On Thursday (October 19th), as Federal Reserve Chairman Jerome Powell reiterated the position that interest rates must remain high for a longer period of time and lacked immediate support for November rates, the US dollar fell and the gold market continued to trade near intraday highs.
Spot gold closed up 1.37% on Thursday at $1974.15 per ounce, returning to its highest level since mid July.
COMEX December gold futures closed up nearly 0.62% at $1980.50 per ounce.
COMEX February gold futures closed up approximately 0.61% at $2000.20 per ounce.
COMEX December silver futures closed 0.29% lower at $23.031 per ounce.
COMEX January silver futures closed 0.29% lower at $23.157 per ounce.
Market News Analysis
The potential intensification of the Middle East war and the risk of affecting the world economy have also prompted more investors to turn to safe haven assets, thereby driving the rise of gold# The Israeli-Palestinian conflict#
After three days of gains, COMEX's December gold has risen by over 2% this week, compared to over 5% in the previous week.
Ed Moya, an analyst at online trading platform OANDA, said that although Powell's comments have dampened the US dollar and boosted gold prices, the escalating conflict between Palestine and Israel has also provided significant support. Moya added, "It is expected that volatility in the region will remain high, which will keep gold prices around the $2000 level
The decline in the US dollar has made commodities denominated in US dollars more affordable for international buyers, after Powell failed to signal a Fed rate hike in his interest rate decision on November 2nd# Federal Reserve policy shift#
Inflation is still too high, "Powell said in a speech and answered a question raised at an event held at the New York Economic Club. He added, "The current risk is still high inflation. We may enter a period of more inflation, but it is difficult to know. It may be that interest rates are not high enough. However, the Chairman of the Federal Reserve cannot conceal his surprise at the Fed's significant rate hike and the relative inflation issues it has caused, but how surprised the US economy itself is.
Analysts point out that the gold market has digested a lot of bad news, and the Federal Reserve should not bring the same resistance to precious metals as its tightening cycle is coming to an end.
Analysts pointed out that gold prices have not only returned to an astonishing level of $2000 per ounce, but also given the level of bond yields, the rebound in gold prices is even more impressive. The yield of 10-year treasury bond reached the highest level since July 2007, at 5%.
Analysts point out that as the world faces two major conflicts and political uncertainty continues to rise, the highly negative correlation between gold and bond yields has been broken. Apart from the Russia Ukraine crisis, many political analysts are watching to see if the Palestinian Israeli conflict will cause further chaos and instability in the Middle East.
OANDA Senior Market Analyst Edward Moya said, "It is expected that volatility in the region will remain high, which will keep gold prices near the $2000/ounce level
Some analysts said that gold may still be an attractive asset as concerns about US debt continue to grow. This sentiment may drive more investors away from the bond market, pushing up yields. The market is increasingly concerned that the Federal Reserve may lose control of the yield curve, which will force them to start buying bonds and expanding their balance sheet.
Kim Wyckoff, senior market analyst at Kitco.com, said, "The speech by Federal Reserve Chairman Powell at the New York Economic Club today was not seen as more forceful, which relieved bullish gold bulls
Sean Lusk, co head of commercial hedging at Walsh Trading, told Kitco News that if there is a significant sell-off in the stock market, all bets will be lost I think metals may outperform the market because they won't become loss leaders. Lusk said gold is in a favorable position to ride the recent wave of oil price increases and safe haven buying. "They've been running together before, and it's not uncommon," he said. But if oil collapses, the reason for the collapse is uncontrolled inflation, and economic activity is currently declining
Focus on financial data and events on Friday (Beijing time)
① Pending EU US Summit
② 07:30 Japan September Core CPI Annual Rate
③ 08:00 US President Biden delivers a speech on the Palestinian Israeli conflict and the Russia-Ukraine conflict
④ 09:15 China to October 20th one-year loan market quoted interest rate
⑤ 14:00 German September PPI monthly rate, UK September quarterly adjusted retail sales monthly rate
⑥ 14:35 Bank of Japan Governor Kazuo Shibata delivers a speech
⑦ 20:30 Canada August Retail Sales Monthly Rate
⑧ 21:00 Federal Reserve Huck delivers a speech on the economic outlook
⑨ The total number of oil drilling operations for the week from 01:00 the next day to October 20th in the United States
