Gold Continues Rising as the US Dollar Weakens
The gold (XAU) price rose for the third consecutive trading session, gaining 0.58% and reaching a six-month high.
The U.S. economy continues signaling a slowdown, increasing the chances for interest rate cuts and pulling down the US Dollar Index. Market sentiment currently shows a 25% probability the Federal Reserve (Fed) might start reducing rates in March 2024, with the likelihood increasing to 45% by May. Recent data revealed a 5.6% decline in U.S. new home sales to 679,000 units in October, lower than the expected 723,000 units. DXY reached its lowest point since late August, making gold more affordable for holders of other currencies. Meanwhile, yields on 10-year Treasury notes remained close to their two-month low of 4.363%. The probability of lowering interest rates decreases the opportunity cost associated with holding non-yielding bullion. However, the most recent data from the physical market shows that China's net gold imports via Hong Kong fell for a second consecutive month in October as slow economic recovery reduced demand.
XAU/USD was relatively flat during the Asian and early European trading sessions. Today, traders should focus on the release of the U.S. CB Consumer Confidence report at 3:00 p.m. UTC. Lower-than-expected figures will have a positive impact on XAU/USD. However, higher-than-expected numbers may bring the pair down towards 2,000. 'Spot gold may extend gains into a range of $2,026 to $2,032 per ounce, as it has more or less broken a resistance at $2,016,' said Reuters analyst Wang Tao.
The Euro Continues to Rise, But Further Gains Are Questionable
The euro (EUR) gained 0.13% on Monday as weaker-than-expected sales of new homes in the U.S. brought the US Dollar lower.
Technically, the US Dollar Index did enough damage over the last two weeks to really suggest a breakdown. So the dollar's heyday is done, and we're now looking at a softer dollar,' said Amo Sahota, the director at FX consulting firm Klarity FX. The market believes the Federal Reserve (Fed) has ended hiking interest rates and may start cutting them by Q1 2024. Also, expectations for the eurozone's monetary policy don't differ drastically. Christine Lagarde, the President of the European Central Bank (ECB), said it's too early to claim success in the battle against inflation. However, she acknowledged the economy is stagnating, suggesting that the eurozone may have reached the peak in the interest rate. Eurozone inflation data and the U.S. Core Personal Consumption Expenditure data will be released on Thursday. Both indicators are expected to show a trend of disinflation.
EUR/USD was falling slightly during the early European trading session. The latest data showed that consumer confidence in Germany improved in November but remained at a rather low level. Later today, traders should pay attention to the U.S. Consumer Confidence Index at 3:00 p.m. UTC. Higher-than-expected figures will likely reverse the bullish trend in EUR/USD.