Gold Price Forecast: October CPI figures erase some downward potential in XAU/USD – SocGen

Gold price rose 3.9% in the week ending 15 November 2022 after the US Consumer Price Index report came softer than expected. This alleviated downside pressure on the yellow metal, strategists at Société Générale report. 

Money managers turned net long

“One which showed spectacular activity was Gold, with a $7.4bn bullish flow. This was mainly driven by a $6.1bn short covering on the bullion’s future contracts, the largest seen for Gold since data started being aggregated in 2006.”

“Flows reacted to the 10 November release of US YoY core CPI figures for the month of October, which were lower than the market had previously anticipated. Although lower inflation would traditionally be bearish for Gold, market sentiment seems to have focused on the prospect of slower US Fed interest rate hikes or an earlier pivot towards dovish policies which, if tamed faster than inflation decreases, would lower real rates. 

“The 10y US real rates dropped 19.5 bps to 1.44% in the week to 15 November. The latter would be bullish for the non-interest rate generating precious metal as it increases its appeal compared to treasury notes.”