- US Dollar weakens following Q4 US Employment Cost Index.
- Data points to more evidence of a slow down in inflation.
- XAU/USD erases daily losses with a rebound of more than $10.
Gold prices bounced sharply higher following the release of US labor costs data for the fourth quarter. More evidence of a slowdown in inflation pushed US yields to the downside and Wall Street to the upside, weakening the greenback.
The Employment Cost Index (ECI) rose 1% in the fourth quarter, below the 1.1% of market consensus and marked the third consecutive slowdown. Still the index is up by 4% compared to a year ago. The evidence of an improvement in the inflation outlook boosted US yields ahead of Wednesday’s FOMC decision.
Still the numbers are high, suggesting that inflation is still not consistent with Fed’s target. “Even as supply chain pressures ease, commodity prices cool and housing costs temper, we think the FOMC still wants to see a bit more slowing in wage growth before the Committee feels confident inflation is firmly headed to 2% over the medium term”, said analysts at Wells Fargo.
The greenback tumbled after the report and also did Treasuries, boosting gold. Also equity and crude oil price rose. XAU/USD erased all losses and it is hovering around daily highs at $1,927.
Earlier on Tuesday, gold bottomed at $1,900 a critical support. Now price is back above the $1,920 zone, another relevant technical area. If it remains above, a test of $1,935 will be on the cards.
Technical levels
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD clings to strong daily gains near 1.0900
EUR/USD trades at its strongest level since mid-October near 1.0900 after starting the week with a bullish gap. The uncertainty surrounding the US election outcome weighs on the US Dollar and helps the pair continue to push higher.
GBP/USD holds above 1.2950 as USD stays under pressure
GBP/USD stays in positive territory above 1.2950 after failing to clear 1.3000 earlier in the day. Heading into the US presidential election, the 10-year US Treasury bond yield is down more than 2% on the day, weighing on the USD and allowing the pair to hold its ground.
Gold treads water below $2,750 amid US election uncertainty
Gold price is on the defensive below $2,750 in European trading on Monday, erasing the early gains. The downside, however, appears elusive amid the US presidential election risks and the ongoing Middle East geopolitical tensions.
Three fundamentals for the week: Toss up US election, BoE and Fed promise a roller coaster week Premium
Harris or Trump? The world is anxious to know the result of the November 5 vote – and may have to wait long hours for the outcome. Markets will also respond to the composition of Congress. The Bank of England and the Federal Reserve will enter the fray afterward.
US presidential election outcome: What could it mean for the US Dollar? Premium
The US Dollar has regained lost momentum against its six major rivals at the beginning of the final quarter of 2024, as tensions mount ahead of the highly anticipated United States Presidential election due on November 5.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.