03/11/2023: This Week in Gold with Market Updates:
Gold opened the week trading at $2,005 an ounce, a weekly high for the metal before it embarked upon a bearish trend for much of the week. Monday saw Gold prices hold steady near the psychological threshold of $2,000. This was driven by escalating safe-haven demand amid the ongoing Middle East conflict. Gold experienced a marginal 0.5% dip, to close the day at $1,995. After gold surpassed the $2,000 level on Friday and hit $2,009, StoneX analyst Rhona O’Connell noted that gold was establishing a foundation for future gains, contingent on geopolitical developments.
On Tuesday, gold experienced a modest decline. Gold experienced a peak to $2,003 during the early trading hours before retreating 0.9% to settle at $1,984. The retreat in price can be seen to be psychological resistance that gold has often experienced around the $2,000 level. Investors may have also seen an opportunity to take profits ahead of significant economic reports to be released during the week.
Gold prices dipped on Wednesday following the FED’s decision to keep interest rates unchanged. FED Chair, Jerome Powell, indicated that rate cuts are not currently under consideration, which exerted further downward pressure on gold. After opening at $1,980, price initially rose to $1,987 prior to the FED’s meeting before retreating to $1,975 to close.
On Thursday, gold exhibited strength as the U.S. dollar weakened and Treasury yields retreated as investors speculated that the FED may have completed their current interest rate hiking cycle. This added to the appeal of gold, as is expected. Thursday saw gold reverse the bearish trend that it was on and push higher, ultimately finishing the day 0.5% higher at $1,985 an ounce.
Gold advanced further on Friday, briefly surpassing the psychological $2,000 level during the day. Weak U.S. job data added to the already existent safe-haven demand that the yellow metal was experiencing. The release of the latest jobs data was welcoming to bullion investors as it added to the hope that the FED may finally be done with raising rates. At the time of writing, gold is trading at $1,991.
Silver finished the day 0.9% higher on Monday, closing at $23.34 an ounce after opening at $23.14. Silver typically follows gold’s trajectory yet may diverge every now and again during extreme events.
On Tuesday, silver fell 1.6% to close the day at $22.75 an ounce.
Silver fell to a weekly low on Wednesday, hitting $22.57 before quickly bouncing off the low and moving to the upside. Price climbed 2% to settle at $23.04 an ounce.
After a brief run to the upside, silver moved lower again following the FED’s stance on the future of interest rates. Price closed at $22.71 an ounce.
On Friday, silver followed the same upward trajectory as gold, moving higher in response to the latest jobs data and a weakened dollar. At the time of writing, silver is up 1.9% from the open and the metal is trading at $23.17 an ounce.
Tuesday: Consumer Confidence:
The consumer confidence index fell to 102.6 in October, down again from September’s figures. Consumer’s anticipate rising inflation and are predicting a potential economic downturn, despite maintaining strong spending levels. Concerns over inflation and global conflicts impact sentiment.
Wednesday: Interest Rate Decision (FED):
The FED, for the second consecutive meeting, decided to maintain interest rates at the 22-year high, between 5.25 and 5.5%. This decision reflects the FED’s cautious approach and the Central Bank’s aim to assess the impact of previous rate hikes on inflation and the economy.
While acknowledging a robust economic expansion and sustained job gains, the FED expressed concern about tightening financial conditions due to rising long-term bond yields. This decision arrived at a time of heightened global market volatility, influenced by increased geopolitical tensions and soaring long-term Treasury yields.
Analysts anticipated high rates to help moderate demand, but the economy’s resistance poses a challenge to the control of inflation. The FED indicated that the rate hike cycle was not over.
Thursday: U.S. Jobs Data and Interest Rate Decision (BOE).
The U.S. job market exhibited signs of moderation as non–farm payrolls increased by 150,000 in October. This suggests a gradual normalisation in the labour market, driven by an improved labour supply and a slower pace of hiring. The unemployment rate rose to 3.9%, indicating a slight increase in lay-offs. Investors responded, which led to a rally in Treasuries and a weakening dollar. The data raised bets of the FED being finished with the current rate hiking cycle.
The Bank of England maintained interest rates at the current 15-year high i.e. at 5.25% for the second consecutive meeting. Despite the economic projections hinting at recessionary trends, the BOE emphasised that borrowing costs would remain elevated. The Bank of England’s resolute stance on interest rates, aimed at curbing inflation, may influence investor sentiment towards safe-haven assets like gold. As central banks around the world grapple with inflationary challenges, gold’s appeal as a hedge against rising prices may gain traction. However, gold’s trajectory will also be shaped by broader economic factors and geopolitical developments, warranting close monitoring for potential investment strategies.
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Have a great weekend.