On Friday (December 1st) during the New York session, there was a sudden change in the precious metals market, with both spot gold and futures gold showing significant increases.
Specifically, the spot gold price strengthened steadily after the opening of US stocks and reached a intraday high of $2075.83 per ounce around 02:30 Beijing time, only $5 away from the record high of $2081.95 set on May 4th this year.
As of writing, the spot gold price has slightly retreated to around $2071 per ounce, with an intraday increase of over $34 or 1.6%. On a weekly basis, spot gold has accumulated more than a 3% gain and recorded three consecutive weeks of gains.
In terms of futures gold, the most active February 2024 gold contract on the New York Mercantile Exchange closed at $2089.7 per ounce with an increase of $32.5 or 1.58%. The highest point reached during trading was $2095.70 per ounce, setting a new historical high.
Market analysts believe that the decline in the US dollar index and US Treasury yields is the main reason for the rise in gold prices that day. The US dollar index is currently reported at 103.23 near its low since September.
The “anchor for global asset pricing,” yield on US 10-year Treasury bonds is now reported at 4.199%, reaching its lowest level since September 8th; while yield on two-year US bonds which are most sensitive to central bank interest rates fell by15 basis points to reach4 .545%, hitting a new low since June13th.
Media analysis suggests that Federal Reserve Chairman Powell’s comments during that day enhanced traders’ confidence that rate hikes have already been completed and interest rate cuts may occur early next year.Powell reiterated caution regarding monetary policy decisions bythe Fedand attempted to suppress expectations of rate cuts.
Previously, a “hawkish” figure in the Federal Reserve, board member Bullard admitted that if inflation continues to decline, the central bank is willing to consider cutting interest rates. Brett Ryan, economist at Deutsche Bank pointed out that Powell did not explicitly refute Bullard’s comments today, leading the market towards a dovish direction.
The Chicago Mercantile Exchange’s “FedWatch” tool shows that the market now believes there is less than 3% probability of further rate hikes bythe Fed. At the same time, swap contracts predict that the probability of implementing the first interest rate cut before March next year has exceeded 60%, compared to30% prior to Powell’s speech.
Everett Millman, Chief Market Analyst at Gainesville Coins stated,”Gold has experienced a Santa Claus rally-like increase and I expect this situation will continue until the end of this year. The (spot) gold price definitely has potential for retesting historical highs.”
However,Suki Cooper, analyst at Standard Chartered Bank analyzed that “gold prices may have entered overbought territory. In the past two years,gold tends to prematurely reflect monetary policy expectations.”