On Wednesday (October 25th) in the European market, spot gold maintained its intraday rebound trend, with gold prices currently trading around 1972 US dollars per ounce.
FXStreet analyst Dhwani Mehta pointed out that the upward risk of gold prices remains intact, with a target of $2000 per ounce. On the daily chart, gold prices are forming a potential bullish flag shape.
Fundamentally, gold prices continue to profit from the Middle East crisis. As of now, the current round of conflict between Palestine and Israel has resulted in over 7200 deaths on both sides.
The economist team at Commerzbank wrote in a report: "News from the Middle East may continue to determine the direction of gold, while previous dominant factors such as changes in bond yields have retreated to a secondary position
FXStreet analyst Christian Borjon Valencia pointed out that as Israel intensifies its attacks on the Gaza Strip and the conflict intensifies, geopolitical risks may continue to support gold prices.
Analysis of the Prospects of Gold's Latest Technology
Mehta stated that from a short-term technical perspective, the price of gold seems to have remained unchanged as it is still a 'buy on dips' trade. On the 14th, the relative strength index (RSI) was slightly lower than the overbought region, indicating more upside potential. In addition, gold prices have continued to rise from their October low of $1811 per ounce and have started to consolidate this week, currently forming a potential bullish flag.
Mehta said that from the gold daily chart, the technical side still favors bullish traders, with short-term resistance currently seen at the barrier level of $1980 per ounce.
Gold prices need to break through $1980 per ounce to challenge the July 20th high of $1988 per ounce. Afterwards, gold buyers will aim for a 5-month high of $1997 per ounce, followed by breaking the $2000 per ounce barrier.
On Wednesday (October 25th), in order to curb the highest inflation in 40 years, Federal Reserve officials led by Federal Reserve Chairman Powell have raised interest rates 11 times since March 2022, ending the era of loose money while putting pressure on the stock market and raising concerns about the upcoming economic recession.
Since the September meeting of the Federal Open Market Committee, several Federal Reserve officials have hinted that interest rates may rise further.
At the same time, some people proposed the opposite view, believing that the federal funds rate for this cycle may have reached its peak. The recent fluctuations in the bond market have pushed the yield of the 10-year treasury bond bond up to 5%. As Jerome Powell pointed out, this may have lightened some burdens for the Federal Reserve to some extent, thus reducing the demand for further monetary policy tightening.
As of September, the annualized inflation rate is still around 3.7%, almost twice the Federal Reserve's 2% target. The latest Bloomberg survey shows that the market believes there is a 55% chance that the United States will fall into an economic recession within the next 12 months.
According to CME's FedWatch tool, the market believes that there is a 97% probability that the Federal Reserve will not adjust interest rates at the Federal Open Market Committee meeting on November 1st. This will keep the federal funds rate within the range of 5.25% to 5.50%.
In December, traders believed there was a 29% chance of another 25 basis points increase.
The following are quotes from eight policymakers, suggesting what may happen next. These quotes may contain clues to their economic policies and interest rate decisions.
Monetary Policy Outlook
On October 16th, Philadelphia Fed Chairman Patrick Huck said, "Unless I see a completely different situation in the data and contacts, I believe we can keep interest rates unchanged now
On October 19th, Federal Reserve Chairman Jerome Powell stated: "If there is further evidence of sustained above trend growth, or if the tension in the labor market no longer alleviates, this may pose a risk to further inflation control and may require further tightening of monetary policy
On October 20th, Atlanta Fed Chairman Rafael Bostick said, "I am really trying to focus people on inflation, it is still 3.7%. Our goal is 2%. Before I consider relaxing our stance, we must be closer to the 2% inflation target
Current financial situation
On October 19th, Federal Reserve Chairman Jerome Powell stated, "In recent months, financial conditions have significantly tightened, and long-term bond yields have been an important driving factor for this tightening. We have been monitoring these developments as continuous changes in financial conditions may have an impact on the direction of monetary policy
On October 10th, Neil Kashkali, Chairman of the Minneapolis Federal Reserve, stated: "Higher long-term yields may play a role in bringing inflation back to the downward channel. However, if these higher long-term yields are due to changes in their expectations of us, then we may actually need to take action according to their expectations to maintain these yields
On October 9th, Dallas Fed Chairman Lorry Logan stated, "If long-term interest rates remain high due to a high term premium, there may be no need to raise the federal funds rate. However, if the reason behind the strong economy is an increase in long-term interest rates, the FOMC may need to take more measures
Inflation expectations and labor market
On October 18th, Federal Reserve Board member Christopher Waller said, "Although there are some reasons to believe that inflation will continue to decline, let me remind you that, as I have repeatedly emphasized, we have seen a series of good inflation reports disappear multiple times in the past. Therefore, I will closely monitor the next few reports to more clearly indicate whether inflation is moving towards a 2% trajectory
On October 12th, Boston Fed Chairman Susan Collins said, "Due to the tightening of interest rates, I do expect wage growth and overall economic activity to slow down in the coming months
In early trading on Thursday (October 26th) in the Asian market, gold prices were trading around $1982 per ounce. After a series of weak economic data, concerns about a recession in the eurozone supported safe haven demand, and gold prices continued to rise, continuing their recent gains. Any significant increase in gold is largely hindered by ongoing concerns about rising US interest rates, especially as data released on Tuesday showed an improvement in local business activity in October. The US dollar strengthened in overnight trading, while the yield of US treasury bond bonds also stabilized from the recent decline. Due to Israel's delayed ground attack plan on Gaza and some signs of easing in the conflict between Israel and Hamas, there has been a decrease in safe haven demand for gold this week. During periods of political and financial uncertainty, gold is used as a safe investment. But this was partially offset by the weak purchasing managers' index data in the eurozone, raising concerns about potential recession in the region. Germany is the largest economy in Europe and entered a recession earlier this year. On the one hand, geopolitical tensions and disappointing economic data in Europe have driven safe haven trading in gold. Gold prices remain near recent highs, but there are still doubts about whether they can break through this level in the short term, especially given the release of more US economic clues this week. The market is currently mainly waiting for more economic clues from the United States this week, mainly the third quarter gross domestic product (GDP) data released on Thursday. More signs of recovery in the US economy will provide the Federal Reserve with greater space to keep interest rates high for a longer period of time, while also weakening the safe haven appeal of gold. After the release of this week's GDP data, PCE inflation data, the Federal Reserve's preferred inflation indicator, will be released. In recent months, the rise in inflation in the United States has provided more impetus for the Federal Reserve to maintain its hawkish stance. The central bank is scheduled to hold a meeting next week to decide on interest rates, although the market generally expects the Federal Reserve to remain calm. Nevertheless, Federal Reserve officials have stated that they will raise interest rates at least once this year and that interest rates will remain high for a longer period of time, at least until the end of 2024. Given that gold has no yield, higher interest rates reduce the attractiveness of investing in assets such as gold.
Analysis of the technical aspects of gold; Gold yesterday closed with a long shadow K line, close to the cross star, indicating a certain level of support at the 1953 low. After the appearance of this type of pattern, the next day it will supplement the shadow line and continue to be bullish and upward. If 1953 is used as a right or wrong defense, it is possible that the high position will continue to fluctuate and consolidate, and it is not possible to immediately forcefully brush the 1997 high point. But if there is no good rebound in the shadow today, and instead the positive line is directly raised, breaking through yesterday's high point and making an upward charge, it will soon hit the 2000 level. In addition, the 10 day moving average support has gradually moved up to 1946, which is also a good key support buying point. Therefore, Wang Tianfa believes that the short-term trend bulls are still there, but the previous strong attacks have been temporarily postponed along the way, entering a brief correction and consolidation stage. The length of the correction time will depend on whether the shadow lines will be supplemented today. Gold is currently in a fluctuating state between 1963 and 87 in the 4-hour Bollinger Belt orbit. This oscillation phenomenon is not caused by the technical needs of gold itself, but rather by the extremely complex trading environment in the current market, resulting in a lack of clear directional choices for both long and short sides. The price of gold continued to fluctuate in a narrow range between 1970 and 85. If this trend continues, it may mean that bulls are accumulating strength, and positive expectations of fundamentals also provide support for gold prices.
The upper short-term focus is on the first line resistance from 1993 to 1995, while the lower short-term focus is on the first line support from 1963 to 1960,
Oil trader Pierre Andurand said he expects Saudi Arabia to maintain its current supply restrictions until oil prices reach at least $110 per barrel.
The founder of Andurand Capital Management LLP stated during the Q&A session of the Saudi Future Investment Initiative held in Riyadh that as inventory declines in the coming months, "the market will have to beg for more supply at some point
He added, "Saudi Arabia will have to decide when and at what price to restore supply." "In my opinion, oil prices may be adjusted around $110 per barrel. Therefore, there is still room for oil prices to rise." Since July, Saudi Arabia has promised to implement a unilateral production reduction of 1 million barrels per day in addition to existing restrictions. Earlier this month, Saudi Arabia stated that it will maintain restrictions until the end of this year. Andurand stated that Saudi policy remains the determining factor in crude oil prices. Although the war between Israel and Hamas may lead to greater conflict in the Middle East, the global benchmark oil prices have fallen below $90 per barrel. He said that a direct confrontation with Iran is "not impossible" and may change the situation. Andurand believes that oil demand will reach a high point by the end of this decade and then gradually decline. When it comes to metals, he warns that the copper market may be in trouble as mining supply is expected to peak while demand accelerates due to energy transformation.
Market News Analysis
Tuesday's API data showed a decrease in inventory levels in the United States. EIA storage data will expire at 14:30 Greenwich Mean Time
IG customer sentiment suggests further selling after recent repositioning.
Oil prices have significantly declined in the past three trading days and accelerated their decline after the release of PMI data in Europe. The severe manufacturing and service industry data in Europe highlights the resistance faced by the European economy, raising concerns about future oil demand.
In addition, according to data from the European Central Bank on Wednesday, bank loans across the entire eurozone have remained almost flat, exacerbating the difficult times ahead. The deterioration of credit conditions usually precedes an economic recession. However, the good news is that China, the world's largest oil importer, has approved 1 trillion yuan of sovereign bonds, which is the latest attempt to stimulate the economy and will boost market sentiment.
The impact of the Middle East conflict on oil prices cannot be underestimated. In regions with significant global oil production, ongoing conflicts may escalate into broader regional conflicts. Traders are prepared for the possibility of a war spreading between Israel and Hamas, which could disrupt oil transportation in the Middle East - although there is little evidence of such an impact. Despite an unexpected increase in US crude oil and gasoline inventories last week, there was still a rebound. John Kilduff, a partner at the New York Energy Hedge Fund Again Capital, said, "It is indeed difficult to allocate an appropriate war risk premium for crude oil now, as Middle Eastern oil transportation has not been truly affected by this conflict." "However, concerns about contagion still exist, so on such a day, the market may decline due to an increase in US crude oil inventories and return to risk
A government report on Wednesday (October 25th) showed that the increase in US crude oil inventories exceeded the consensus of Wall Street analysts, with unexpected increases at the federal level and in storage centers related to the delivery of trading contracts on the New York Mercantile Exchange. The weekly oil status report from the US Energy Information Agency (EIA) shows that the increase in crude oil inventories for the week ended October 20th was after a decline in exports.
EIA data shows that as of the week ending October 20th, the US crude oil inventory balance increased by 1.372 million barrels, while analysts generally expect a decrease of 450000 barrels. This growth is in stark contrast to the 4.491 million vehicles in the week before October 13th, driven by a surge in exports. Last week, crude oil exports decreased from 5.31 million barrels per day to 4.833 million barrels per day.
In addition to the increase in federal crude oil inventory, the inventory at the Cushing Storage Center in Oklahoma also increased by 213000 barrels, which is the delivery point for West Texas Intermediate crude oil futures traded on the New York Mercantile Exchange. Cushing's storage levels have significantly decreased this year, sparking concerns that they may reach such critical lows, making storage center operations more complex. Last week, the storage center had a net outflow of 1.05 million barrels.
The inventory of gasoline, a major fuel product in the United States, has increased, while the inventory of distillate oil, a raw material for diesel and heating fuels, has decreased. In terms of gasoline inventory, there was an increase of 156000 barrels, compared to the previous consumption of 2.371 million barrels, and analysts generally expect a decrease of 1.266 million barrels. Automotive fuel gasoline is the largest fuel product in the United States. Distillate oil inventory decreased by 1.686 million barrels, compared to a deficit of 3.185 million barrels the previous week, and analysts expect a decrease of 1.75 million barrels. Distillate oil is refined into heating oil, diesel for trucks, buses, trains, and ships, and fuel for jet planes.
In response to the potential impact of the escalation of the Middle East conflict on global oil prices, governments around the world are actively taking various measures to ensure stable and sustainable oil prices.
The US government is currently exploring a series of strategies. As of now, a key approach being considered is to collaborate with Saudi Arabia and domestic oil producers to increase oil supply. Another option for the United States is to utilize strategic oil reserves. This reserve was largely consumed during the Russia-Ukraine conflict, showing its potential value in stabilizing the energy market during the period of political turmoil.
Bank of Canada Governor McLehm said, 'We now expect oil prices to remain above the level we assumed in July. In the context of a sharp rise in oil prices, we will pay special attention to its impact on core inflation. If a certain
