Gold prices are boosted as Fed whispers slower rate hikes
The excitement about the possibility of lower interest rate increases by Fed outweighed weakening economic data. Gold prices entered backwardation on Friday and were on track for modest gains this week. Backwardation is a phenomena when spot gold prices trade higher than futures. This suggests that there may be an increase in demand for the yellow metal in the near future.
Spot gold was down 0.1% to $1,753.20 an ounce, while December gold futures were down 0.1% to $1,752.75 an ounce. This week, both securities were expected to increase by roughly 0.3%. The trading price for futures contracts that were longer than December was higher. The price of an ounce for contracts expiring in January and February, respectively, was roughly $1,761.6 and $1,768.8, respectively.
Due to a U.S. vacation, metal markets had nothing to go on Thursday. Volumes were similarly low. The supportive hints from the Fed’s November meeting minutes that were issued earlier this week gave prices a boost. US interest rates are still around 2008 financial crisis levels and are predicted to peak at substantially higher levels.
Investors may move to gold as safe heaven as dollar starts to weaken
Gold may profit from renewed demand for safe haven assets in the upcoming months. This could be caused by a declining dollar and the state of the world economy. This week’s PMI prints from the United States and Japan provided a gloomy image of the two greatest economies in the world. China’s record-high daily COVID-19 infections only add to the push.
The dollar was expected to decline by 1% this week. Wider metal markets were supported by a declining dollar. On Friday, silver futures up 0.3% and were expected to rise by 2% this week, while platinum futures decreased 0.2% but were expected to rise by 1% this week.
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Among industrial metals, copper prices increased slightly on Friday. Copper prices were expected to close the week mostly unchanged due to unfavorable indications from China. Futures for copper increased by 0.2% to $3.6360 per pound and were expected to close the week up 0.1%.
Gold aims towards monthly highs
If bulls defeat the intraday high at $1,761 and last Friday’s high at $1,770, the path will be clear toward the three-month high of $1,787.
The critical $1,750 level will put the bearish commitment to the test on the downside. The $1,733 low from Monday will serve as the next level of support. Currently gold is testing the crucial $1,750
Gold spot chart, Source: Author’s technical analysis, Tradingview.com