The market speculates on a Fed shift as the price of gold increases by roughly 1% due to a WSJ piece. US T-bond rates decreased, which supported the gold price as it recovered from the month’s lows. Gold Price Prediction: A break over $1650 might drive gold to $1665, but the downward trend is still present.
As US Treasury yields decline in response to a Wall Street Journal (WSJ) article stating that Fed officials are divided about December’s rate hike, as November’s increase to the Fed funds rate (FFR) of 75 bps is most certain, gold prices rebound from monthly lows around $1617 and move steadily upward towards the $1640s region.
Gold rises as Fed policymakers discuss December’s rate increase.
The WSJ story also said that officials are debating whether to raise rates at a slower rate in December—50 basis points—despite concerns that doing so may be seen as the Fed “pivoting,” which would lead to a rally in stocks—which, the report claims, is not the case. Instead, to reduce inflation, Fed policymakers are slowing the rate of rate rises. After the story was published, US stocks surged, and US bond rates declined, which boosted the price of gold at the start of the session as it recorded a new monthly low.
The US 10-year T-bond yield is increasing by two basis points to 4.250%, which is still significantly below the YTD high of 4.338%, which was last reached before the 2007 global financial crisis. Additionally, according to the US 10-year Treasury Inflation-Protected Securities (TIPS) bond yield, US accurate rates decreased from 1.838% to 1.706%, providing relief to those who own yellow metal.
Fed officials said action is needed since inflation is rising.
Due to the lack of US economic data on Friday, market participants were more inclined to listen to more Fed remarks. Several Fed speakers, including Lisa Cook, a member of the Fed board, and Patrick Harker, president of the Philadelphia Fed, said on Thursday that the Fed would have to keep raising interest rates. In a statement, Harker said he is “disappointed by the lack of progress reducing inflation” and he anticipates rates to remain higher than 4% in 2023.
Due to the broad trading range shown by the hourly chart and growing rumors of an intervention in the USD/JPY, the US Dollar Index is plummeting like a stone, from around 113.94 to 112.90.
Gold Price Prediction
The XAU/USD is still negatively skewed on the daily chart, although it is still quite near the YTD lows of $1614.92. While the Relative Strength Index (RSI), at 39.86, is going upward but still in negative territory, the daily Exponential Moving Averages (EMAs), trading far above the current price, maintain their bearish slope. Thus, sellers continue to be in control even if they enjoy a break as the yellow metal is ready to extend its losses for two consecutive weeks. The 20-day EMA will be tested if XAU/USD breaches $1650; otherwise, it will continue to be vulnerable to re-testing the YTD lows.
