Gold continues to struggle despite a substantial decline in the U.S. dollar. In New York Trading today, gold had a respectable gain but gave up those gains in Globex trading. Closing of New York trading today had gold adding $15.10 of value and was fixed at $1664. As of 4:30 PM, EDT gold futures basis most active December contract is only $5.80 or 0.35% and settled at $1654.70. The December contract got to high trading of $1674.30 and a low of $1649.10 after opening just $0.80 above today’s low.
A major contributor in keeping the gold prices from lowering is dollar weakness. Currently, the U.S. dollar is down 1.182 points or -1.04% and fixed at 112.025. The KGX (Kitco Gold Index) market participants were sellers, with spot gold currently at $1649 with a net gain of $4.60 today. However, when speculated closely, participants were seen as aggressive sellers taking lower physical gold by $12.80. Gold’s gains would have been absent thanks to the dollar weakness of adding $17.40.
Today’s market participants witnessed a strong risk-on sentiment in U.S. equities. As a result, the Dow gained 1.86%, the S&P 500 gained 2.65%, and the NASDAQ composite gained 3.43%.
A serious concern about the remaining two FOMC meetings in November and December was there among the market participants who were trading the precious metals. There is a high possibility that both Federal Reserve meetings will contain interest rate hikes of 75 basis points each.
The CME’s FedWatch tool has a 97.4% probability that the Federal Reserve will raise rates by ¾% at the November FOMC meeting and a 65.3% probability of a ¾% rate hike in December. If this happens, it will take the Fed funds rate from 300 and 325 basis points to 450 to 475 basis points by the end of 2022.
During the last week, market participants were active buyers of 30-year bonds and 10-year Treasury Notes. That ultimately resulted in an inverted yield curve with yields in the 10-year Notes priced slightly above the 30-year bond. However, that inversion has been neutralized today with the 10-year note and the 30-year bond yielding 4.015%.
A record level of inflation is seen, with the latest CPI core data revealing a little uptick in inflationary pressures from 6.3% in August to 6.5% in September. However, the Eurozone is experiencing much higher inflation than the United States, with the CPI index registering at approximately 10%. There is a negligible chance that the Federal Reserve will reduce the magnitude and frequency of rate hikes long as inflation is constantly hiking. Therefore, it is likely that the aggressive monetary policy of the Federal Reserve will result in a recession in the first quarter of the 2023 year. The question remains unanswered: How deep of a recession will result from the Fed’s aggressive rate hikes?