The U.S. ISM non-manufacturing PMI unexpectedly rose, driving the dollar and U.S. bond yields to rebound
Gold Fundamental Outlook
On Monday, the U.S. ISM non-manufacturing PMI rose to 56.5 in November from 54.4 in October, unexpectedly higher than the expected 53.1, showing that economic activity in the U.S. service sector is still in the expansion range. After the release of the data, the U.S. dollar and U.S. bond yields rebounded while gold prices fell. The U.S. dollar index closed up 0.75% yesterday, the 2-year U.S. bond yield rose 10 basis points, and gold fell 1.61% under pressure.
The U.S. labor market remains relatively strong and the strong demand side continues to keep the U.S. economy resilient. This has eased concerns that the U.S. economy has entered a deep recession, but it has also increased the difficulty of a rapid decline in U.S. core inflation, which may become an impact on the Fed’s terminal interest rate and interest rate hikes potential factors of duration.
According to the CME Federal Reserve Watch, after the US November non-agricultural report and November ISM non-manufacturing PMI data, the market expects that the probability of the Fed raising interest rates by 50 basis points in December remains at about 80%, which shows that the market is slowing down the Fed. Expectations for the pace of rate hikes have not changed, and gold may not see a sharp decline.
Before the Federal Reserve’s interest rate decision on December 15, the U.S. November PPI annual rate this Friday and the U.S. November CPI data next Tuesday may become the driving factors that trigger changes in market expectations. If the U.S. PPI and CPI fall further, it will continue for gold The rally provides the conditions.
Figure 1 Gold, U.S. dollar index and 2-year U.S. bond yields
Chart source: TradingView
Gold 4-hour chart
Chart source: TradingView
On the 4-hour chart, gold continued its uptrend last week since early November. After breaking through the November 15 high (1,786), it moved further up to the resistance area near the August 10 high (1,807), technical indicators The relative strength index (RSI) and MACD came out of the classic top divergence pattern, showing the exhaustion of bull power, after which gold prices fell sharply.
In the short term, it may continue to decline to the 61.8%/78.6% Fibonacci retracement level (1,757/1,743). If the trend falls below this support, it will pave the way for a further decline to 1734/1729 in the market outlook; on the other hand, if the trend Stabilized and rebounded in this support area, and the market outlook is expected to retest the December 5 high (1,810).
(by Chris Li)
Follow me on Twitter for more communication: @ChrisLi865
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