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XAU/USD Latest: Gold advances as weaker data weighs on US yields

By Daniela Hathorn

13:43, 17 November 2023

Gold bars
Gold bars - source: getty images

Gold (XAU/USD) is looking to close the week in the green as the precious metal builds higher momentum on Friday, taking the weekly gain to 2.75%. The commodity has been reacting mostly to falling yields in the US – as a non-yielding asset, gold tends to outperform when yields are low.

XAU/USD daily chartXAU/USD daily chart - Past Performance is not a reliable indicator of future results

Weakening data in the US is the main reason behind the recent drop in the US dollar and yields. Whilst the economy continues to show robustness and is far away from a recession, the softer jobs and inflation data have increased the odds that there will be no more rate hikes from the Federal Reserves, even bringing forward expectations about rate cuts. Data from Reuters shows markets are now pricing in 22bps of cuts by May, and then increasing to over 50bps by the end of July.

Market-implied pricing for the upcoming FOMC meetings

Market-implied pricing for the upcoming FOMC meetingsSource: refinitiv

With concerns about a wider escalation of the Israel-Gaza being mostly out of the way, the appetite for gold could remain fragile and dependent on the progress in yields and the dollar. Fundamentally, the latest economic data across the globe is showing weakening growth and falling inflation but so far recession seems to be off the books, at least immediately, which weakens the appetite for gold as a hedge against economic hardship.

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2.27 Price
-2.290% 1D Chg, %
Long position overnight fee -0.0162%
Short position overnight fee -0.0057%
Overnight fee time 21:00 (UTC)
Spread 0.0050

Oil - Brent

84.62 Price
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Gold

2,407.90 Price
-0.140% 1D Chg, %
Long position overnight fee -0.0191%
Short position overnight fee 0.0109%
Overnight fee time 21:00 (UTC)
Spread 0.30

Silver

30.63 Price
-0.700% 1D Chg, %
Long position overnight fee -0.0205%
Short position overnight fee 0.0123%
Overnight fee time 21:00 (UTC)
Spread 0.040

In the US, a soft landing – whereby inflation falls without a big hit to growth – seems like a very likely scenario. This would likely allow bonds and stocks to move higher simultaneously. Conversely, in a hard-landing scenario, bonds would likely overtake stocks as emergency rate cuts would weigh on sentiment, bringing yields significantly lower.

For gold, a hard landing would be better as investors would be more likely to flock to it in search of safety, but even if a soft landing turns out to be the way forward, investors are likely to keep their portfolios diversified with precious metals in case things get ugly further down the line.

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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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