Gold Benefits From USD Dip on AI Funding Fears
Weak USD Boost Gold
Gold prices are rising today amidst the pullback in USD as focus shifts from US inflation data yesterday to concerns over funding levels in the AI sector. AI corporate bonds have come under pressure this week fuelling fears that investment in the sector has hit a wall. AI investment has been a key driver of the US economy recently with bullish growth forecasts largely tied to expanding spending in the AI space. The downturn in USD as a result of the rout in AI stocks is a strong indication of how tied AI performance has become to the wider economy. So much so that the sell off in AI bonds has overtaken the hawkish repricing we’ve seen in traders’ Fed rates expectations on the back of yesterday’s US inflation data. US CPI was seen jumping sharply again last month, topping bullish forecasts. In response to the data, market pricing for a Fed hike this month was seen jumping to around 30% while pricing for a December hike is now over 90%.
US PPI Up Next
Looking ahead today, traders will be monitoring the moves in the AI world. Any further selling should keep UAD under pressure, allowing gold to push higher as safe haven flows divert away from USD and into gold. We’ll also see the latest US PPI data which is expected to come in hot on the back of yesterday’s CPI beat. If seen, this could help sure up USD near-term, capping the recovery in gold. For now, though, AI stocks remain the key story to follow and while selling continues, gold should continue higher.
Technical Views
Gold
Gold prices continue to hold support at the 4.092.60 level along with the bull trend line off last year’s lows. While this area holds as support, a rotation higher is still feasible with a break above 4,204.01 seen opening the way for a recovery towards 4,389.24 and the bear trend line from last year’s highs.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.