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Marketupdate | 21/11/2023

Nov 21, 2023 | Marketupdates | 0 comments

“Gold rallies on noise that the Fed’s interest rate hiking cycle is over”.

Indications only | Closing prices are bids | Prices & Charts  : Trading View | Market Research Refinitiv | See disclaimer below

Thoughts for The Day: Gold rose to $1985 in early Asian trading on Monday but then embarked on a sustained decline throughout the European session to reach a low for the day of $1966 shortly after the New York opening on good trading volume before staging a recovery to end with a pared 0.15% loss at $1978. The yellow metal has extended its’ rally to $1994 this morning in reaction to weakness in the USD and a decline in US10YT yields on a growing conviction that the Fed’s interest rate hiking cycle is over, and all eyes will be on the FOMC minutes due to be released late tonight for signals on the US Central Bank’s monetary policy. The expected trading range today is $1970 to $1995. Silver succumbed to profit taking, ending down 1.18% at $23.,40, but the PGM’s had a strong start to the week with platinum rising 2.33% to $921, and palladium posting a sector leading gain of 2.45% to $1087.

Market Commentary: November 21, 2023, (source Reuters)

  • Gold prices rose on Tuesday, supported by a weaker U.S. dollar and Treasury yields as investors look forward to minutes from the Federal Reserve’s latest meeting for more guidance on its interest rate outlook. Spot gold was up 0.6% at $1,988.29 per ounce, as of 0133 GMT. U.S. gold futures gained 0.5% to $1,990.10.
  • “The dollar and the U.S. bond yields continue to come down. Demand from central banks is also quite strong. All these are bullish for gold. The market is reconsidering that drop we saw yesterday,” said Edward Meir, a metals analyst who provides research for Marex. The dollar DXY languished near more than a 2-1/2-month low as investors expect U.S. interest rates to fall next year. A weaker dollar makes gold less expensive for other currency holders.
  • Benchmark U.S. 10-year Treasury yields were hovering near two-month lows touched last week.
  • Minutes from the Fed’s latest meeting are due at 1900 GMT. Signs of slowing inflation in the United States has boosted expectations that the U.S. central bank was done raising interest rates. Markets are widely expecting the Fed to leave rates unchanged in the December meeting and currently pricing in a greater than 50% chance of a rate cut of at least 25 basis points by May, according to CME’s FedWatch Tool. Lower interest rates decrease the opportunity cost of holding gold.
  • “I think the minutes will be a non-event … There was not going to be any mention of cuts, Jerome Powell made that very clear in his news conference. It’s just the market that’s expecting cuts from the Fed,” Meir said. Inflation is likely to remain “stubborn” and force the Fed to keep interest rates elevated for longer than investors anticipate, Richmond Fed president Thomas Barkin said.
  • Spot silver rose 1% to $23.64 per ounce, platinum was flat at $918.59, while palladium eased 0.2% to $1,076.26.

Economic Analysis (Trading Economics):

  • The leading economic index declined 0.8% in October and fell for the 19th month in a row, but the U.S. economy doesn’t appear any closer to a recession than when the losing streak began. Economists polled by the Wall Street Journal had forecast a 0.7% drop in the leading index, a gauge of 10 indicators designed to show whether the economy is getting better or worse.
  • US 20 Year Bond Yield was 4.73 percent on Tuesday November 21, according to over-the-counter interbank yield quotes for this government bond maturity. Historically, the United States 20 Year bond Yield reached an all-time high of 6.12 in August of 2023.

Gold Chart

Silver Chart

Platinum Chart

Palladium Chart

This document is issued by Value Trading BV. While all reasonable care has been taken in preparing this document; no responsibility or liability is accepted for errors of fact or for any opinion expressed herein. Opinions, projections and estimates are subject to change without notice. This document is for information purposes only and for private circulation. It does not constitute any offer, recommendation or solicitation to any person to enter into transaction or adopt any hedging, trading or investment strategy, nor does it constitute any prediction of likely future movements in rates or prices or any representation that any such future movements will not exceed those shown in any illustration.