Summary

  • International gold prices were trading firm near $4,130 an ounce, supported by falling oil prices and a weaker dollar as hopes grew for an end to the war in the Middle East.
  • The market is increasingly pricing in the possibility of a Federal Reserve rate hike, which is acting as a factor limiting further gains in gold.
  • Nicky Shiels said the gold market is likely to post modest gains or move sideways through year-end, with short-term prices likely to be driven largely by trend-following trades and physical demand.

Forecast Trend Report by Period

Gold remained near record levels as lower oil prices and a weaker dollar supported demand amid hopes the war in the Middle East could end.

According to Bloomberg on November 9, spot gold traded around $4,130 an ounce. Bullion rose 1.7% the previous day and gained 5% last week. The move followed easing inflation concerns as prospects grew for progress in peace talks between the US and Iran.

Oil prices have been declining as the prospect of a diplomatic resolution to the Iran conflict gained traction after the US midterm elections. Brent crude fell to around $92 a barrel. Because higher energy prices have fueled inflation and prompted monetary tightening, lower oil prices have boosted the appeal of non-yielding gold.

A weaker US dollar also supported gold prices. A falling dollar makes gold cheaper for investors using other currencies. Bloomberg’s dollar spot index fell 0.5% the previous day.

Still, the possibility of another Federal Reserve rate increase remains a constraint on further gains in gold. Markets are increasingly pricing in a benchmark rate hike in December. Richmond Fed President Tom Barkin and Chicago Fed President Austan Goolsbee also referred the previous day to a resilient US economy and persistent inflation pressures.

Nicky Shiels, head of metals strategy at MKS PAMP, said the gold market would likely post modest gains or move sideways through year-end. She added that major institutional investors were likely to remain on the sidelines until January, leaving market conviction low. In the short term, price moves are likely to be driven largely by trend-following trades and physical demand.

Meanwhile, as of 8:27 a.m. Singapore time, spot gold was down 0.3% at $4,127.80 an ounce. Silver also fell 0.3% to $53.30 an ounce after rising about 3% the previous day. Platinum and palladium likewise edged lower.

Suehyeon Lee