In his speech yesterday, ECB President Mario Draghi emphasized the regulator’s intention to keep interest rates low: on the one hand, this factor provides fundamental support to gold prices, and on the other, puts pressure on them .
Lack of tough action from the ECB contributes to lower yields on alternative low-risk investments (such as Eurobonds), but also weakens the euro, which plays into the hands of the dollar and negatively affects gold. The US PPI rose 0.4% in September versus August, indicating accelerating inflation and supporting the Fed’s intention to raise rates this year.
Today investors will expect the release of data on retail sales and consumer inflation in the US in September (at 15:30 Moscow time). In the opinion of our analysts on foreign exchange markets, some support for the dollar may be provided by the expected by market participants a rise in annual inflation to 2.3%. The market also expects core inflation to accelerate to 1.8%.
We believe that gold is likely to continue trading near $ 1,295 / oz due to political uncertainty in the US: health care reform and recently proposed tax restructuring measures continue to face various obstacles.
In addition, it is highly likely that US President Donald Trump will today refuse to support an international agreement to suspend Iran’s nuclear program, which will increase geopolitical uncertainty, said Mikhail Scheibe of Sberbank Investment Research.