After an impressive October, the precious metal backtracked this month. However the decline was contained by the 38.2% Fibonacci of the October surge, with the help of this week's soft CPI report. Headline inflation eased to 3.2% y/y and Core ticked down to 4% y/y, in what is the smallest increase in two years. This cooldown reinforced optimism that the Fed wil refrain from further rate hikes. XAU/USD is at the driver's seat with the ability to tackle the October highs (2,009), although the next major resistance (2,080) is distant.
On the other hand, the Fed can't declare victory over inflation yet, as it remains high and far from the 2% target. At the same time, labor market remains tight despite coming into better balance and the economy is generally strong. As such, policymakers may need to do more to restore price stability and in any case, they have stressed the need for sustained restrictive stance. As such, there is scope for downward pressure, but strong catalyst would be required for closes below the 38.2% Fibonacci that could negate the bullish bias and open the door to further losses towards and beyond 1,884.
Senior Financial Editorial Writer
Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.
With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.