of gold (XAU/USD) has been struggling to gain momentum, trading around $2,570 on Friday, after hitting a two-month low in the previous session. The ongoing selling pressure on gold is primarily driven by a strong US Dollar, which has increased the cost of gold for investors holding other currencies. A stronger dollar typically makes gold less attractive because it becomes more expensive in other currencies and yields better returns in US-denominated assets, such as government bonds. Additionally, there is growing uncertainty about the Federal Reserve’s (Fed) future monetary policy, particularly regarding the pace of interest rate reductions.

Another key factor affecting gold’s price is the market’s expectation of inflation. There is a growing expectation that inflation could rise next year, partly due to policies associated with President Donald Trump. This has led to expectations that the Federal Reserve might not cut interest rates as aggressively as previously anticipated. Higher interest rates generally reduce the appeal of gold, as investors seek assets that offer returns, such as bonds or savings accounts, rather than holding gold, which does not produce any income.

However, geopolitical risks such as the escalating tensions in the Middle East and the ongoing conflict between Ukraine and Russia are providing some support for gold. Gold has long been considered a safe-haven asset, meaning that in times of political or economic instability, investors often turn to gold as a store of value. The growing uncertainty in global affairs has the potential to drive more demand for gold, as investors seek refuge from the volatility of traditional financial markets

Looking ahead, investors will be closely monitoring several key economic reports later in the day. The US Retail Sales data for October will provide insights into consumer spending, which is a crucial driver of economic activity. A strong retail sales number could signal that the economy is doing well, potentially encouraging the Fed to raise interest rates further. Conversely, weak retail sales might suggest a slowdown, which could reduce the likelihood of rate hikes. These reports are important because they give a snapshot of the health of the manufacturing sector, and any significant deviation from expectations could influence market sentiment regarding the broader economy.

 Furthermore, speeches from Federal Reserve officials Susan Collins and John Williams will be watched closely for any signals about the Fed’s future policy stance. Any comments regarding inflation, interest rates, or economic growth could provide important clues about where the central bank is heading and, in turn, impact gold prices.