Gold futures surged more than 1% on Thursday (Nov. 16), bolstered by a weakening dollar and a notable drop in US bond yields, amidst growing expectations that the Federal Reserve (Fed) might halt its current trend of interest rate hikes.
The price of gold futures escalated by $23, marking a substantial 1.17% increase to reach $1,987.30 per ounce, while silver futures rose by 39.50 cents, or 1.68%, closing at $23.933 per ounce. Platinum and palladium futures also experienced slight increases, settling at $902.80 and $1,049.60 per ounce, respectively.
The dollar index against major currencies saw a 0.04% decline, resting at 104.3490, simultaneously reflecting a reduction in the yield on the 10-year US Treasury note, which dropped to 4.473% overnight.
A weaker dollar typically makes gold contracts priced in dollars more expensive for investors using alternate currencies. Additionally, the decline in US bond yields tends to diminish the opportunity cost of holding gold, as it does not generate interest like other assets.
The surge in the gold market was further fueled by expectations that the Federal Reserve might pause its streak of interest rate hikes. This speculation gained traction following the release of lower-than-anticipated Consumer Price Index (CPI) and Producer Price Index (PPI) figures by the United States. Additionally, the recent revelation that first-time applicants for unemployment benefits surged by 13,000 to 231,000 last week—marking the highest level in three months—provided added support to the speculation of the Fed halting rate hikes.
CME Group’s FedWatch Tool currently indicates investor expectations for the Fed to maintain interest rates within the range of 5.25-5.50% in the December 2023, January 2024, and March 2024 meetings before potentially executing a 0.25% rate cut to 5.00-5.25% during the May meeting.
The convergence of a weakening dollar, declining bond yields, and speculations about the Fed’s future monetary policy adjustments have collectively driven a surge in the gold market, as investors cautiously anticipate the central bank’s upcoming decisions.
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Friday, November 17, 2023