Gold price rebounds, oil price plunges, suppressing Federal Reserve rate hike expectations
Forex Network, November 3rd—— Spot gold and December gold futures on the New York Mercantile Exchange both rose by more than 2% after hitting a one-year low last week. West Texas Intermediate (WTI) and Brent crude oil both fell by over 6%, easing inflation concerns and prompting the market to lower expectations for further Federal Reserve rate hikes.
On Monday (November 2nd), falling oil prices dragged down the US Dollar Index, providing yet another layer of support for the non-yielding asset, gold.
Gold prices rebounded following a sharp drop last week, as traders shifted their focus from the Federal Reserve's rate hike expectations to declining oil prices and the US midterm elections.
Gold prices hit a one-year low last Friday, and in Monday’s early session, both spot gold and gold futures surged by more than 2%. The early decline in oil prices eased market worries over inflation, spurring short covering and speculative buying. At the same time, some investors opted to square their positions and adjust holdings ahead of Tuesday's US midterm elections, which could influence future government policy directions.
The decline in oil prices has not yet changed market bets on a December rate hike, but it does affect expectations for the overall magnitude of rate increases during this tightening cycle.
Market expectations for a December rate hike have slightly declined today—enough to suppress the US Dollar Index and thus support gold prices.
The core driver of current market moves comes from the oil market. Iran and Qatar held talks for a third consecutive day, negotiating a possible US-Iran ceasefire, which led to WTI and Brent crude both plunging more than 6%.
Expectations of easing inflation and cooling rate hike outlooks are the main factors impacting the market today—both directly influencing the valuation of the non-yielding asset, gold.
Some believe that last Friday’s gold sell-off was triggered by a sharp drop in US tech stocks. Weakness in equities triggered margin calls, forcing hedge funds to liquidate gold holdings to meet margin requirements.
Other analyses point out that the main theme this week is the political risk around the US midterm elections, with the outcome possibly impacting US fiscal policy. However, some believe the impact will be limited: neither party is likely to tackle the current US high debt issue, and a high-debt environment is long-term positive for gold prices.
In the early Monday session, spot gold on the weekly chart slightly rebounded after last week’s sharp decline. The price saw buying interest before falling below last week’s low, indicating that capital is either bottom-fishing or reacting technically to an oversold market.
The weekly swing chart indicates the primary trend is still downward. If the price falls below $3,870.32, a renewed downtrend will be confirmed; only an upside breakout above $4,697.11 would shift the primary trend upwards.
The secondary trend is also downward. Holding above $4,217.39 would turn the secondary trend bullish, likely driving a shift to a bullish market.
The key range currently being tested is the large wave band between the November 2024 low of $2,536.85 and the January 2026 high of $5,602.23, with the retracement zone between $4,069.54 and $3,707.82. Many long-term investors view this zone as a value accumulation area.
Upper resistance: The 52-week moving average at $4,447.29 is a major long-term trend resistance; next is $4,481.78, which is 20% below the all-time high of $5,602.23 and is viewed as the starting point of a bear market.
Key points for further observation
The major trend remains down, with prices significantly below the 52-week moving average, confirming a bear market and an overall bearish bias.
For value-oriented traders (passive limit orders, active market orders), the focus should be on the range: $4,069.54 to $3,707.82. How the market reacts in this range will reflect whether bulls are willing to actively take out sell orders near $4,069.54, or if capital opts for passive buying at the 61.8% retracement level of $3,707.82.
A steady hold above $4,069.54 will weaken bearish expectations; a break below $3,707.82 would further reinforce a bearish outlook.
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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