The decline of the US dollar index and the decline of the yield of US treasury bond bonds provided support for precious metals. On Friday (November 17), gold prices rose slightly in the US market.
The recent technical trend of gold has improved this week, which has attracted bullish buying. On Friday, gold prices climbed to a two-week high of $1993.42/ounce in the Eurasian session and will see their first weekly rise in three weeks. But in the early morning trading of the US market, there was a rebound after falling below 1980.
As of press release, spot gold is currently trading at $1984.96 per ounce, up 0.19% on the day.
This is an exceptionally important trading week. The US inflation data is moderate, while the UK inflation data is also relatively moderate. The headline news of the Wall Street Journal today is: "There is a turning point in the global inflation struggle
This week, the risk appetite of traders and investors has been boosted, as evidenced by the US stock index hitting a several week high. After releasing mild US inflation data earlier this week, the market now expects the Federal Reserve to have completed its rate hike cycle. More and more people believe that the Federal Reserve will further lower interest rates in the spring. The decline in global interest rates is beneficial for metals, indicating an improvement in consumer and business demand amidst a decrease in borrowing costs.
Kinesis Money market analyst Carlo Alberto De Casa said that overall, investors are optimistic about gold as they bet that the United States will not raise interest rates further and expect the Federal Reserve to adopt a dovish stance in 2024.
Lower interest rates lower the opportunity cost of holding gold, a non income asset used to hedge against inflation.
After data shows that inflation has slowed down, the market is currently expected to lower interest rates as early as May next year.
This week's data shows that the US consumer price index remained flat in October, with core interest rates rising 0.2%, weaker than expected, while the producer price index fell by the largest amount in three and a half years.
The US dollar will fall this week, making gold cheaper for buyers holding other currencies, and the yield of 10-year treasury bond bonds will also fall.
However, analysts at Commerzbank in Germany stated in a report that the recovery of gold is unlikely to continue because "it may take some time for the market to completely transform and start speculating that the US is about to cut interest rates".
Commerzbank added that gold prices will only hold above the $2000 mark by the middle of next year.
Analyst Christopher Lewis stated that gold prices are approaching the $2000 region, which is a potential area for significant resistance. In this situation, I think we are more likely to continue trying to open up some type of trading range, considering that the US bond market continues to offer higher interest rates, despite their previous decline, which makes sense. They are still very high, and it is difficult for traders to overlook this.
Lewis emphasized that due to geopolitical issues, the gold market may receive some boost, as there are currently many problems around the world, and it is clear that gold may be a good way to protect wealth. In this environment, there is a high possibility of upward breakthroughs. However, it may be worth noting that there is significant resistance between the $2000 and $2100 levels. Therefore, the ultimate breakthrough of gold requires another fundamental trend, but now the market is not interested in short selling.
