On Monday (November 20th), gold prices bottomed out and rebounded, initially under pressure due to the rebound in US Treasury yields. However, US Treasury yields subsequently fell, and recent US economic data boosted bets on the Fed's completion of interest rate hikes. The US dollar continued its decline, providing support for gold prices. In addition, the market continues to evaluate last week's inflation data in the United States and is seeking clues in the November meeting minutes of the Federal Open Market Committee released on Wednesday.
Spot gold closed 0.16% lower on Monday at $1977.64 per ounce.
COMEX December gold futures settled 0.22% lower at $1980.3 per ounce.
Market News Analysis
Last week, due to weak October Consumer Price Index (CPI) data in the United States, downward pressure on US yields and the US dollar increased, leading to an increase in gold prices. On Friday, the yield of 10-year treasury bond fell to 4.38% from the peak of 5.02% at the end of October, the lowest level since the end of September. Similarly, the two-year and five-year interest rates have fallen to their lowest points since September, at 4.80% and 4.35%, respectively.
On Monday, some interest rates rebounded to 4.90%, 4.47%, and 4.46%, which seems to have put pressure on this unprofitable metal. The question now arises whether a month of positive inflation data is enough to end the Fed's tightening cycle. Any new evidence of rising inflation or overheating of the economy could exacerbate hawkish bets on the Federal Reserve. The change in expectations of the Federal Reserve's future policy actions led to the yield of benchmark 10-year US treasury bond bonds falling to a two month low on Friday, benefiting the non yielding metals.
Economists at Dao Ming Securities say that, The door to a downward trend in gold prices may finally be open, as our advanced position analysis indicates that the upward flow of funds has now reached its peak. We now estimate that if there is no decisive breakthrough above $2000 per ounce, the purchasing activity of trend followers may gradually stop. The significant deterioration of US data may bring increasing resistance to short positions, but the scope of tactical downward trend is still expanding
Last week's US Consumer Price Index report showed that consumer inflation has cooled faster than expected, while last Thursday's initial jobless claims in the US indicate that the labor market is cooling. The market seems to be confident that the Federal Reserve will maintain interest rates unchanged at its policy meeting in December 2023, and is expected to cut rates by nearly 100 basis points by the end of 2024.
The US dollar is hovering near its lowest level since September and is seen as another factor providing support for gold prices ahead of Tuesday's FOMC meeting minutes.
The escalation of the Israeli-Palestinian conflict has raised concerns about its potential impact on the world economy, which in the worst case could lead to a recession.
As widely expected, the People's Bank of China has maintained the loan market quoted interest rate near historic lows and injected approximately 80 billion yuan of liquidity into the market. Chinese regulatory authorities have vowed to provide more policy support for the struggling real estate industry, boost investor confidence, and limit the safe haven currency gold.
Dao Ming Securities analyst Ghali expects gold prices to start hitting a series of new historical highs at this time. He also stated that even before the upcoming breakthrough, the current strength of gold indicates that central bank purchases have led to structural changes in the market.
Ghali said, "The interesting thing about the gold market is that the interest rate hikes we see are often quite detrimental to gold prices, but if you narrow down, today's gold prices are still hovering near historical highs.
Focus on financial data and events on Tuesday (Beijing time)
① 08:30 RBA Announces Minutes of November Monetary Policy Meeting
② 15:00 Swiss October Trade Account
③ At 18:15, Bank of England Governor Bailey testified in Parliament
④ 21:30 Canada October CPI Monthly Rate
⑤ 23:00 Annualized total sales of completed homes in the United States in October
⑥ The next day at 03:00, the Federal Reserve announced the minutes of its November monetary policy meeting
⑦ API crude oil inventory for the week from 05:30 the next day to November 17th in the United States
