On Friday (November 8), during the Asian trading session, spot gold experienced slight fluctuations and is currently trading near $2704.76 per ounce. Boosted by the Federal Reserve's interest rate cut, gold prices rose over 1% on Thursday, reaching a high of $2710.10 per ounce. The Federal Reserve, as expected by the market, lowered the federal funds rate by 25 basis points to a range of 4.50%-4.75%, signaling concerns about economic and employment slowdowns. The Fed's actions caused the U.S. dollar index to fall by 0.6%, closing at 104.33, moving away from the previous highs reached during the election. As U.S. bond yields decline, gold's attractiveness to investors increases.
The Federal Reserve Chairman stated at the press conference that future policies would continue to be adjusted prudently to achieve balanced development of the economy and the labor market. Although the rate cut was anticipated, the Fed's warnings on high inflation prompted some bond market sell-offs. The market speculates that the Fed will lower rates by another 25 basis points in December.
Meanwhile, the Bank of England announced a rate cut of 25 basis points to 4.75% earlier, with the global monetary policy trend leaning towards easing, providing buying support for the gold market. The dovish stances of both the Federal Reserve and the Bank of England lead investors to expect a further relaxation of global monetary conditions.
The market is also focusing on geopolitical risks that support gold prices. Recently, tensions in the Middle East have intensified, with the Israeli military stating they have conducted airstrikes on Hezbollah targets in Lebanon, escalating concerns over supply chains and regional stability. Additionally, the number of initial U.S. unemployment claims rose slightly last week, and continued claims also increased, showing some weakness in the job market. The market expects that inflation pressure in the U.S. remains high, combined with the uncertainty surrounding the policies of the new government, which may prompt the Fed to maintain a gradual approach to rate cuts.
Moreover, the employment and inflation data released this week also influenced market sentiment. Factors such as hurricanes and strikes led to a slowdown in the non-farm employment growth in October, and the rise in unit labor costs hindered the progress of inflation reduction. The market generally believes that gold will continue to receive strong support in the coming months, as global monetary policies tend towards easing and geopolitical instability persists, potentially keeping gold prices robust.
