Data showing a rise in the US unemployment rate in October added to optimism that the Fed will be less aggressive in rate hikes going forward. Gold prices rose 3% on Friday as the dollar subsequently fell.
“This situation allowed gold prices to rise”
US bosses hired more staff than expected in October. However, the increase in the unemployment rate to 3.7% pointed to some relaxation in the labor market conditions. The dollar index (DXY) fell 1.6% following the employment data. This made dollar-priced gold more attractive to offshore buyers.
Spot gold closed Friday and the week at $1,680, up 3.15%. Gold bullion is up about 2.2% this week. That marked the biggest weekly percentage profit since the end of July. Kitco Metals senior analyst Jim Wyckoff comments:
The US jobs report hit the sweet spot of what the market wanted to see. This allowed gold prices to rise.
“A real run for gold to $1,700 next week is possible”
The US central bank increased interest rates by 75 basis points on Wednesday. However, he signaled that they will soon shrink the aggressive rate hike cycle as it gives the economy time to absorb the fastest monetary policy tightening in the last 40 years. In the midst of this, Fed policymakers indicated on Friday that they would consider a smaller rate hike at their next policy meeting. Edward Moya, senior analyst at OANDA, comments:
Long variable delays in the Fed’s tightening convinced traders to take a slower rate of rise and then decide when to stop. If next week’s US inflation report includes a downside surprise, it’s possible for gold to run true to $1,700.
What are the gold scenarios compared to the US CPI data?
Investors are still digesting the Fed’s comments, according to Carlo Alberto De Casa, external analyst at Kinesis Money. The analyst notes that there is a little more optimism on Friday. In this context, the analyst makes the following statement:
Uncertainty still prevails as markets try to focus attention on the dove’s announcements. It is possible that a random number above expectations will push investors to bet on further rate hikes. This will put pressure on gold and shares. Numbers below the estimates (in this odd scenario) would likely be positive for gold and equities.
Interest rates are likely to remain high, according to OCBC FX strategist Christopher Wong. But the strategist says that the slowing rate of increase is likely to moderate the pace of the downturn below.
“Gold is unlikely to move further”
Koindeks.com As you follow, gold rose to $1,680 against the hawkish Fed tone. But Commerzbank strategists report that the recovery has come to a halt. strategists explain these views as follows.
Fed Leader Powell said that the speed of rate hikes is not that valuable anymore. He also stressed that the key question is at what level interest rates will eventually peak. And now, Fed members believe it looks higher than they assumed in September. The Fed’s goal is to bring real interest rates into positive territory. This means that the key rate will remain high until the inflation rate drops below this.
Strategists, in general, find the FOMC meeting more hawkish than expected. They note that this is reflected in expectations for higher interest rates and a stronger dollar. From this they come to the following conclusion:
It ultimately caused the gold price to drop. Gold made a U-turn shortly before hitting yearly lows. From here it started to rise again.
Weekly gold technical analysis
Technical analyst Christopher Lewis describes what he saw in the technical photo of gold in the following form. Gold markets initially fell during the week. But on Friday, on the contrary, he turned and took off. Obviously, there is a lot of concern right now about what central banks around the world will do. It’s worth noting that there were large purchases of gold, possibly late Thursday, which several futures analysts recorded. Whether this has any meaning in the future will be a question for them. But what I see is that there is a lot of resistance at the top quickly. So I think we are more likely to not go sideways in the short term.
If it can break above the $1,750 level, there would be a huge turnaround in the market. Presumably, it opens the possibility of a bull market. I think this will happen eventually. But we are nowhere near a scenario where central banks around the world begin to loosen monetary policy, particularly the Federal Reserve. There are some people out there trying to ‘manage the Fed from the front’. However, the truth is that they will stay tight for longer than many people expect. So I think rallies and gold probably have a limited shelf in some form.
If we fall below the lows of the last few weeks, then it’s time to start shorting again. Because that would be a pretty big breach of short-term reinforcement. At this point, I predict that the target will reach the level of $ 1,600, and perhaps even $ 1,500 after that. When trading, keep in mind the negative correlation between this market and the US dollar and the interest rate.