Market Update:
- Gold prices surged by $27 to hit a record high of $2719, rewarding gold bugs with a 4-day rally.
- US 10-year yields decreased by 2 basis points to 4.07%.
- WTI crude oil fell by $1.27 to $69.40.
- S&P 500 rose by 0.3%.
- Japanese Yen (JPY) performed well, while the Canadian Dollar (CAD) lagged behind.
Gold bugs celebrated a strong and steady rise in gold prices, hitting a new all-time high after a continuous ascent. Despite positive sentiment in Chinese equities, marking a 4.4% increase in the MCHI today, the demand for gold remained robust.
The optimistic atmosphere in China influenced a slight retreat in the US dollar, erasing most of the gains driven by yesterday’s retail sales data. This shift in market dynamics is based on the belief that China’s strengthening economy will have a positive ripple effect on Europe and global growth, ultimately narrowing the economic gap with the US.
Furthermore, market sentiment is leaning towards a positive outlook for 2025 economic growth, as evidenced by the continued bullish signals in equities.
The euro bounced back from a recent two-month low, gaining 33 pips to reach 1.0864 as investors speculate on a potential 50 basis point cut in December (currently at 23% odds). This optimism might stem from expectations of sustained low inflation due to the decline in oil prices.
Meanwhile, the British pound saw an uptick above 1.30, forming a minor double top near 1.3075, a level to monitor in the upcoming week, with the latest quote at 1.3042.
In contrast to the prevailing positive trend, the Canadian dollar faced challenges once again, primarily influenced by oil market dynamics. With the market anticipating a 50 basis point rate cut by the Bank of Canada next week, the likelihood has surged to 93%.
Insight:
Gold’s impressive rally to a new all-time high could be driven by a mix of factors, including inflation concerns, geopolitical tensions, and the depreciation of the US dollar. Investors seeking safe-haven assets often turn to gold during times of uncertainty, which could explain the strong demand for the precious metal. Additionally, the performance of the Japanese Yen and the lagging Canadian Dollar reflect the global market’s sensitivity to economic news and central bank policies, which can impact currency movements significantly.
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