On Thursday (November 9th), as Federal Reserve Chairman Jerome Powell maintained his tightening tendency, he stated that although inflation has decreased, the central bank still lacks confidence in controlling it. Powell's hawkish speech helped the US dollar and US bond yields rise, but the impact on gold was not significant, with gold closing slightly higher.
Spot gold rose 0.41% (or 8.04 US dollars per ounce) to close at 1958.20 US dollars per ounce.
COMEX December gold futures closed 0.61% higher at $1969.80 per ounce.
COMEX December silver futures rose 0.78% to close at $22.905 per ounce.
Market News Analysis
Powell delivered a speech during a group discussion at the International Monetary Fund in Washington, D.C. Powell stated that the Federal Open Market Committee (FOMC) is committed to achieving a sufficiently restrictive monetary policy stance to reduce inflation to 2% over time; We do not have confidence that we have achieved such a position: "Improving supply issues in the economy will help reduce inflation from its 40 year high in June 2022 to 2020; However, he stated that the improvement in economic conditions has done everything possible to reduce inflation. "Looking ahead, a significant portion of the progress made in reducing inflation may have to come from tightening monetary policies that suppress aggregate demand growth
The yield of US treasury bond bonds stopped the sharp decline last week and is rising, but it failed to depress the gold price. After Powell's speech, the US 10-year treasury bond bond yield and the US dollar index continued to rise.
Investors believe that the probability of the Federal Reserve keeping interest rates unchanged is 91%, while the possibility of the first rate cut is expected to be in June 2024, with a probability of 42%.
The gold market did not respond much to Powell's hawkish remarks. Spot gold has successfully gained solid support at around $1950 per ounce.
Philip Petursson, Chief Investment Strategist at IG Wealth Management, stated that the strengthening of the US dollar in 2023 has dragged down gold prices, but gold may experience significant breakthroughs in the near future. Petursson stated that even at $2000 per ounce, there is considerable room for gold prices to rise, and gold prices should rise significantly in the coming year.
For most of this year, gold has been dragged down by strength and the US dollar, "Petursson said. They are often negatively correlated, so as the US dollar strengthens, gold tends to weaken slightly. Now, if we think the US dollar will start to weaken from here, I think this is the basic situation for us to enter 2024, which is beneficial for gold
Petursson stated that IG believes that gold is undervalued by 20%. Once it seizes this offer and breaks through, firmly breaking through $2000 per ounce, we believe it may go even higher to the potential $2400 per ounce
Capital Economics predicts that gold prices will rise to $2100 per ounce by the end of 2024. Keiran Tompkins, a macro commodity economist at Kaitou, stated in a report that the conflict between Palestine and Israel is not expected to prevent the Federal Reserve from cutting interest rates next year. Our basic assumption is that the Israeli-Palestinian conflict will not lead to a significant increase in energy prices, although we acknowledge the tail risk of the conflict expanding to include oil producing countries and physical supply disruptions. Therefore, the current form of conflict is not enough for central banks to start loosening policies next year, "Tompkins said." The decline in energy prices means that the Federal Reserve will be more likely to lower inflation rates to its target of 2%. With inflation under control, Kaitou Macro expects to significantly lower interest rates next year.
"We expect that the Federal Reserve will cut the federal funds rate by 200 basis points next year from the first half of 2024. Therefore, our forecast is that by the end of 2024, the yield of 10-year US treasury bond bonds will decline from slightly higher than 4.50% at present to 3.75%, most of which is due to the decline of the real yield and the weakening of the US dollar."
Although investment demand is expected to push gold prices back to historical highs, Tompkins pointed out that he does not expect a significant breakthrough as price increases will affect physical demand.
Investors will closely monitor the Federal Reserve's Logan speech, the initial value of the Michigan Consumer Confidence Index in November, and UoM's 5-year consumer inflation expectations. These events may point the way for gold prices.
Focus on financial data and events on Friday (Beijing time)
① 15:00 UK Q3 GDP Annual Rate Correction
② 15:00 UK September adjusted merchandise trade account
③ 15:00 UK September Three Month GDP Monthly Rate
④ 15:00 UK September Manufacturing Output Monthly Rate
⑤ 15:00 UK September Industrial Output Monthly Rate
⑥ 20:30 Federal Reserve Logan delivers a speech
⑦ 20:30 European Central Bank President Lagarde has a fireside conversation
⑧ 23:00 Expected one-year inflation rate for November in the United States
⑨ 23:00 Initial Value of the University of Michigan Consumer Confidence Index for November in the United States
⑩ The total number of oil drilling operations for the week from 02:00 the next day to November 10th in the United States
