On Thursday (October 27), the international gold price rose and fell, with resistance near $1,670 an ounce, and the U.S. dollar index rebounded after refreshing the low of 109.527 since September 20. But expectations of the Federal Reserve slowing down the pace of interest rate hikes are bearish for the dollar, and gold prices are expected to rise again.
At 15:31 Beijing time, spot gold fell 0.30% to US$1,659.65 per ounce; the main COMEX gold futures contract fell 0.34% to US$1,663.6 per ounce; the US dollar index rose 0.17% to 109.868.
The latest data from the CME Group showed that the open interest of COMEX gold overnight increased for the third consecutive day, an increase of about 2,300 contracts; the trading volume increased for the second day in a row, an increase of more than 2,000 contracts. Both open interest and volume rose, suggesting that gold prices could rise further in the near term.
Ilya Spivak, currency strategist at DailyFX, said there are signs that some central banks, including the Federal Reserve, are softening their rhetoric, giving room for the dollar to correct lower and for gold to find more footing.
The Bank of Canada announced a smaller-than-expected rate hike overnight, saying its historic monetary tightening was nearing an end. Investors awaited a new policy decision from the European Central Bank due later in the day.
FXStreet’s Haresh Menghani explained: “Investors focused on the new ECB statement and press conference on fears that the ongoing Russian-Ukrainian war will adversely affect the economy, despite ECB President Christine Lagarde’s reference to Canada earlier this month. Interest is the best tool to beat inflation.”
The annualized total of new home sales in the U.S. fell after a seasonally adjusted September, and last month’s data was downgraded, suggesting the Federal Reserve’s interest rate hikes had worked. Investors will also look at U.S. third-quarter GDP data due later in the day. The initial value of the annualized quarterly rate of real GDP in the third quarter of the United States is expected to be 2.4%, which is expected to reverse the contraction trend of the previous consecutive quarters. A weaker-than-expected data would weigh on the dollar.
While the Fed is widely expected to raise interest rates by a fourth straight 75 basis points at its November meeting, the December rate hike is likely to be trimmed. Gold is highly sensitive to Fed rate hikes as this increases the cost of holding gold, a non-yielding asset.