2023-11-27 06:44:00
(Original title: Gold market analysis: Weak U.S. data raises expectations of interest rate hikes, gold takes the opportunity to break through the 2000 mark)
Huitong Finance APP News – As recent U.S. data show that economic and inflationary pressures have slowed down, the market has ruled out the possibility of further interest rate hikes by the Federal Reserve, and expectations for an interest rate cut next year are getting higher and higher. The U.S. dollar fell again last week, marking the second consecutive time. Weekly decline. Driven by the weakening of the U.S. dollar, gold rose strongly last week. Spot gold prices rose by more than $20, or 1.1%, last week, closing above the key $2,000/ounce mark.
On Friday, the S&P Global Composite PMI showed a slight increase in U.S. private sector economic activity, remaining at 50.7. However, the manufacturing PMI declined during the same period, falling from 50.0 to 49.4, which is in the contraction range. On the other hand, the services PMI improved slightly, rising from 50.6 to 50.8. It is worth noting that U.S. service and manufacturing employment fell in November for the first time since mid-2020, affected by sluggish demand and rising costs. In response, markets appear to be weighing weakness in manufacturing, increasing bets that the Fed will pause on raising interest rates. This also explains why gold rose on Friday and finally closed above the $2,000/ounce mark.
Currently, any signs of weakness in the U.S. economy will give the Federal Reserve limited room to maintain higher interest rates and increase the possibility of an early interest rate cut. This week, Powell’s speech and major U.S. data will come one after another. Various data and Powell’s speech are expected to cause considerable fluctuations in the gold market. First, the U.S. Bureau of Economic Analysis will release a revised estimate of annualized growth for third-quarter gross domestic product (GDP) on Wednesday. This was followed by the personal consumption expenditures (PCE) price index and the U.S. ISM manufacturing purchasing managers index in November. On Friday, Federal Reserve Chairman Jerome Powell will also speak on monetary policy. Regarding the above-mentioned data, if the final results are unsatisfactory, it will surely further stimulate the market’s expectations for the Federal Reserve to cut interest rates next year, and then gold will continue to find reasons to rise further. However, what needs to be watched closely is the speech by Federal Reserve Chairman Powell on Friday before the December interest rate meeting. If Fed policymakers deliberately dampen market expectations and try to convince participants that they will not consider cutting interest rates for an extended period of time, the dollar may find its footing to stabilize, forcing gold’s bullish momentum to cool down.
The daily chart of gold shows that the relative strength index (RSI) has gone above 60, indicating that gold is still trying to accumulate upward momentum. Gold prices closed above the key level of $2,000 an ounce last Friday. Gold bulls will need to keep an eye on whether gold prices can hold this level. Once gold prices confirm $2,000 per ounce as a support level, it may push gold bulls to continue trying to advance toward the peak. In this case, $2010/oz and $2040/oz could be set as the next bullish targets. On the downside, the 20-day simple moving average (SMA) forms dynamic support near $1,980 per ounce. If the daily closing price of gold is below $1,980 per ounce, it will weaken the bullish atmosphere for gold.
Wang Gang, Bank of China Guangdong Branch
These are my personal views only and do not represent the views of my institution.
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