Fundamental Forecast for Gold:Neutral

Gold prices were fractionally higher this week with the precious metal up nearly 1% to trade at 1275 ahead of the New York close on Friday. Prices have continued to hold within a tight trading range of less than 3% since the October 4th sell-off as an increase in offshore demand is offset by expectations for higher rates from the Fed later this year. Heading into the start of November trade, all eyes are on a break of this consolidation range.

U.S. 3Q GDP figures released on Friday showed the economy grew at an annualized pace of 2.9% q/q, topping estimates for a print of just 2.6%. The Core Personal Consumption Expenditure, (PCE), the Fed’s preferred gauge of inflation, also beat consensus with a print of 1.7% q/q. Still, the data is unlikely to move the needle for the monetary policy outlook, with Fed Fund Futures still pricing in just a 17% chance of a hike this month as expectations for a December rate-hike hold decision steady at nearly 75%. For gold, the implications are for more sideways price action with next week’s event risk likely to charge considerable volatility in prices.

Highlighting the economic docket next week are key central bank rate decisions with the RBA, BoJ, BoE & the FOMC on tap ahead of Friday’s U.S. Non-Farm Payrolls report. Also note that next week marks the open of November trade with the U.S. elections in view just one week later. That said, expect volatility – Gold priceaction may largely take cues from USD price action and with the DXY reacting to a key resistance confluence late in the week. We’ll take a more neutral stance heading into the start of the month while noting a broader downside focus sub-1303.