On Thursday (November 2nd), spot gold remained volatile and is currently trading around $1983. The US dollar index has bottomed out and rebounded, currently above the 106 level. Due to the actions of the Federal Reserve and the Bank of England, traders have doubled their bets that global interest rates may eventually peak, and the stock market continues to rise. It is worth noting that although the Fed's rate hike may have come to an end, it does not mean that the Fed will immediately start cutting interest rates. Powell's speech also emphasized that the Federal Reserve will continue to closely monitor economic data and adjust policies flexibly. Therefore, investors still need to pay attention to future economic data and the Fed's movements in order to better understand the development of the investment market.
Although gold is expected to benefit from the prospect of no further interest rate hikes, any significant upside potential for gold remains questionable as US interest rates may remain high for a longer period of time. Powell also acknowledged that the Federal Reserve still has a long way to go before reaching its 2% inflation target, and had previously hinted that the bank's target interest rate would remain above 5% until at least the end of 2024. Higher interest rates are detrimental to gold as they increase the opportunity cost of holding gold. Nevertheless, with the outbreak of the war between Israel and Hamas driving up safe haven demand, gold has remained strong since October. The focus now is entirely on the upcoming release of US non farm employment data on Friday. Any signs of a strengthening job market will provide more impetus for the Federal Reserve to raise interest rates, and Powell reiterated this view on Wednesday. The private employment data released on Wednesday showed a cooling in the job market, which may indicate a weakening of non farm employment data.
Market News Analysis
The growth in the number of first-time applicants for unemployment benefits in the United States has exceeded expectations, and the US labor market seems to be losing some momentum. The US dollar is weak, and the gold market is showing a healthy trend. On Thursday, the US Department of Labor stated that as of the week ending October 28th, the number of weekly jobless claims rose to 217000, an increase of 5000 from the previous week's revised 210000. The latest labor market data is slightly higher than expected. According to consensus predictions, economists expect the number of initial claims for unemployment benefits to remain around 210000.
The spot gold market continues to remain below $2000 per ounce; However, the initial response to the latest labor market data has slightly increased.
Not only is the number of first-time applicants for unemployment benefits constantly increasing, but laid-off workers also face some difficulties in finding new jobs. As of the week ending October 21st, the number of renewed claims for unemployment benefits that were delayed by one week increased to 1.818 million. The number of people applying for unemployment benefits has increased by 35000 compared to the revised level of the previous week.
Encouraged by the weakening yield of the US dollar and US treasury bond bonds, the hawkish tone of the Federal Reserve was lower than expected. Although the increase of gold was limited by the rise of risk appetite, gold still maintained an upward trend on Thursday.
Federal fund futures show that traders expect an 80% chance of a rate hike in December, with the Federal Reserve starting to cut rates in mid-2024.
The decline in US dollar and US bond yields due to this view has benefited gold. But most traders have turned to risk driven assets such as stocks, limiting any significant gains in gold. Under the prevailing risk appetite environment and the uncertainty of the Federal Reserve's future interest rate hike path, it is difficult for gold prices to take advantage of the opportunity for a slight intraday increase.
Although it is expected that gold will benefit from the prospect of no further interest rate hikes, any significant upside potential for gold remains questionable, and US interest rates may remain high for a longer period of time.
Powell also acknowledged that the Federal Reserve still has a long way to go before reaching its 2% inflation target, and had previously hinted that the bank's target interest rate would remain above 5% by at least the end of 2024.
Higher interest rates do not bode well for gold as they increase the opportunity cost of holding gold. Nevertheless, due to the outbreak of the Israeli-Palestinian conflict driving up safe haven demand, gold has continued to rise strongly since October.
According to the FedWatch tool of Chishang Exchange, the market currently believes that the probability of the Federal Reserve suspending interest rate hikes again in December is 80%. Investors will also pay attention to the US non farm payrolls report released on Friday to further understand the Federal Reserve's policy path.
Technical analysis of gold: Gold fluctuates and rebounds at the beginning of the day, although the space is not very large. The above 5-day line of 1990 also shows some pressure again, and from the rhythm of today's US index trend supporting the decline, the rebound space of gold is indeed small. The reason for today's stagflation of gold may be related to its own technical structure. Currently, gold is fluctuating between the 5th and 10th day lines of 1990 to 80, causing a stalemate between the long and short sides. However, if combined with the expectations of the Palestinian Israeli situation and the current dust settled interest rate policy of the Federal Reserve, it is still difficult for gold to decline again, which has led to a stalemate between the long and short sides of the market.
From the 4-hour chart, it can be seen that the gold K-line continues to operate below the middle track of the Bollinger belt, with its high point constantly moving downwards. Today, influenced by the announcement of interest rate decisions by the Federal Reserve on the news side, gold has been falling all the way, breaking the intraday low point, but has received support from 1970. After encountering support, gold rebounds, and can wait for pressure levels to layout short orders. The short position trend remains unchanged, but there is a rebound in the short term. After rebounding around 1990, it continues to be mainly short; From the 1-hour chart, it can be seen that the price is currently adjusting sideways in the upper track of the Bollinger band, with the KDJ dead cross downward and the MACD red kinetic energy column gradually decreasing. The rebound of gold in the 4-hour level trend is basically touching the pressure band in the early stage, and the current short-term moving average is still in a state of bonding and leveling. It is highly likely that it will continue to maintain a slightly volatile trend in the short term.
At present, there is a certain degree of deviation in the small cycle trend, and there are signs of weakening in the short-term trend. The overall price revolves around this range of high altitude, low altitude, and multi cycle participation to see the rhythm of long and short volatility. The 1995 line of the strong and weak divide between long and short positions remained unchanged until the daily level broke through and stabilized at this position.
The upper short-term focus is on the first line resistance from 1994 to 1996, while the lower short-term focus is on the first line support from 1972 to 1970.
On Thursday (November 2nd), US crude oil continued its weak decline; After the premium loss caused by the Middle East conflict, the Federal Reserve decided to become the focus of attention, with oil prices showing a loss at the beginning of November. The Federal Reserve has maintained interest rate stability as expected, leading to a strengthening of the US dollar, but has stated that it will remain open to the possibility of future interest rate hikes. The strengthening of the US dollar has made it more expensive to purchase fuel using other currencies, thereby putting pressure on prices. Last week, the increase in US crude oil and gasoline inventories also put pressure on crude oil futures, as refineries undergoing seasonal maintenance restarted their facilities slower than expected to avoid an increase in gasoline inventories. Analysts said: "The oil market will continue to monitor the deteriorating demand outlook and whether the latest developments in the Israeli Hamas war will lead to supply disruptions." Market analysts said that if the war does not pose a threat to production, Without OPEC+support, oil prices may find it difficult to maintain prices near recent highs until 2024, which makes the meeting later this month crucial. "Oil is an uncertain factor, but currently, the commodity market is in a dormant state., If there are incorrect results in the Middle East region, oil prices are likely to rise significantly.
Market News Analysis
US policymakers struggled during this week's two-day policy meeting to determine whether the financial situation is already tense enough to control inflation, or whether the economy, which continues to exceed expectations, may require more restraint. Finally, the Federal Reserve held its benchmark interest rate unchanged at 5.25% -5.50% on Wednesday. Oil investors have been closely monitoring the Federal Reserve's policy decisions, fearing that a significant interest rate hike may slow down the economy and weaken energy demand.
Price Futures Group analyst Phil Flynn said, "If the Federal Reserve calls a halt, oil prices should be very close to bottoming out." According to Reuters, Saudi Arabia, the largest oil exporter, may reconfirm in the coming days to extend the voluntary production reduction of 1 million barrels per day until December.
Brent crude oil prices hit a 2023 high in September, approaching $98 per barrel, but on Thursday they fell to the $86 per barrel range. Despite being supported by the Middle East conflict, concerns about economic growth and demand continue to put pressure on prices.
Saudi Arabia voluntarily reduced production in July as a supplement to the extensive supply restriction agreement reached in OPEC+6. Saudi Arabia stated in September that it would extend the production reduction deadline until the end of the year and review the decision once a month.
UBS analyst Giovanni Staunovo said, "Due to Saudi Arabia and OPEC+adhering to 'proactive, preemptive, and preventive policies' and considering ongoing economic growth concerns, I expect Saudi Arabia to announce an extension of voluntary production cuts
The Saudi Ministry of Energy did not immediately respond to requests for comment on whether to maintain production cuts in December.
Reuters also expects Saudi Arabia to continue reducing production in December, and they believe that the reduction may continue beyond December.
According to Saudi Arabia's practice in previous months, the decision to maintain the December production reduction may be made in a statement in early November. It is unlikely to take any action on 2024 until the next OPEC+meeting in Vienna on November 26th. The last meeting of OPEC+, including allies such as the Organization of Petroleum Exporting Countries and Russia, was held in June and has limited supply until 2024. We believe Saudi Arabia may extend its voluntary production reduction period beyond the end of December, "said Richard Bronze, an analyst at consulting firm Energy Aspects Callum Macpherson from Investec and Helima Croft from RBC Capital Markets also stated that they believe the rate cut may last for 12 months or even longer.
Hansen said, "Given the current price level and weak seasonal demand, Saudi Arabia is unlikely to consider increasing production, nor will it be in December, nor is it likely to be in the first quarter
According to reports, there was an increase in maritime oil cargo in October, with Brazil and Russia making outstanding contributions. In October, the sea freight of oil increased, the volume of oil cargo sent to Brazil significantly increased, Russian exports continued to recover, and the North Sea shipment volume surged. Since June, the monthly growth rate of 23 oil producing countries and regions has exceeded 38 million barrels per day for the first time. This growth in oil exports has offset the efforts of OPEC+oil producing countries to reduce production.
The growth of Europe and China continues to lag behind market expectations, and the setback in demand growth is affecting crude oil prices as investors worry that a sharp contraction in crude oil usage will not consume production supply. Although the increase in crude oil production was lower than expected, as crude oil usage continued to fall below demand, US crude oil reserves continued to increase, dispelling the energy market's claim of a serious shortage of crude oil pipeline supply.
Looking ahead, oil traders will pay attention to Friday's US non farm employment data, with an expected increase in employment from 336000 in September to 180000 in October. These events may have a significant impact on the price of crude oil denominated in US dollars. Oil traders will gather clues from the data and seek trading opportunities around crude oil prices.
Investors should also continue to pay attention to the developments in the Middle East, as broader conflicts may disrupt supply in the region, leading to nervousness in the oil market.
Yesterday, crude oil rose first and then fell, accompanied by a wave of anti pumping washing and consolidation. It ended at a low level and the daily line closed with a small negative K-line with a long shadow. Continuing to break through the low point of 81.50 locally, combined with the resistance point of yesterday's second high and the resonance between the previous day's high point of 83.30-83.50 being obstructed, this position forms a short-term short position defense. The 4-hour chart shows that the steps are fluctuating and falling, and the resistance is currently moving down near the mid rail, relying on the oscillation of the mid rail to move downwards. Overall, it remains weak and under exploration. The rhythm is slightly slow and circuitous, but currently the structure has started to weaken slowly, transitioning into a unilateral decline in the oscillation. A roller coaster ride with one hour of ups and downs, creating a tumultuous downward step.
The upper short-term focus is on the first line of resistance from 83.7 to 8.9,
Stay tuned for short-term support from 81.3 to 81.5.
