Gold prices have spiked sharply higher following the release of the latest US consumer price index (CPI) data.
Spot gold traded at $1,947.03 per ounce before the numbers were released, but has since jumped to $1,961.50 by 14:26 GMT as investors responded to the news.
The dollar index is down just shy of 1% at 104.55.
October’s CPI came in below expectations on both a month-over-month and year-over-year basis. The core readings were also cooler than anticipated.
This has dramatically shifted expectations about the Federal Reserve’s next move. The probability of the Fed leaving rates unchanged at its December meeting is now nearly 100%, up from around 86% prior to the data.
There is now only a 0.5% chance of a 25 basis point rate cut in December, down from just under 100% beforehand.
Looking ahead, futures markets are now pricing in a bias for the first 25 basis point cut to come in May rather than June.
According to Thomas Hayes, chairman of the hedge fund Great Hill Capital, the Fed is done. He commented, “We’re happy to see both headline and core CPI come in lower than expected. It’s telling us that the Fed is done; there’s nothing left for it to do here.”
Daniel Ghali, a commodity strategist at TD Securities, said the lower-than-expected CPI data is positive news for precious metals like gold. Ghali believes further weakening of inflation data over the remainder of 2023 could undermine the US dollar.
Looking ahead, Ghali sees potential for significant gold price increases if these conditions materialise. He predicts prices could reach around $2,100 per ounce within six months