Analysis of Gold News: On Thursday (October 19th), gold prices slightly rose. The initial data did not have a significant impact on the precious metal market, and the focus was still on the speech of Federal Reserve Chairman Jay Powell later. Last week, the number of new US applications for unemployment benefits unexpectedly decreased, indicating that the labor market remains tense and employment growth has been strong for another month. Due to concerns about the escalation of the conflict between Israel and Hamas, the demand for safe haven assets has remained unchanged. Despite the gradual cooling of the labor market, the situation remains tense, with the number of people applying for unemployment benefits hovering at the lower limit of 194000 to 265000 this year. However, the hot labor market did not have a significant impact on the gold market, as gold prices remained relatively stable and there were some mild technical selling pressures. After the initial data was released, spot gold rose by about $10 in the short term and is currently trading at $1960.38 per ounce.
Last week, the number of new US applications for unemployment benefits unexpectedly decreased, indicating that the labor market remains tense and employment growth has been strong for another month. The report on the number of people applying for unemployment benefits covers the week when the government conducted a survey on commercial institutions based on the non farm employment data in the October employment report. During the survey period from September to October, the number of people applying for unemployment benefits decreased. The economy created 336000 jobs in September, the highest in eight months. Following recent dovish remarks by several Federal Reserve officials, market focus will also focus on Powell's speech at the New York Economic Club to obtain more clues about the path of interest rates. Although the US central bank has raised its benchmark overnight interest rate by 525 basis points since March 2022 to the current range of 5.25% -5.50%, the labor market remains strong. It is driving consumer spending and the overall economy, ultimately keeping inflation high, leading many economists to expect the Federal Reserve to maintain higher interest rates for a longer period of time.
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
Technical analysis of gold: Gold continued to experience high volatility within the day, with a very narrow range of fluctuations, only retreating to the first line in 1945. This state of concern in the current market about the escalation of the situation between Palestine and Israel, leading to a continued rise in risk aversion. Once the gold market rises, it is difficult to achieve a state of stability. In terms of evening operations, even if there may be some obstacles to short-term gains, technically it is only considered as a temporary suspension of gains and does not mean that there will be no rise, let alone a downward adjustment. Although there is an expectation of a pullback, this is only an opportunity to participate in multiple orders, and do not blindly beat the empty space with too much anticipation.
According to the gold 4-hour chart, it is in an upward trend, with random indicators in a passive state within 4 hours and MACD in a dual line passive state. Currently, the indicators are not clear enough signals; In terms of form, prices resist decline and continue to rise after price retreat; Leaning towards sustained oscillation upwards; The random indicator fluctuates upwards within one hour, with upward morphological fluctuations, and MACD double-line bonding. The overall short-term upward bullish operation within one hour.
The upper short-term focus is on the first line resistance from 1993 to 1990, while the lower short-term focus is on the first line support from 1963 to 1965.
Analysis of crude oil news: On Thursday (October 19th) in the US market, crude oil prices were trading around $88.80 per barrel. The tension in the Middle East has led to a surge in oil prices; Biden's trip to Israel became urgent; The strong demand for crude oil has brought a bullish trend to the crude oil market; OPEC's measures to maintain a distance from politics have stabilized oil prices. According to the latest news from the US Energy Information Administration (EIA), crude oil inventories are tight: last week, US oil product exports fell to their lowest level since October 2022; The import volume of commercial crude oil excluding strategic reserves for the week ending October 13 was 5.942 million barrels per day, a decrease of 387000 barrels per day compared to the previous week and the lowest since the week ending July 7, 2023; The global oil market is a complex and multifaceted entity, often directly influenced by political events and economic policies. The recent developments in the Middle East have once again proven this and have had a significant impact on the oil industry. One development is the escalating tension between Iran and Israel, characterized by Iran's call for an oil embargo on Israel. Iran has become an important participant in the global oil market due to its abundant reserves and strategic location. The country's call for an oil embargo on Israel is not surprising, and due to global supply tightening, it may have an impact on the entire market. The Organization of Petroleum Exporting Countries (OPEC) has promised to reduce oil production by 2 million barrels per day by the end of 2024, while Saudi Arabia and Russia have agreed to further reduce production by 1.3 million barrels per day until the end of this year. If the embargo is implemented, it will affect global oil prices. The conflict between Palestine and Israel continues to escalate, and the global crude oil market fluctuates violently. The market is concerned that if Arab countries become embroiled in conflicts, the oil supply in the Middle East may decrease or be interrupted, leading to another significant increase in crude oil prices.
Market News Analysis
The settlement price of West Texas Intermediate Crude Oil (WTI) traded in New York in November increased by $1.05 per barrel, or 1.5%, to $89.37 per barrel. So far this week, the US crude oil benchmark has risen 0.6%.
The most active December contract for Brent crude oil traded in London closed at $92.38 per barrel on Wednesday, up $0.88 per barrel, or nearly 1%. This week, the global crude oil benchmark rose 2.3%.
Oil prices have continued to rise, despite concerns about US inflation, Federal Reserve Chairman Jerome Powell's unwillingness to suggest another rate hike has weighed on the US dollar, allowing commodity bulls (including those betting on rising crude oil prices) to win.
The worsening tensions in the Middle East have provided more support for economic recovery, which has raised concerns about potential disruptions to Middle Eastern crude oil production or transportation, although there is currently no indication that both situations will occur. According to the Associated Press, two US officials stated that on Thursday, a drone attacked an Al Thanf military base in southern Syria. A drone attacked an oil facility in eastern Syria where US troops were stationed# The Israeli-Palestinian conflict#
Earlier in the day, crude oil prices fell by more than 1% due to a six-month exemption from sanctions imposed by the United States on Venezuelan oil. In theory, although actual new oil production takes longer, sanctions exemptions will allow more Venezuelan oil to enter the market. Experts say that the transaction is not expected to rapidly expand Venezuela's oil production, but it can increase profits by allowing some foreign companies to return to their oil fields and provide crude oil to a wider range of cash payment customers# Energy crisis#
Today Powell's speech is another story. Powell downplayed the prospect of interest rate hikes, providing another strong support line for oil bulls.
Powell hinted that he is pleased with the decline in inflation this summer, and that the Federal Reserve is unlikely to raise interest rates again unless there is clear evidence that an increase in economic activity will endanger inflation progress. Powell's remarks are closely related to recent statements by other Federal Reserve officials, both suggesting plans to keep interest rates unchanged at the next meeting. This is partly because the rise in long-term yields over the past month may slow down economic growth, and if yields rise, it will actually replace interest rate hikes. When describing whether there will be another tightening of monetary policy, Powell used the word 'possible' twice instead of the more forceful word 'will': 'Evidence of economic strength may put further inflation at risk or serve as a reason for further tightening of policy'.
Inflation is still too high, "Powell said in a speech at an event at the New York Economic Club and answered questions raised. 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 not be long enough for interest rates to remain high
The economy is a story of strong demand. The economy is very resilient, with strong growth. The growth rate is higher than the long-term trend. This is a surprise, "he said, but added," It's hard to know how the economy can grow at a higher rate.
But Powell was unwilling to directly signal another rate hike, which also kept federal fund futures (a benchmark for the Federal Reserve's interest rate determination) unchanged in the current 5.25% to 5.50% range. This has pushed down the US dollar index - a tool to keep the US dollar against six major competitors - because people believe that the US dollar will be at a disadvantage in an environment where the Federal Reserve may keep interest rates unchanged without further rate hikes. After Powell's speech, crude oil prices rose as the US dollar fell, making commodities priced in US dollars cheaper for international buyers# Federal Reserve policy shift#
According to reports, the US Department of Energy announced on Thursday that it hopes to purchase 6 million barrels of crude oil to replenish the Strategic Petroleum Reserve (SPR), delivering 3 million barrels in December and January next year respectively, while continuing its plan to replenish emergency reserves. The Ministry of Energy added that it will continue to replenish reserves through monthly bidding until at least May 2024, and the specific quantity has not been determined. The Department of Energy hopes to sign the contract at a price of $79 per barrel or lower, which is significantly higher than the previous range of around $70 per barrel, but lower than the current WTI crude oil price of $90 per barrel. The Biden administration has expressed the hope that its repurchase strategy will bring good returns to taxpayers.
On Thursday, WTI crude oil briefly broke above $90 per barrel, reaching a maximum of $90.68 per barrel, a new high since October 2nd, and an increase of approximately 2.8% from Wednesday's closing price; Brent crude oil briefly broke above $93 per barrel, reaching a maximum of $93.48 per barrel, a new high since September 29th and a 2.26% increase from Wednesday's closing price.
Summary of institutional comments
(1) John Kilduff, a partner at Again Capital LLC in New York, said, "We are still in a state of constant change, and the possibility of escalation, especially from the Arab world, is an issue
(2) Economists at Commerzbank in Germany say that if oil prices rise, the average value of American goods in the world market will become higher, while the value of goods produced by other countries (such as Europe) will become lower.
Technical analysis of crude oil: Yesterday, the Xiaoyangxing K-line of crude oil was consolidated and closed, but it still recovered to its original position after a slight increase. The daily line has been reorganized for three consecutive trading days with the Cross Star K-line, and the previous large positive line has not been further extended after volume expansion, resulting in weak bull momentum and a longer period of consolidation as the main focus. Daily partial passivation, sorting and correction are waiting for further expansion. The competition for strength on the weekly line is ongoing. The next two trading days will still be fiercely contested. The 4-hour chart showed a slight fluctuation and upward trend, but its persistence was insufficient, making the space uncertain and more inclined towards a seesaw and fluctuating approach. Although the rebound from the previous double bottoms continued in a chronic upward trend, every time a small high point was reached, it fell into a long-term consolidation seesaw. At present, the distance from the double bottom point is relatively far, and it is difficult to set the long loss level. It is not ruled out to conduct a third downward exploration to confirm the low point, after all, this week's upward movement can be insufficient. The upward space in the local area cannot be seen too high, with a method of rushing high and pausing to organize.
