Gold bounces back above $4,150 — but is the $4,000 floor safe?

Gold recovered most of Wednesday’s CPI losses overnight. Spot gold rose 1.3% to $4,158.63 an ounce by 02:57 GMT on Thursday, according to a Reuters report carried by CNBC, bouncing from a one-week low as the dollar slipped from an 18-month peak. US gold futures for December were up 1.8% at $4,180, silver rose 1.1% to $56.26, platinum 0.3% to $1,611.15 and palladium 1.3% to $1,107.83.

Two Fed voices cool October fears

Wednesday’s hot inflation report — covered in Hot CPI, hot yields, cold metals — had sharply raised the odds of a rate hike at the Fed’s 27–28 October meeting. Two officials pushed back overnight:

• Mary Daly, president of the San Francisco Fed, said the Fed will probably need to raise rates further, Reuters reports, but signalled no need for a hike at the October meeting.
• Michelle Bowman, the Fed’s Vice Chair for Supervision, said there is time to wait and see before any more action.

The odds moved accordingly. CME FedWatch put the chance of an October hike at about 22% before the CPI data; Kitco and FXStreet reported it near 40% straight after. By 02:57 GMT on Thursday, after Daly and Bowman had spoken, Reuters had it at about 27%.

Neither said the hiking was over. What they did was push the next move out to December or later — and for gold, which competes with interest-bearing assets, a later hike is better than an earlier one.

Is $4,000 safe?

Kyle Rodda of Capital.com, quoted by Reuters, put it plainly: “We’re coming up to a really critical level for gold, which is just below the $4,000 level.” If the data stay strong, he added, the Fed may have to hike relatively urgently. It is the same line other analysts have watched for weeks: FXStreet’s trendline support near $4,001, Trade Nation’s major support around $4,000, and FXEmpire’s warning that a break below $4,100 risks $4,000 — see the CPI trade map. Wednesday’s selloff took gold below $4,100, the first of those levels, before Thursday’s bounce. Whether the floor holds next time is not something we predict.

What comes next

• Today, 12:30 GMT: US producer prices (PPI) and retail sales for September. A hot PPI would suggest more inflation is coming through the pipeline; strong retail sales would suggest the economy can take higher rates. Either would add to hike pressure. Soft numbers would do the reverse.
• Friday, 03:30 GMT: Fed Chair Kevin Warsh speaks at the IMF meetings in Bangkok.

For the current figure, see the live gold price.

Every figure here is as reported by the publications listed under Sources, at the time they reported it. Prices move; the live gold price has the current one. Nothing on this page is investment advice.