Gold’s Shallow Pullback Shows Bulls Remain Resilient Above $4,000
LONDON (November 17)
Gold prices started the new week slightly lower after it had slipped more than 2% on Friday, though it could have been more had it not managed to recover from the session’s lows on the last day of the week.
Consequently, it still finished the week up by around 2%. That marks its first weekly gain in three and highlights just how resilient the metal has been, especially considering that at least two key bearish pressures have now eased, with the US government re-opening and a US–China trade truce being extended recently.
Friday’s sell-off initially looked as though this resilience was finally cracking; yet gold held up well on the weekly chart, with no major technical damage. Still, the question now is whether the coming weeks will finally bring some genuine downward pressure or will we see more of the same.
Will Central Banks Continue to Purchase Gold?
Gold’s resilience has been a touch surprising. With the US government reopening and a trade truce easing tensions, you would expect a fall in safe-haven demand. So far, though, the market has barely reacted, barring the two-day slide at the back end of last week.
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Unless we see genuine selling pressure this week, gold’s resilience points to one conclusion: investors are still banking on continued central bank buying. It’s a risky assumption—especially at these elevated levels—because even central banks may be reluctant to keep adding at what many consider overstretched prices.
FOMC Minutes and Jobs Report
On a macro level, a great deal now hinges on what the Fed decides at its 10 December FOMC meeting, with markets pricing the odds of another 25bp cut at roughly 50%.
The Fed is probably far more comfortable with that sort of expectation, especially given the limited flow of data following what turned out to be the longest government shutdown in US history. And with the chances of a December cut effectively a coin toss, the US dollar may not need to push too far on Wednesday evening, when we get the minutes from the 28–29 October meeting.
That, of course, was the gathering where Jerome Powell made a point of stressing that a December cut was anything but guaranteed.
But it does feel as though Wednesday and Thursday’s data will set the tone for the US dollar’s next move. On Thursday, we finally get the September NFP report. Markets are looking for a modest +50k gain in payrolls and an unchanged unemployment rate at 4.3%. That sort of outcome is probably neutral. Anything better may be slightly supportive for the US dollar, given that a December Fed cut would require meaningfully weaker numbers.
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We’ve also got a heavy line-up of Fed speakers through the week.
Meanwhile, a number of global macro releases are also due, including global PMIs on Friday, which may influence gold indirectly via moves in the US dollar.
However, most attention will remain firmly on the US economy with the government now reopened. Recent Federal Reserve commentary has taken a slightly hawkish turn. If upcoming data disappoints and re-opens the door to a potential December rate cut, we could see the US dollar soften. That would generally be supportive for gold.
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