Article by: ETO Markets
Gold (XAU/USD) has declined nearly 7% in November as markets react to significant political shifts following the re-election of former President Donald Trump. Recent US economic data presented mixed signals: Initial Jobless Claims fell to 217K, better than expected, while the Producer Price Index (PPI) rose 0.2% on a monthly basis and 2.4% for the 12 months ended in October, raising inflation concerns. Monthly wholesale inflation increased by 0.2%, reaching 2.4% year-over-year, with the core PPI annual rate at 3.1%, slightly above forecasts.
Overall, the US Producer Price Index (PPI) for October came in slightly above expectations, while the Consumer Price Index (CPI) aligned with forecasts. Market focus has turned to Federal Reserve Chair Jerome Powell, who noted that with steady economic growth, a strong job market, and inflation above target, there is no urgency to cut interest rates, allowing for a more measured approach.
In the energy sector, the International Energy Agency (IEA) reduced its 2025 oil demand forecast after OPEC's recent downward revisions due to weaker demand in regions like China and India. Meanwhile, the strengthening US Dollar Index (DXY) has made oil more expensive for holders of other currencies, potentially reducing demand and putting further pressure on oil prices.
Gold (XAU/USD) has recovered to around $… on Friday after hitting a two-month low. However, its upside potential may be limited by a strong US Dollar and uncertainty surrounding the Federal Reserve's pace of interest rate cuts. Expectations of higher inflation next year due to Donald Trump's policies have reduced the likelihood of rate cuts, making gold less appealing as higher interest rates reduce the attractiveness of non-yielding assets.
Despite this, geopolitical tensions, such as the conflict in the Middle East and the Russia-Ukraine war, may push gold prices higher as investors seek safe-haven assets. Key upcoming data, including US Retail Sales for October and the NY Empire State Manufacturing Index, will be closely watched.
Fed officials, including Jerome Powell and Thomas Barkin, have suggested that the US economy is performing well, providing room for gradual rate cuts. The US Producer Price Index (PPI) rose 2.4% YoY in October, above expectations, and weekly Initial Jobless Claims increased to 217K, slightly lower than expected. The markets now see a 59.1% chance of a 25-basis point rate cut by the Fed in December, down from 75% last week.
Gold (XAU/USD) is trading higher on the day but remains vulnerable on the daily chart as it nears the 100-day Exponential Moving Average (EMA). With the 14-day Relative Strength Index (RSI) below the 50 mark at 33.60, the possibility of further downside remains. Sustained trading below the 100-day EMA could open the door to $…, the September 8 low, followed by additional support at $…, the July 25 low, and potentially the $… psychological level. On the upside, immediate resistance lies at $…, the September high. A decisive break above this resistance could propel gold toward $…, the November 6 high.
West Texas Intermediate (WTI) crude oil is trading around $… on Friday, steadying after a sharp draw in US fuel stocks helped offset concerns about oversupply. The latest Energy Information Administration (EIA) report showed a rise in US crude oil inventories, up by 2.089 million barrels for the week ending November 8, though slightly lower than the previous week's increase. Gasoline inventories, however, fell by 4.4 million barrels, hitting a two-year low, defying expectations for a build.
A stronger US Dollar could cap oil price gains, as a higher dollar makes oil more expensive for foreign buyers, reducing demand. The US Dollar Index (DXY) is trading near 106.90, following a year-to-date high of 107.05. Dennis Kissler of BOK Financial noted that crude futures are trying to find equilibrium as the rising dollar and potential policy shifts under a Trump-controlled Congress may influence energy policies. Additionally, OPEC's recent downward revision of global oil demand growth for 2024 and 2025, driven by weak demand in China and India, adds further pressure on WTI prices.
Crude oil is forming a pattern of lower highs and higher lows, signalling a potential breakout. From a technical perspective, the setup points to a likely downside break given the prevailing bearish factors. On the upside, the 55-day Simple Moving Average (SMA) at $… serves as the first resistance level, followed by a significant technical level at $… (100-day SMA). The resistance level at $…, which held in October and August, remains distant but could be tested if geopolitical tensions, particularly in the Middle East. On the downside, support is located at $…—a level that held in both September and October. If this support fails, the previous five-month low at $… comes into focus, with $… (the 2023 low) as further support.
