Gold Rises as Traders price-in Fed Rate Cuts
By Kyle Rodda
13:17, 20 November 2023
Gold prices have declined despite a drop in Treasury yields and a weaker US Dollar. We look at the key drivers and technical levels for the gold price.
Gold rises as softer data raises odds of Fed rate cuts
Weaker economic data and signs of a more rapid fall in inflation in the United States have led traders to price out further US Federal Reserve hikes and bake-in a higher probability of rate cuts next year. According to data from Bloomberg, futures are implying 90 basis points worth of cuts in 2024. The drop in rate expectations and, subsequently, Treasury yields have supported the gold price as the yield advantage in bonds diminishes at the margins.
(Source: Bloomberg)
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Gold prices boosted by a weaker US Dollar
The pricing-out of US Federal Reserve rate hikes and the risk of slowing US economic activity has led to a weaker US Dollar. The lower Dollar has also given gold a marginal boost as the positive correlation between the Greenback and the yellow metal following the onset of the Israel-Hamas war weakens.
(Source: Trading Economics)
Past Performance is not a reliable indicator of future results.
Gold long positions decline despite higher prices
Despite the rise in the gold price last week, long positioning in the gold market fell slightly, according to data compiled by the World Gold Council. Net long positioning remains relatively low by historical standards, suggesting there could be more buyers waiting on the sidelines in the event of a bullish catalyst for gold.
(Source: World Gold Council, Comex)
Past Performance is not a reliable indicator of future results.
Gold pulls back as upside momentum fades
Gold rejected downward sloping trend line support as the daily RSI indicates momentum remains skewed to the downside. The market found buying support at $US1930, which marks a confluence of technical levels, including the 50 and 100-day moving averages. A break above downward sloping trendline resistance and technical resistance at $US2000 would be a bullish signal for gold; a break below $US1930 would be a bearish signal.
(Past performance is not a reliable indicator of future results)
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