HFM information and reviews
HFM
96%
Octa information and reviews
Octa
94%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
Vantage information and reviews
Vantage
85%

Gold hits new records, but runs out of fuel


4 December 2023 Written by Raffi Boyadjian  XM Investment Analyst Raffi Boyadjian

The meteoric rally in gold prices came to a crescendo early on Monday, with the precious metal hitting a new record high above $2,100 per ounce, before running into a wave of profit-taking and subsequently retreating. With the global economy losing steam and inflation cooling off, bond yields have declined substantially as markets brought forward the anticipated timing of Fed rate cuts, which in turn has served as rocket fuel for gold prices. 

Geopolitical demand has been another driving force behind this blistering rally. Tensions in the Middle East have fueled demand for gold as a hedge, while direct purchases from China and other central banks to diversify their reserves amid a ‘new Cold War’ climate have also played a crucial role in lifting prices this year.

The fact that the breakout today happened in a thin liquidity environment during early Asian trading complicates matters, and perhaps explains why gold got hammered back down so quickly.

That said, the broader landscape for gold seems favorable heading into next year, with the world economy staring down the barrel of a mild recession and central banks anticipated to slash interest rates significantly to cushion the blow.

Oil keeps sinking despite ‘good news’

Meanwhile, oil prices have been unable to capitalize on a series of 'encouraging' developments lately. An extraordinary decision by OPEC+ last week that saw the cartel announce deeper cuts to oil production was met with skepticism from traders, who doubted whether all OPEC nations would adhere to these "voluntary" production cuts. Similarly, some missile attacks against commercial ships in the Red Sea over the weekend were not enough to spur buying appetite in energy markets either. The Pentagon said a US warship shot down three drones in response, with Yemen’s Iran-backed Houthi rebels claiming responsibility for these attacks in an escalation of the regional conflict.

Oil prices dropped further on Monday despite the prospect of reduced supply, which underscores that the market is more concerned about weakening demand and views the OPEC+ supply cuts as insufficient to balance things out, especially with US production at record levels and rising.

All quiet on the FX front, RBA decision next

Trading activity was more quiet in the FX arena, with economic news flow being light and most major currency pairs staying close to their opening levels. The US dollar chopped around with no clear direction, as traders weighed some hawkish remarks from the Fed chief that it is ‘premature’ to speculate on rate cuts against a softer ISM manufacturing survey on Friday.

Last week, a spell of euro weakness was one of the dominant trading themes. Euro/sterling fell particularly sharply, as cratering inflation in the Eurozone reinforced speculation that the ECB will be the first major central bank to cut rates next year, whereas the sanguine mood in equity markets bolstered the risk-sensitive British pound.

Looking ahead, the next event for FX traders will be the Reserve Bank of Australia rate decision early on Tuesday. Markets assign only a 5% probability for a rate increase, so the market reaction will come down mostly to whether the RBA keeps the door open for further action in February. As for the rest of the week, there is also a Bank of Canada rate decision scheduled for Wednesday, ahead of the latest edition of US nonfarm payrolls on Friday.

By XM.com
#source

Share: Tweet this or Share on Facebook


Related

Fed minutes and Nvidia earnings in the spotlight
Fed minutes and Nvidia earnings in the spotlight

Dollar gets knocked down ahead of FOMC meeting minutes. Gold recovers more ground, China-related assets gain after rate cut. Nvidia earnings later today will set the tone in stock markets.

21 Feb 2024

Dollar in wait and see mode, kiwi extends gains

Dollar trades mixed as traders await tomorro's Fed minutes. Kiwi extends gains on bets that the RBNZ could hike again. Aussie remains unimpressed by hawkish RBA minutes. China announces biggest ever cut in 5-year LPR.

20 Feb 2024

Dollar unable to capitalize on hot inflation prints
Dollar unable to capitalize on hot inflation prints

US producer prices come in hot, but dollar cannot sustain gains. Stock markets take a step back, Nvidia earnings to set the tone. Gold recovers recent losses with some help from geopolitics.

19 Feb 2024

Rate cut bets boosted by surprise dip in US retail sales

"Higher for longer" fears ease as US consumers spend less. Pullback in yields propels S&P 500 to another record close. Dollar softness props up euro as ECB doves get more vocal. Early rate cut hopes thrown a lifeline.

16 Feb 2024

Sticky US inflation fuels the dollar's engines

Dollar rallies across the board after higher-than-expected CPIs. Investors scale back their rate cut bets, get closer to Fed's dot plot. Dollar/yen surges above 150, triggers intervention warnings. Pound extends declines after UK CPIs, awaits tomorrow's GDP.

14 Feb 2024

Markets seek direction from US CPI report
Markets seek direction from US CPI report

Wall Street eases from highs as investors on standby for US inflation update. Dollar supported as yields crawl higher, yen resumes slide. Pound lifted by strong jobs data. Bitcoin soars above $50,000.

13 Feb 2024


Forex Forecasts

MultiBank Group information and reviews
MultiBank Group
84%
XM information and reviews
XM
82%
FP Markets information and reviews
FP Markets
81%
FXTM information and reviews
FXTM
80%
AMarkets information and reviews
AMarkets
79%
BlackBull information and reviews
BlackBull
78%

© 2006-2024 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.