October 14, 2022 02:29 AM ET
By: AnalysisWatch
Gold (XAU/USD) is rallying to reach a new daily high of $1,670, continuing its recovery from the previous day's two-week low, as global markets are cautiously optimistic ahead of Friday's key U.S. consumer data. Also favorable for metals prices could be the recent decline in U.S. government bond yields and the lack of negative news in Asia.
Ten-year government bond yields in the United States remained at their highest levels since October 2008 late Thursday, while two- and 30-year bond coupons were also down from multi-year highs at the time of publication. In addition, S&P 500 futures and Asia-Pacific stocks are following Wall Street's gains.
The moves could be due to the rejection of higher interest rates by Asian policymakers, particularly in Japan and China, as well as hopes for further stimulus from Beijing and London. The fact that the U.S. dollar was unable to defend the bull market in the face of lower Treasury yields may also have had a positive impact on market sentiment and the XAU/USD.
It is worth noting that markets had fully priced in the Fed's 75bp rate hike, and the same could be interpreted as no great welcome for the 100bp rate hike in the next meeting, which in turn could sink the DXY amid the "buy the news, sell the fact" pattern.
Looking ahead, risk catalysts will be critical for XAU/USD traders to identify fresh momentum ahead of September U.S. retail sales, preliminary Michigan Consumer Sentiment Index (CSI) results, and October University of Michigan (UoM) 5-year consumer inflation expectations.
Given the market's surprising reaction to the positive U.S. inflation data, the scheduled U.S. consumer-oriented numbers will be traded with caution.
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