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Gold Price Weighed Down by The Fed Sentiment and Technical Factor

by Didimax Team

Spot gold prices slipped by 0.7% to $1748.84 an ounce for a total weekly decline of 1.3%. Gold futures prices seen on Comex New York also slipped by half a percent to $1754.4.

For your information, it was the lowest level since November 11 as did the following XAU/USD chart showing a 0.55% drop in gold prices to $1750. The declining trend still can be seen in the market. 

In addition to the pressure on the strengthening of the US Dollar, the issue of the Fed's where they still tight the rate hike is a scourge for bullish gold. This factor is always considered by market participants. 

Although the latest United states inflation data has shown a decline, the voices of the top US central bank officials still tend to be hawkish. This was quite surprising for the analysts. 


The Fed may Still Raise the Rate

Boston Fed President Susan Collins said on Friday (November 18) about this topic. She said that the Fed will still be carrying out the discourse of raising interest rates in the future to suppress inflation.

In fact, Collins said that an increase in the rate to 75 basis points would still be carried out. Previously, San Francisco President Mary Daly also expressed the same thing. 

That was where raising the Fed's interest rate to the level of 4.75%-5.25% at the beginning of next year still makes sense to do. That is why; people should prepare this condition properly. 

Daly said that the halt to raising interest rates has not been discussed by central bank policymakers. There is a huge possibility that rate hike will Be still higher. 

Price Drop is Reasonable after Rally

Reasonable Price Drop After Big Rally Despite various speculations and fundamental factors, David Meger of High Ridge Futures said that the decline in gold prices this time was more due to technical factors. 

The small drop in gold prices after the recent rally, has been through a technical retracement in the gold market. The pullback could continue until the end of the December option next week. 

That could lead to further consolidation in this precious metal. The market as a whole seems to be focused on the Fed's interest rate expectations as said by Meger. 

A similar view was also expressed by Fawad Razaqzada of City Index. He says that Gold has defended pretty well so far. Correction is always possible after a big upward movement.

Elsewhere, Crude Oil Price Slumped 

Crude oil prices slumped significantly in Monday's (21/November) trading. It was actually pressured by market panic over a potential economic recession after China reported its highest rise in COVID cases since April 2022. 

At the time of this news written, Brent oil was down by 0.96 percent at $88.25 a barrel. Meanwhile, WTI oil was down by 0.67 percent at $80.35 a barrel.

The weakening of oil prices that has occurred since last week is actually inseparable from investor panic over the slowdown in oil demand from China. The surge in COVID-19 cases in several regions there has reached quite alarming numbers. 

If the rise in COVID cases in China continues, local authorities could potentially implement strict restrictions as happened in the second quarter. The volume of oil shipments from Aramco to China for December has decreased.   

US Dollar Adds Pressure, Markets Wait for OPEC Reaction

In addition to China's demand problems, oil prices were also overshadowed by the strengthening of the US Dollar. DXY is currently rising to a range of 107.49.

It is especially after a number of Fed officials made hawkish statements. They mentioned that the America’s central bank will not stop their tightening policy before the inflation rate falls to its 2 percent target. 

Despite a slight decline in October, US inflation is currently still above 7%. If this condition continues to happen, OPEC+ may cut a further oil production. 



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