Softer-than-expected US inflation triggered a sell-off in the US Dollar, helping Gold prices to recover. That is unlikely to last, in the opinion of economists at ANZ Bank.

Fed rate hikes hang over Gold

“The recent Gold price rally was triggered by softer-than-expected US inflation for October. However, we believe the market reaction to the latest inflation print was exaggerated as inflation remains near 7.7%, which is well above the central bank’s target of 2%. Further, the month-on-month increase was still 0.4% for both September and October.” 

“It is not enough for the Fed to be confident that inflation is on track to move back to 2% sustainably. Any hawkish comments from the Fed could reverse the recent bullish move in XAU/USD.” 

“Retreating inflation and rising rates until early 2023 would keep real rates rising, leaving the backdrop challenging for non-yielding Gold.”