Fed comments leave gold price at three-week lows

Gold price at lowest in over three weeks, markets wait for U.S. inflation data

On Monday, the price of gold remained below $1,940 per ounce, lingering at its lowest levels in over three weeks. The precious metal faced downward pressure from a robust dollar and rising Treasury yields as investors prepared for upcoming U.S. inflation data.

Last week, gold saw a nearly 3% decline, influenced by hawkish comments from Federal Reserve officials. Fed Chair Jerome Powell said the central bank is "not confident" it has taken sufficient measures to curb inflation.

However, the gold price found some support following Moody's decision to downgrade its U.S. credit rating outlook from stable to negative.

In a comment on November 11, Moody’s, a leading ratings agency, said that “without effective fiscal policy measures to reduce government spending or increase revenues” in a high interest rate environment, it expects “that the US’ fiscal deficits will remain very large, significantly weakening debt affordability.”

Markets showed little response to the reduction, with the DXY dollar index largely trading sideways as of Monday.

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Gold risk premium: Safe-haven buying linked to Israel-Hamas war subsides

In a commodities overview on Monday, Daniel Hynes, Senior Commodity Strategist at ANZ Bank, wrote that central bank gold purchases have remained resilient despite lower overall safe-haven demand for the yellow metal — an observation he also made last week:

“Gold felt last week amid the threat of further interest rate hikes. The haven buying that emerged following Hamas’ attack on Israel has also dropped significantly. While speculative buying has stopped, central bank purchases are likely to remain strong. Data last week showed PBoC’s gold holdings rose nearly 8% m/m to 71.2m ounces in October.”

In its weekly Precious Metals Appraisal, German technology firm Heraeus echoed similar sentiments to Daniel Hynes, pointing to the erosion of the risk premium linked to war in the Middle East:

“Geopolitical risk premium unwound last week, and the gold price fell to a three-week low. No significant developments in the Levant mean that gold gave back more of its recent gains. The price fell through the 200-day moving average — a bad sign for the bulls.”

Gold price forecast: ANZ sees $1,930-$2,000 range for the yellow metal

Another note from ANZ Bank revealed its gold price forecast, which said it expects the commodity to trade in the $1,930-$2,000 range:

“The price could find support near a 200-DMA of $1,934. If gold trades in the range of $1,930-$2,000, the bullish trend will remain intact. However, a decisive break below $1,930 could build up selling pressure and the price could pull back to $1,900 in the near term.

On the upside, any price rebound may face resistance at $2,000. Although a break of this level looks unlikely now, it could trigger short covering which could lift the price towards the next resistance of $2,062, the high recorded in May 2023.

On balance, we expect gold to trade in the range of $1,930-$2,000.”

At the time of writing on Monday, the front-month gold futures contract on the NYMEX traded around the $1,934 mark, as per MarketWatch data.

The price of gold has retreated by close to 2.3% over the past five days but remains 6% up year-to-date.

When considering gold and other commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.