Gold Weekly Commentary: Gold prices recorded their largest weekly increase in the past four weeks, the “Palestine-Israel” situation has added variables, and the target is set at the 2000 mark
Gold prices posted their biggest weekly gain in four as the dollar and U.S. Treasury yields weakened and expectations grew that the Federal Reserve would end monetary policy tightening.
On Friday (November 17), gold prices remained stable, with spot gold closing down 0.03% at $1,980.65 per ounce after rising to a two-week high earlier in the session. Prices rose about 2.2% last week.
(Spot gold trend chart)
Everett Millman, chief market analyst at Gainesville Coins, said on Friday: “There is a lot of potential for gold prices to continue to rise, but before the next round of gains, gold prices must move a bit lower and possibly test the $2,000 level at the same time. Data released this week confirmed The fact that the Fed may end raising interest rates will boost gold prices. The direction of gold prices will depend on the upcoming data and the market’s reaction to the data.”
Review of the week’s headlines
Last Monday (November 13), before the release of the US Consumer Price Index (CPI), the price of gold (XAU/USD) rose slightly due to the weakening of the US dollar and the decline in US Treasury bond yields. Gold prices rose as they encountered some buyers as U.S. Treasury yields fell and the U.S. dollar weakened overall.
Although the Israeli-Palestinian conflict continues, political risks remain muted based on market reaction. However, an escalation in the conflict remains and could be positive for gold. Meanwhile, gold traders are looking to get some clues from a Fed spokesman.
Last Tuesday (November 14), gold prices rose as U.S. Treasury yields plummeted due to a weak U.S. inflation report, which put pressure on the U.S. dollar. Spot gold was quoted at 1963.00, an increase of 0.86%.
The U.S. Consumer Price Index showed annual inflation fell to 3.2% in October from 3.7% in September, below market expectations of 3.3%. Core inflation also slowed to 4% from 4.1%, the lowest level since September 2021. The data undermined expectations that the Federal Reserve would raise interest rates before the end of the year and boosted market expectations for the first rate cut since 2020.
Last Wednesday (November 15), gold prices faced selling pressure as U.S. retail sales data for October fell slower than expected. Spot gold fell back after hitting a weekly high of $1,975.22 per ounce. The reason for its failure to hold above $1,970 was mainly due to the correction of the U.S. dollar and the rebound in U.S. Treasury yields. Spot gold closed down 0.19% at $1,959.25 per ounce.
In terms of U.S. economic data, the producer price index (PPI) fell by 0.5% in October, missing expectations of a 0.1% increase. The annual growth rate also dropped from 2.2% to 1.3%. Additionally, core PPI data was lower than expected. The data were consistent with consumer price index (CPI) data released last Tuesday, which suggested inflation was cooling. Retail sales fell 0.1% in October, compared with expectations for a sharp decline of 0.3%.
Economic focus reinforced evidence of a push for the dollar lower last Tuesday, although the impact was different last Wednesday, likely due to a pullback. For now, risk appetite remains, U.S. bonds are strong, and the dollar remains fragile, all of which may support further gains in gold prices.
Last Thursday (November 16), spot gold rose sharply and resumed its upward trend. Buoyed by a weaker U.S. dollar and falling Treasury yields, gold broke through resistance at $1,975 and jumped to its highest level in more than a week, with prices rising above $20, also driven by technical factors. The spot gold settlement price closed up 1.12% at $1,981.11 per ounce.
Data released on Thursday showed a softening in the labor market, which, coupled with recent inflation data, reinforced the view that the Federal Reserve is unlikely to raise interest rates further. These unfavorable U.S. economic data exacerbated the decline in U.S. Treasuries, which are often seen as the cost of holding the non-yielding metal, causing prices to surge. U.S. Treasury yields closed at weekly lows, with the 2-year bond rate falling to 4.83%, and the 5-year and 10-year yields falling by 4.43% and 4.45% respectively.
Outlook for this week
The latest Kitco News Weekly Gold Survey shows retail investors retain an overwhelming bullish bias in the week ahead, while a similar proportion of market analysts have shifted to neutral assessments of gold’s near-term prospects.
Last week, 12 Wall Street analysts participated in the Kitco News gold survey. As in the previous week, three experts (25%) expect gold prices to rise in the coming week, but only one expert (8%) predicts gold prices will fall. An overwhelming majority (67%) are neutral on gold in the week ahead.
Meanwhile, Kitco’s online poll generated a total of 595 votes and market participants were more optimistic than in the previous week’s survey. 394 retail investors, or 66%, expect gold prices to rise in the coming week. Another 125 respondents, or 21%, expect lower prices, while 76 respondents, or 13%, are neutral on the precious metal’s near-term prospects.
(Image source: Kitco)
This week will be a short one for trading and economic data, as Thursday is the U.S. Thanksgiving holiday, meaning much of the activity will be compressed into the first three days. Highlights include the release of the latest FOMC minutes and October existing home sales data on Tuesday, followed by October durable goods data, November University of Michigan consumer sentiment data and weekly jobless claims on Wednesday.