Gold surges to new 20-day highs near $1210 as data and Trump weigh on USD

  • Annual core CPI stays unchanged at 2.2% in September in the U.S.
  • Pres. Trump continues to criticize Fed's monetary policy.
  • US Dollar Index finds support near 95.

The XAU/USD pair gained traction in the last hour and advanced to its highest level since September 21 near $1210. As of writing, the troy ounce of the precious metal was adding $14, or 1.25%, on the day while trading at $1209.

According to the monthly inflation report released by the U.S. Bureau of Labor Statistics, the core-CPI, which excludes volatile food and energy prices, rose 2.2% on a yearly basis in September to match August's reading and came in below the market expectation of 2.3%. After plummeting to its lowest in nearly two weeks at 95 with the initial market reaction to the data, the US Dollar Index erased a small portion of its daily losses and was last seen at 95.15, where it was still down 0.3% on the day.

In the meantime, the U.S. President Donald Trump, once again, criticized the Fed's monetary policy during an interview with Fox Business as he argued that the Fed was too aggressive and was making a big mistake. Regarding the conflict with China, Trump said that his policies were hurting the Chinese economy and added that he had 'a lot more to do.' If these remarks weigh on the market sentiment and force Wall Street to extend its losses following yesterday's collapse, we could see higher demand for the safe-haven gold.

"The Fed is not pursuing inflation, it is not seeking to damp an overheating economy. It is chasing a 'normal' rate environment and will continue to do so as long as economic growth holds up.
All presidents prefer lower rates...Trump is just more newsworthy," FXStreet Senior Analyst Joseph Trevisani said.

Technical outlook

With today's impressive upsurge, the CCI indicator on the daily chart rose toward the 100 mark to suggest that bulls are taking control of the price action. On the upside, the initial resistance aligns at $1212 (Sep. 13 high) ahead of $1220 (Aug. 3 high) and $1228 (Jul. 31 high). Supports, on the other hand, could be seen at $1200 (psychological level), $1194 (50-DMA) and $1185 (Oct. 10 low).

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