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MTrading Team • 2023-11-21

Gold rises to 12-day high on softer US Dollar, China stimulus hopes

Gold rises to 12-day high on softer US Dollar, China stimulus hopes

Traders appear cautiously optimistic on early Tuesday amid receding odds of the Fed’s rate hikes. Also keeping the sentiment mildly positive are concerns that China will take more measures to deal with the struggling property sector while the other major central banks are off the line that previously protected restrictive policies.

However, the economic uncertainties outside the US allow the market players to rush towards the US Treasury bonds and Gold, while the US Dollar drops to a three-month low ahead of the key Fed Minutes. Further, Crude Oil snaps a three-day winning streak as energy markets reassess the previous clues of supply crunch amid economic woes.

Talking about the currencies, USDJPY drops the most among the G10 currency pairs while USDCAD appears the least affected amid softer crude oil prices. Further, EURUSD and GBPUSD edge higher while AUDUSD struggles to justify the hawkish tone of the RBA Governor amid mixed signals from the RBA Minutes.

Elsewhere, BTCUSD and ETHUSD both print mild losses as crypto markets witness another hurdle from the US SEC while concerns about transaction fees mount.

Following are the latest moves of the key assets:

  • Brent oil prints mild losses to snap a three-day uptrend near $82.10 at the latest.
  • Gold price remains firmer at the highest level in two weeks, around $1,992 as we write.
  • USD Index remains pressured at the lowest level in 11 weeks, close to 103.30 by the press time.
  • Wall Street closed with mild gains but the Asia-Pacific stocks edged higher. That said, equities in Europe and the UK begin the day with indecision.
  • BTCUSD and ETHUSD both print mild losses to around $37,300 and $2,010 at the latest.
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Dollar remains poor ahead of Fed Minutes

The US Dollar Index (DXY) drops for the third consecutive day while poking the lowest level since late August. In doing so, the Greenback’s gauge versus the six major currencies bears the burden of mixed Fed concerns, as well as downbeat Treasury bond yields. That said, the US 10-year Treasury bond yields reverse Friday’s corrective bounce off a two-month low while the 30-year counterpart revisits the late September levels.

It’s worth noting that the recent Fed talks and the US data have been against the US central bank’s further rate hike and weigh on the US Dollar despite the increasing economic optimism surrounding Washington. It should also be observed that China’s readiness for further stimulus adds strength to the XAUUSD upside but fears about more pains for the Chinese reality sector test the Gold buyers. Additionally, the recent hardships for the Indian economy and chatters about the Reserve Bank of India’s (RBI) policy pivot also check the precious metal’s upside. In that case, it becomes important to know that India and China are two of the world’s biggest gold customers.

Treasury Secretary Janet Yellen said on CNBC that the US and China recognize they have the opportunity to work together. The policymaker also criticized higher rates by saying, “The higher interest rate environment does pose additional challenges for debt reduction.” Further, Richmond Fed President Thomas Barkin said that the inflation does seem to be settling but the job is not done.

In a different case, China Customs signaled a decline in smartphone exports during the January to October period amid shrinking global demand, and relocation of production. Also, the news that Chinese authorities are preparing a funding list for property developers amidst growing default risks challenged the sentiment in Asia.

In the case of the central bankers, European Central Bank’s (ECB) Governing Council member Francois Villeroy de Galhau mentioned that they should and can avoid recession while adding that a soft landing path is more likely. On the same line, policymakers from the UK also signaled economic hardships and challenges for the Bank of England’s (BoE) further rate hikes even as the rate cuts are far from now. Furthermore, Reserve Bank of Australia (RBA) Governor Guy Bullock crossed wires earlier in the day, following the release of the RBA’s latest monetary policy Minutes, while saying, “We haven't had any productivity growth in Australia for several years.” RBA’s Bullock also added that the Bank is increasingly optimistic about the labor market.

  • Strong buy: USDCAD
  • Strong sell: ETHUSD, GBPUSD, Gold
  • Buy: USD Index, Nasdaq, USDJPY

Central bankers, Canada inflation eyed

Looking ahead, multiple central bankers from the UK, Europe and the UK are likely to keep the traders busy on Tuesday, together with Canadian inflation data. However, major attention will be given to the Minutes of the US Federal Reserve’s (Fed) monetary policy to confirm the end of the rate hike cycle. In a case where the FOMC Minutes cite easing inflation pressure and negatives of higher rates, as well as the US soft landing, the US Dollar will have a further downside to trace.

May the trading luck be with you!