This Week: Gold to surge on Middle East conflict fears?

The fighting between Israel and Hamas has embroiled the Middle East in a major conflict, sending markets flocking towards safe havens.

At the time of writing, gold jumped over 1% to move back into the mid-$1800 region, also helping spot prices recover from "oversold" conditions.

At the time of writing, XAUUSD is forecasted to have a 74% chance of trading between $1815-$1891.47 this week, according to the Bloomberg model.

Despite the early Monday gains, gold remains some $200 below its year-to-date peak around $2063, with markets wary of the threat of higher-for-longer US interest rates.

Traders will surely be keeping one eye on developments in the Middle East, and the other still on the Fed’s policy outlook this week.

Events Watchlist

• Monday – Friday, October 9th – 13th: Fed Speak

Although Fed Chair Jerome Powell is not in the lineup over the coming days, this week still features speeches by 9 other Fed officials. Should this chorus of “Fed speak” continue ramming home their “higher for longer” plans for interest rates, that may push US yields higher while potentially eroding gold’s early-Monday gains.

• Wednesday, October 11th: FOMC meeting minutes

Although the Fed kept its rates unchanged at the September FOMC meeting, markets have taken into account that policymakers expect fewer rate cuts in 2024. However, if the minutes reveal cracks in the FOMC’s apparent collective hawkishness, that may prompt a softening in the US dollar/yields and another tailwind for bullion.

• Thursday, October 12th: US September consumer price index (CPI)

This keenly awaited data release is expected to show that US inflation is further easing, via lower readings for both core and headline CPI. However, a higher-than-expected set of CPI figures may move gold back closer to the psychologically-important $1800 level, provided the ongoing Middle East conflict does not escalate further.

Here’s comprehensive list of other key economic data and events due this week:

Monday, October 9

• EUR: Germany August industrial production
• USD: Speeches by Fed Vice Chair Michael Barr, Dallas Fed President Lorie Logan, Fed Governor Philip Jefferson

Tuesday, October 10

• JPY: Japan August balance of payments
• AUD: Australia September business confidence; October consumer confidence
• USD: Speeches by Atlantic Fed President Raphael Bostic, Fed Governor Christopher Waller, Minneapolis Fed President Neel Kashkari, San Francisco Fed President Mary Daly speech
• IMF issues updated world economic outlook
• PepsiCo earnings

Wednesday, October 11

• AUD: Australia September household spending
• EUR: Germany September CPI (final); ECB CPI expectations
• USD: FOMC meeting minutes; speeches by Fed Governor Michelle Bowman, Atlanta Fed President Raphael Bostic

Thursday, October 12

• JPY: Japan September PPI
• AUD: Australia October consumer inflation expectations
• EUR: ECB meeting minutes
• GBP: UK August GDP, industrial production, trade balance
• USD: US September CPI; speech by Atlanta Fed President Raphael Bostic; weekly initial jobless claims

Friday, October 13

• CNH: China September CPI, PPI, external trade
• EUR: Eurozone August industrial production; speech by ECB President Christine Lagarde
• USD: US October consumer sentiment; speech by Philadelphia Fed President Patrick Harker
• SPX500_m: Earnings from JPMorgan, Citigroup, Wells Fargo, BlackRock