On Thursday, US economic data reinforced expectations that the Federal Reserve will adopt a cautious approach to rate cuts in the coming year. The US Dollar Index hit a new 2-year high, pressuring gold, which briefly surged past the $2620 mark before paring gains to close 0.34% higher at $2594.65 per ounce. Oil prices weakened as global central banks signaled a cautious stance on monetary easing, raising concerns about next year’s demand. US crude futures closed below the key $70 level.
Gold Market Overview
On Thursday, US economic data bolstered market expectations that the Federal Reserve will adopt a cautious approach to rate cuts in 2024. The US Dollar Index hit a new 2-year high, pushing gold briefly above $2620 per ounce before retreating. By the close, gold posted a 0.34% gain to settle at $2594.65 per ounce.
Economic Data & Market Sentiment
- US GDP: The final estimate of third-quarter GDP growth was revised up to 3.1% annually, beating the previous estimate of 2.8%.
- Jobless Claims: Weekly initial jobless claims declined more than expected, indicating that the labor market is gradually softening. This strengthened expectations that the Federal Reserve will slow the pace of rate cuts.
Bart Melek, Head of Commodity Strategy at TD Securities, commented, “The GDP data and jobless claims suggest the economy remains strong.” He added that a resilient economy combined with inflation risks gives the Fed little reason to act aggressively, which traditionally weighs on non-yielding assets like gold.
Dollar & Bond Yields
The US Dollar Index (DXY) held on to the prior day’s gains, climbing 0.35% to 108.401 — its highest in over two years. Meanwhile, the 10-year US Treasury yield rose 5.82 basis points to 4.5722%, further pressuring gold prices.
Vassili Serebriakov, an FX strategist at UBS in New York, said, “The key focus is on central bank decisions, which have been broadly supportive of the US dollar. The Fed’s hawkish rate cut approach and the Bank of Japan’s dovish stance are the two main drivers.”
What to Watch Today
Investors will focus on the release of the Fed’s preferred inflation gauge, the Core PCE Price Index. Attention will also be on a speech by San Francisco Fed President Mary Daly, a voting member of the 2024 Federal Open Market Committee (FOMC).
Technical Analysis of Gold
On Thursday, gold experienced a wide range of price movements. Prices reached a high of $2626, but resistance at that level triggered a pullback to a low of $2587 before closing at $2594. The daily candlestick formed a “kite line” pattern, featuring a long upper shadow. This suggests strong resistance at the highs, as neither a new high nor a new low was established, reflecting the pressure from a previous bearish candle.
Today’s Focus & Strategy
- Trading Strategy: Focus on short positions during rebounds, with long positions on pullbacks as a secondary approach.
- Key Resistance: 2605-2610
- Key Support: 2575-2570
Oil Market Overview
On Thursday, oil prices weakened as global central banks took a cautious stance on monetary easing, heightening concerns about potential demand weakness in 2024. US crude (WTI) futures fell below the key $70 mark. By the close, WTI January crude futures were down $0.67 (-0.95%) to $69.91 per barrel, while Brent February futures fell $0.51 (-0.69%) to $72.88 per barrel.
Global Central Bank Decisions
- Bank of England: The Bank of England held interest rates steady on Thursday, but policymakers were divided on how to handle a slowing economy.
- Federal Reserve: Fed Chair Jerome Powell stated on Wednesday that the Fed is at or near a point where it may slow the pace of rate cuts. He added that rate decisions for 2024 will be data-dependent.
- European Central Bank (ECB): Multiple ECB officials have also emphasized “caution” regarding future monetary policy decisions.
Alex Hodes, an analyst at commodity broker StoneX, remarked, “The extent of monetary easing from the Fed in 2025 is now expected to be less aggressive than initially thought, leading the market to adjust its forecasts accordingly.” Investors should also note that the FOMC will rotate its voting members in 2025, bringing in a more hawkish group of regional Fed presidents, which may create additional resistance to further rate cuts.
Market Supply Outlook
JPMorgan analysts predict that the oil market could face a supply surplus of around 1.2 million barrels per day in 2024. However, if former President Trump follows through on his campaign promise to crack down on Iranian oil exports, the global supply could tighten, which would likely support oil prices.
Technical Analysis of Oil
On Thursday, oil saw a classic “spike-and-reversal” price pattern. Prices climbed to a session high of $70.55 but faced strong resistance, triggering a sharp reversal to a low of $69.0. WTI eventually closed at $69.193. The daily candlestick formed an inverted hammer, with two consecutive inverted hammer patterns on the daily chart signaling intensified selling pressure near the resistance zone.
Today’s Focus & Strategy
- Trading Strategy: Focus on short positions during rebounds, with long positions on pullbacks as a secondary approach.
- Key Resistance: 70.5-71.0
- Key Support: 68.0-67.5
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Disclaimer
This information contained in this blog is for general reference only and is not intended as investment advice, a recommendation, an offer, or an invitation to buy or sell any financial instruments. It does not consider any specific recipient’s investment objectives or financial situation. Past performance references are not reliable indicators of future performance. Doo Prime and its affiliates make no representations or warranties about the accuracy or completeness of this information and accept no liability for any losses or damages resulting from its use or from any investments made based on it.
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