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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. 

Oil - Brent

84.58 Price
-0.610% 1D Chg, %
Long position overnight fee 0.0284%
Short position overnight fee -0.0504%
Overnight fee time 21:00 (UTC)
Spread 0.032

Gold

2,411.42 Price
-0.180% 1D Chg, %
Long position overnight fee -0.0191%
Short position overnight fee 0.0109%
Overnight fee time 21:00 (UTC)
Spread 0.60

Natural Gas

2.32 Price
+1.850% 1D Chg, %
Long position overnight fee -0.0162%
Short position overnight fee -0.0057%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Silver

30.82 Price
-2.110% 1D Chg, %
Long position overnight fee -0.0205%
Short position overnight fee 0.0123%
Overnight fee time 21:00 (UTC)
Spread 0.040

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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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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