Gold remains positive as US data favours bets for the end of rate hikes
- Gold appreciates as bets of rate cuts in early 2024 extend to most of the major central banks.
- The cautious market sentiment is providing an additional support to the precious metal
Gold price (XAU/USD) keeps a mild buying tone in Thursday’s early European session, with price action approaching the top of the last few days’ trading range.
US Jobless Claims have increased to 220,000 in the last week of November, up from 218,000 claims in the previous week. This confirms the weakening trend of the US labor market anticipated by the JOLTs and the ADP reading earlier this week and endorses the view that the Fed might be prone to start cutting rates in March 2024.
Investors are increasingly confident that the major central banks’ tightening era is over and speculation that rate cuts might come before previously thought is keeping bullion sellers in check.
The Federal Reserve (Fed) is widely expected to leave rates on hold at their monetary policy meeting next week, with the market pricing in a 50% chance that rate cuts will start in March Next year.
Investors expect the European Central Bank (ECB) to stand pat on December 14 and to cut rates by 150 points next year, starting in March.
Earlier this week, the Bank of Canada (BoC) and the Reserve Bank of Australia (RBA) hit the pause button, adding to evidence that the tightening cycles are coming to an end.
Daily Digest Market Movers: Hopes of rate cuts and lower US yields keep Gold buoyed
- US JObless Claims data confirms that the labor market is loosening and fuels hopes that the Fed might be forced to cut rates ahead of schedule.
- Investors are now looking at Friday’s Nonfarm Payrolls. Another downbeat reading here might boost hopes of Fed rate cuts in early 2024 which would push Gold higher.
- The CME Group Fed Watch tool prices a 99% chance that the Fed will hold rates next week and a 50% probability of a 25 bps rate cut in March 2024.
- Moody’s warning to China’s debt credit rating has reactivated fears about the stability of the world’s second-largest economy, weighing on market sentiment and providing additional support to the safe-haven gold.
- The US Dollar has pulled back from Wednesday’s highs, as US yields remain depressed at three-month lows although it remains on track to a significant weekly recovery.
Technical Analysis: Gold prices are trading in range wuth upside attemts capped below $2,040
The technical picture shows the XAU/USD pair looking for direction, moving within a narrow range, supported above the key $2,000 level, yet unable to find any meaningful acceptance when it approaches the $2,040 level.
A look at the four-hour chart and we see price action capped below the 50-period SMA. The RSI wavering around the 50 line, which suggests a lack of clear direction with investors awaiting the release of Friday’s Nonfarm Payrolls report.
From a wider perspective, the longer-term bullish trend from early October lows remains intact.
Immediate resistance remains at $2,040, which guards the path towards $2,067, ahead of the record-high $2,150. On the downside, a confirmation below $2,000 would negate the bullish view and add bearish pressure towards $1,950 and $1,932.
US Dollar price today
The table below shows the percentage change of US Dollar (USD) against listed major currencies today. US Dollar was the weakest against the Japanese Yen.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.02% | -0.03% | 0.09% | -0.20% | -1.45% | 0.01% | 0.20% | |
| EUR | -0.02% | -0.07% | 0.09% | -0.19% | -1.48% | 0.01% | 0.18% | |
| GBP | 0.06% | 0.08% | 0.16% | -0.11% | -1.39% | 0.08% | 0.26% | |
| CAD | -0.09% | -0.09% | -0.15% | -0.28% | -1.57% | -0.08% | 0.11% | |
| AUD | 0.18% | 0.19% | 0.12% | 0.29% | -1.28% | 0.19% | 0.37% | |
| JPY | 1.45% | 1.48% | 1.41% | 1.53% | 1.25% | 1.42% | 1.68% | |
| NZD | -0.01% | 0.00% | -0.06% | 0.08% | -0.21% | -1.47% | 0.22% | |
| CHF | -0.20% | -0.18% | -0.24% | -0.11% | -0.40% | -1.66% | -0.18% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Fed FAQs
Monetary policy in the US is shaped by the Federal Reserve (Fed). The Fed has two mandates: to achieve price stability and foster full employment. Its primary tool to achieve these goals is by adjusting interest rates.
When prices are rising too quickly and inflation is above the Fed’s 2% target, it raises interest rates, increasing borrowing costs throughout the economy. This results in a stronger US Dollar (USD) as it makes the US a more attractive place for international investors to park their money.
When inflation falls below 2% or the Unemployment Rate is too high, the Fed may lower interest rates to encourage borrowing, which weighs on the Greenback.
The Federal Reserve (Fed) holds eight policy meetings a year, where the Federal Open Market Committee (FOMC) assesses economic conditions and makes monetary policy decisions.
The FOMC is attended by twelve Fed officials – the seven members of the Board of Governors, the president of the Federal Reserve Bank of New York, and four of the remaining eleven regional Reserve Bank presidents, who serve one-year terms on a rotating basis.
In extreme situations, the Federal Reserve may resort to a policy named Quantitative Easing (QE). QE is the process by which the Fed substantially increases the flow of credit in a stuck financial system.
It is a non-standard policy measure used during crises or when inflation is extremely low. It was the Fed’s weapon of choice during the Great Financial Crisis in 2008. It involves the Fed printing more Dollars and using them to buy high grade bonds from financial institutions. QE usually weakens the US Dollar.
Quantitative tightening (QT) is the reverse process of QE, whereby the Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from the bonds it holds maturing, to purchase new bonds. It is usually positive for the value of the US Dollar.