Gold Continues to Decline for the Fifth Consecutive Day
Gold (XAU/USD) continued the decline on Thursday. The asset lost 0.32% on Thursday and 5.35% since last Thursday—the biggest decline since 2023.
On Thursday, the US Dollar Index (DXY) rose on strong US data and Federal Reserve (Fed) Chair Jerome Powell's comments.
The Department of Labor reported that initial claims for unemployment benefits in the state decreased by 4,000 towards 217,000 on a seasonally adjusted basis for the week, slightly lower than the expected 223,000. This suggests that the weak October nonfarm payroll report may have been an anomaly. In the latest inflation report, the producer price index (PPI) for final demand increased by 0.2% in the previous month, aligning with market expectations, up from an upwardly revised increase of 0.1% in September. Annually, PPI rose by 2.4%, up from 1.9% in September.
On Thursday, the head of the US central bank said that with the economy still growing, a strong job market, and inflation still above the 2% target, there's no need to rush to cut interest rates. Fed can take its time and be more deliberate about it. According to Adam Hetts from Janus Henderson Investors, this has tempered some of the expectations that had been quite optimistic about the chances of interest rate cuts. He said it's still not clear if inflation and employment are balanced, but this message about the economy is positive.
XAU/USD continues its downtrend during Asian and early European trading hours. On Friday, the US Retail Sales data comes out at 1:30 p.m. UTC. A higher-than-expected figure may put more pressure on the gold, while a milder report may support XAU/USD. 'Gold may retest the $2,540 level once again before the rebound to the $2,600 per ounce,' said Reuters analyst Wang Tao.
Euro May Rebound in the Short Term But Looks Weak Fundamentally
The euro (EUR/USD) lost 0.31% against the US dollar (USD) on Thursday, declining for the fifth straight trading session. Meanwhile, the greenback strengthened due to expectations that elected US President Donald Trump would pursue different policies than his predecessor.
The market seems to be quite certain that Trump's policies on immigration, tax cuts, and tariffs will be inflationary and will force the Federal Reserve (Fed) to pursue tighter monetary policy. Yesterday's macro reports put additional bearish pressure on EUR/USD. The US Labor Department reported that US producer prices picked up in October, while the number of Americans filing new applications for unemployment benefits fell last week, suggesting labour market strength.
Meanwhile, Eurostat data showed that eurozone industrial production declined by 2% in September, disappointing investors expecting a less severe 1.4% decline. On top of that, Fed Chair Jerome Powell said yesterday there was no need to rush rate cuts as the economy was still growing, while the jobs market was solid and inflation was still above the 2% target. Overall, EUR/USD may experience an upward technical correction in the short term, but traders still lack a fundamental reason to be bullish on the euro in the long run.
EUR/USD was rising slightly during the Asian and early European trading sessions. Today's macroeconomic calendar is relatively uneventful. Only US Retail Sales may have a noticeable impact on volatility. The market expects a 0.3% rise in monthly retail sales figures and a 0.3% increase in core sales. Lower-than-expected figures may push EUR/USD higher, but there is strong resistance at 1.06000. Conversely, stronger-than-expected figures may further weaken the pair. However, an additional bearish impulse may be limited given that EUR/USD is already near a one-year low.
Rally in Bitcoin Pauses, but the Pair Is Expected to Continue Rising
Bitcoin (BTC/USD) decreased by 3.48% yesterday after rising sharply to a new all-time high above $93,000 following the results of the US election. After a rally, the price corrected towards $88,000.
At the start of the Asian trading session on Friday, Bitcoin was trading at around $88,000. Due to investors taking profits, the price has decreased significantly over the past few days. According to Julio Moreno, Head of Research at CryptoQuant, miners transfer bitcoins from their wallets when the price exceeds $90,000. There was an extreme outflow of miners on Thursday— around 25,000 BTC were transferred. Many experts believe that Bitcoin may reach $100,000, with the increased supply of stablecoins and potential government investment fuelling the increase.
Even though a significant number of miners took profits, futures contracts on exchanges have increased and futures trading volumes have reached $129 billion. It signals that there is increasing activity among traders, which may lead to high price volatility. Bitwise Investment Director Matt Hougan has stated that for Bitcoin to exceed $100,000, increased demand from investors and central banks will be necessary. He has also emphasized the possibility of Bitcoin reaching $500,000.
Following a sharp rise, a correction to $84,000 is anticipated if miners continue to lock in their profits. On a global scale, reaching the $100,000 level for Bitcoin is quite probable, and many investors have already prepared for such a scenario.