Gold Continues to Renew Historical Highs
Yesterday, gold (XAU/USD) reached an all-time high of $2,790 before pulling back slightly towards $2,775. XAU/USD then returned to its previous maximum and has every possibility for further growth.
Yesterday, XAU/USD continued its upward trend due to increased demand for safe-haven assets ahead of the upcoming US presidential election. Additionally, investors' expectations of a decrease in the US interest rates also contribute to the rise in gold prices. According to Reuters, traders predict a 96% probability that the Federal Reserve (Fed) will lower short-term interest rates by 0.25% next week. Today, traders will closely monitor the US Personal Consumption Expenditures (PCE) Price Index report at 12:30 p.m. UTC. Based on forecasts, September's core PCE Price Index will increase by 0.3%. Gold attracts investors regardless of its trend, which helps prevent significant corrections.
Meanwhile, China—one of the largest importers of metals in the world—has seen an increase in manufacturing activity. In October, manufacturing activity increased for the first time in six months. This development supports optimism regarding the policy measures implemented by policymakers to help revive the economy.
XAU/USD will likely continue consolidating around the $2,790 resistance level. The pair will await the release of the PCE report before any significant market movement occurs. Higher-than-expected figures may put downward pressure on the metal, while lower numbers will support the bullish trend in gold.
Euro Gets a Boost from Strong German Inflation Figures
The euro (EUR/USD) gained 0.34% against the US dollar (USD) on Wednesday after the US Gross Domestic Product (GDP) report was slightly weaker than expected.
On Wednesday, the US Commerce Department's advance estimate of GDP showed robust business investment and increased consumer spending but failed to satisfy the market. Investors and traders expected GDP to advance at a 3% pace, but the report revealed annualised growth of 2.8%. According to Reuters, the slight miss reflected a widening trade deficit as businesses boosted imports to satisfy robust demand while inventory accumulation was pared back.
The report indicated that the US economy remains strong, making it more likely that the Federal Reserve (Fed) will soon slow down its rate-cutting campaign.
‘The economy is firing on all cylinders, and unless there is a large external shock or domestic policy error, it is poised to close out the year on a strong note’, said Joe Brusuelas, chief economist at RSM.
Meanwhile, yesterday's higher-than-expected German Consumer Price Index (CPI) may have further supported the euro. Moreover, traders have started repositioning ahead of the US presidential elections, closing long positions in the US Dollar Index (DXY) and opting to remain on the sidelines until the results are released. On top of that, traders may prefer to refrain from opening large positions ahead of the US nonfarm payroll (NFP) report due this Friday.
EUR/USD was falling slightly during the Asian and early European trading sessions. Today's key market-moving event is the release of the US Personal Consumption Expenditure (PCE) Price Index at 12:30 p.m. UTC. The market expects a 0.3% rise in the monthly core PCE Price Index and a 2.6% annual increase.
Higher-than-expected figures may trigger a pullback in EUR/USD towards 1.08000. Conversely, lower-than-expected results may extend the technical rebound towards 1.09000.
Canadian Dollar Slows Down on Oil Price Rise and DXY's Decline
On Wednesday, USD/CAD slowed down its growth due to increased oil prices and the decline of the US Dollar Index (DXY). The pair approached the important resistance level of 1.40000.
The US economic reports indicated a weakening labor market and strong consumer confidence but provided little clarity on the future of interest rates. Thus, the US dollar (USD) decreased, with US Treasury yields following suit. However, some indicators showed a resilient labour market and economy, prompting traders to reduce their expectations for rate cuts. Uto Shinohara, senior investment strategist at Mesirow Currency Management, stated that markets have already factored in a 25-basis-point reduction in interest rates at the upcoming Federal Reserve (Fed) meeting in November. However, the possibility of another reduction in December remains uncertain.
"With the focus shifting to employment data, a strong report on nonfarm payrolls would provide the Fed with the justification for a pause in December. While the outcome of the election may have a significant impact on interest rates in the long term, its immediate effect will depend on employment and economic growth", said Shinohara.
The price of oil, a major export commodity for Canada, increased after data showed that US oil and gasoline inventories unexpectedly decreased last week. Oil futures for the US settled 2.1% higher at $68.61 per barrel.
Reuters reported that OPEC+, a group consisting of OPEC, its allies, and Russia, may delay a planned increase in oil production by a month or more in December due to concerns over soft oil demand and increasing supply. The group was scheduled to increase production by 180,000 barrels per day in December but has already delayed the increase since October due to falling prices.
According to sources close to OPEC+, the group may announce a decision to postpone the production increase the following week.
USD/CAD continues to trade sideways within a range of 1.39000–1.39200 during Asian and early European trading hours. Today, the Canadian Gross Domestic Product (GDP) growth rate data comes out at 12:30 p.m. UTC. Higher-than-expected numbers may trigger a downward correction in the pair, while softer data may support the USD/CAD.