On Tuesday (October 31st), the Federal Reserve meeting is about to take place, and investors are turning their attention to the Fed. Gold prices have slightly fallen to near the 10 day moving average. Under the pressure of a strong rise in the US dollar index, a decline in crude oil prices and a slight rise in the yield of US treasury bond bonds, new selling pressure appeared the day before the Federal Reserve issued its latest monetary policy statement. The Federal Reserve's monetary policy supports a stronger US dollar, and bond yields remain within 5%. Due to the focus returning to the Federal Reserve's monetary policy, gold prices failed to hold the $2000/ounce mark on Tuesday. After the recent rise of gold, short-term futures traders usually take profits.
Spot gold closed 0.62% lower at $1983.87 per ounce.
COMEX December gold futures closed 0.56% lower at $1994.30 per ounce, with a cumulative increase of nearly 6.87% in October. COMEX February gold futures closed 0.56% lower at 2014.60 US dollars per ounce, and rose 6.85% in October.
COMEX December silver futures closed 1.90% lower at $22.952 per ounce, and rose 2.23% in October. COMEX January silver futures closed 1.89% lower at $23.075 per ounce, and rose 2.24% in October.
Market News Analysis
On Tuesday, the overall market sentiment remained severely hit, as investors prepared for tomorrow's Fed rate hike, and the US dollar rose on the same day. The market expects the Federal Reserve to keep interest rates unchanged at its upcoming meeting, but stable US economic data and still strong inflation data increase the possibility of the Federal Reserve raising interest rates for the last time in 2023 at its December meeting.
Recently, central bank purchases of gold may be an unexpected support for gold prices; According to a report by the World Gold Council (WGC), central banks were the main driving force for gold demand in the third quarter. In the three months ended September, central banks around the world have stockpiled an additional 337 tons of physical gold, compared to 175 tons in the previous quarter. The central bank's total gold purchases in 2023 currently exceed 800 tons and may reach a historic high in 2023. The central bank's gold demand is the key factor to balance the gold price, and the gold price has recently become increasingly disconnected from the yield of US treasury bond bonds.
So far, the prospects of the Israeli-Palestinian conflict remain unpredictable, but as investors adapt to the Middle East conflict, gold may lose its safe haven appeal.
ActivTrades senior analyst Ricardo Evangelista pointed out that gold is still in a tug of war with the market, supported by political uncertainty and suppressed by the hawkish monetary policy stance of the Federal Reserve. In a report on Tuesday, he said, "The Gaza conflict has become the focus of attention, and as Israel's ground invasion appears to be becoming a reality, financial markets continue to digest the risk of escalation, thereby driving demand for safe haven gold "At the same time, the dollar is still strongly supported relative to other major currencies, and the index measuring its performance is close to the two-year high reached earlier this month. The Federal Reserve will hold a meeting this week, and there is still some uncertainty about whether Jerome Powell and his peers will raise interest rates again; this uncertainty has supported the dollar, and treasury bond bond yields remain high, limiting the gold brought by hedging transactions There is room for expansion
The market expects the Federal Reserve to maintain interest rates unchanged after Wednesday's monetary policy meeting; However, an increasing number of people expect the central bank to maintain restrictive interest rates in the first half of 2024.
Fixed income analysts at Dao Ming Securities said, "The Federal Reserve may maintain an overall hawkish policy tilt, consistent with the September matrix. However, the committee will reiterate that its goal in formulating the next policy steps is to 'act cautiously'
Commodity analysts at Commerzbank in Germany say that any suggestion by Federal Reserve Chairman Jerome Powell that interest rate hikes are still being discussed at the December meeting could bring greater pressure to gold prices in the short term. They added that the market will also monitor Friday's non farm employment data to look for signs of market weakness.
If this situation is not achieved again, the possibility of the Federal Reserve raising interest rates in December may be even greater. Indeed, the recent impact of interest rate expectations on gold prices is relatively small, but this does not necessarily mean that this situation will continue to apply in the coming weeks, "analysts said. Therefore, we caution against assuming that the gold price increase we have seen in recent weeks will continue, as this is due to special circumstances
Economists at Commerzbank in Germany analyzed the prospects of gold, If the favorable winds brought by speculative investors' purchases weaken, gold will lose momentum. If the driving force of speculative investors' purchases weakens, the upward momentum of gold prices may be lost. In addition, the Federal Reserve may eventually have to raise key interest rates again, which is contrary to current market expectations. The US economy grew at an annual rate of nearly 5% in the third quarter, which is the strongest growth rate in seven quarters At the press conference, Federal Reserve Chairman Powell may open the door for another rate hike in December. More importantly, it remains to be seen whether Friday's data indicates an expected cooling in the US labor market. If this situation is not achieved again, the possibility of the Federal Reserve raising interest rates in December may be even greater. Indeed, the recent impact of interest rate expectations on gold prices has been relatively small, but this does not necessarily mean that this situation will continue to apply in the coming weeks. We warn against assuming that the gold price increase we have seen in recent weeks will continue, as this is due to special circumstances
The focus of this week is the central bank meetings of the Federal Reserve, Bank of England, and Bank of Japan. The Federal Open Market Committee meeting of the Federal Reserve began on Tuesday morning and ended on Wednesday afternoon. Federal Reserve Chairman Powell issued a statement and held a press conference. Most markets expect the Federal Open Market Committee to suspend the rate hike cycle. The US employment situation report for October will be released later this week.
Focus on financial data and events on Wednesday (Beijing time)
① 09:45 China October Caixin Manufacturing PMI
② 15:00 Nationwide House Price Index Monthly Rate for October in the UK
③ 17:30 UK Manufacturing PMI for October
④ 20:15 ADP employment in the United States in October
⑤ 20:30 US Treasury announces a 3-month bond issuance plan
⑥ 21:45 Markit Manufacturing PMI Final Value for October in the United States
⑦ 22:00 US October ISM Manufacturing PMI, US September JOLTs Job Vacancies, US September Construction Expenditure Monthly Rate
⑧ 22:30 EIA crude oil inventory series data for the week from the United States to October 27th
⑨ The next day at 02:00, the Federal Reserve announced its interest rate resolution
⑩ The next day at 02:30, Federal Reserve Chairman Powell held a press conference
