The Federal Reserve is cautious about further interest rate cuts, limiting the rise in gold prices, and the unexpected surge in US gasoline inventories is dragging down oil prices

2024-11-28 2269

On Thursday (November 28th Beijing time), spot gold trading was around 2637.20, with the price increase limited by the Federal Reserve's cautious attitude towards further interest rate cuts and the cooling of geopolitical tensions; US crude oil traded around $68.78 per barrel, although OPEC+is considering delaying the news of increased production to support oil prices, it is more affected by the unexpected surge in US gasoline inventories and concerns about the pace of US interest rate cuts next year.

The S&P 500 index closed down 0.38% on Wednesday, closing at 5998.78 points; The Nasdaq index fell 0.59% to close at 19061.78 points. The Dow Jones Industrial Average fell 0.31% to close at 44723.23 points.

Key Focus for the Day: Eurozone Economic Sentiment Index for November, Initial Value of November CPI Annual Rate in Germany, and Speech by Reserve Bank of Australia President Brock.

Reminder: Due to Thanksgiving, the New York Stock Exchange will be closed, and trading of precious metals and US crude oil futures contracts under the CME will end earlier at 03:30 Beijing time on the 29th, while trading of stock index futures contracts will end earlier at 02:00 Beijing time on the 29th; The trading of Brent crude oil futures contracts under the Intercontinental Exchange ended early at 02:30 Beijing time on the 29th.

equity market

The US stock market closed lower on Wednesday, led by the Nasdaq index, due to a sharp drop in technology stocks on the eve of Thanksgiving. The market is concerned that the Federal Reserve may be cautious about interest rate cuts after sustained strong US inflation data. Data shows that consumer spending grew steadily in October, indicating that the US economy has maintained a strong pace of growth, but progress in reducing inflation seems to have stalled.

According to CME's FedWatch, traders have increased their bets that the Federal Reserve will lower borrowing costs by 25 basis points at its December meeting. However, they expect the Federal Reserve to keep interest rates unchanged at its meetings in January and March. Goldman Sachs stated in a report this week that the escalation of tariff policies may delay the return of US inflation to its 2.0% target.

Dell fell 12% and HP fell nearly 6%, dragging down the information technology sector by 1.2% due to poor quarterly performance expectations. This sentiment spread to super large cap stocks such as Nvidia and Microsoft, and the Philadelphia SE Semiconductor Index closed down 1.8%.

The Russell 2000 index only closed up 0.1%. The index performed poorly after hitting a record high earlier this week. Investors also evaluated earlier data, which showed robust economic growth in the United States in the third quarter. The number of initial unemployment claims decreased again last week.

Scott Welch, Chief Investment Officer of Certuity, said: "It has been proven that inflation is more sticky than the Federal Reserve hopes, which may cause them to pause on the issue of interest rate cuts. The impact of Trump's claimed tariff policy is questionable, and if implemented, it could cause severe inflation. Therefore, the Federal Reserve must balance economic data with the policy agenda of the incoming administration

Achieve balance. "

gold market

Gold prices rose on Wednesday, rebounding from over a week's low hit in the previous trading day, as the US dollar weakened. However, the gains in gold prices narrowed after data showed stagnant inflation progress, suggesting that the Federal Reserve may be cautious about further interest rate cuts. Spot gold was reported at $2638.90 per ounce, up 0.3%. US futures closed 0.7% higher, with a settlement price of $2639.90. The US market will be closed on Thursday due to the Thanksgiving holiday.

Consumer spending in the United States grew steadily in October, but the progress in reducing inflation over the past few months seems to have stalled. Phillip Streible, Chief Market Strategist at Blue Line Futures, said, "We believe that the slight correction in gold prices that we just saw against the data is mainly driven by an increase in personal income. If consumers are stronger, even in the face of higher inflation, they may show resilience behind it, and the Federal Reserve may be less willing to aggressively continue cutting interest rates

The US dollar index fell 0.8%, hitting a two-week low, increasing the attractiveness of gold to holders of other currencies. Streible stated that gold could reach $3000 in the first two quarters of 2025, unless a sharp rise in inflation forces the Federal Reserve to raise interest rates, which could hit the bull market.

At present, the market believes that there is a 70% chance that the Federal Reserve will cut interest rates by 25 basis points in December. In a low interest rate environment, non yielding gold is often favored.

Prior to the release of personal consumption expenditure (PCE) price index data, gold prices rose by 1%. On Monday, gold prices fell sharply by $100, marking the largest daily drop in over five months, as demand for safe haven weakened after Israel and Iran backed Hezbollah announced a long negotiated ceasefire agreement. Spot silver rose 1.1% to $30.09 per ounce; Platinum rose 0.1% to $928.17; Palladium fell 0.4% to $973.76.

Oil market

Oil prices remained almost unchanged on Wednesday, dragged down by unexpected surge in US gasoline inventories and concerns about the pace of US interest rate cuts next year, but news of OPEC+considering delaying production increases provided support. Brent crude oil futures rose slightly by $0.02, settling at $72.83 per barrel. US crude oil futures fell $0.05 to $68.72.

The US Energy Information Administration (EIA) reported that US gasoline inventories increased by 3.3 million barrels last week, reaching 212.2 million barrels, while Reuters surveyed analysts expecting a decrease of 46000 barrels. EIA added that crude oil inventories decreased by 1.8 million barrels in the week ending November 22, with analysts in a Reuters survey expecting a decrease of 605000 barrels.
Market sources cited data from the American Petroleum Institute (API) on Tuesday, stating that crude oil inventories decreased by 5.94 million barrels last week and refined oil inventories increased. US data shows that progress in reducing inflation in recent months seems to have stalled, which could limit the Federal Reserve's room for interest rate cuts in 2025 and put pressure on oil prices.
According to the CME FedWatch Tool, traders have increased their bets that the Federal Reserve will reduce borrowing costs by 25 basis points at its meeting on December 17-18. However, they expect the Federal Reserve to keep interest rates unchanged at its meetings in January and March.
After accepting an agreement mediated by the United States and France, Israel agreed to a ceasefire with Hezbollah in Lebanon, which came into effect on Wednesday. The real question is how long the ceasefire agreement can actually be implemented, "said Dennis Kissler, Senior Vice President of Trading at BOK Financial
OPEC+sources said that the alliance is discussing further delaying the oil production increase originally scheduled for January, which has given support to oil prices.
The US dollar fell to its lowest level since November 13th during trading on Wednesday, dropping 0.74% in afternoon trading to 106.06. Compared to the two-year high reached last Friday, it has fallen by 1.9%. The market is digesting a series of data highlighting the resilience of the US economy, while investors assess the risk of President elect Trump launching a no win tariff. Few traders are interested in establishing or holding positions before the long weekend of Thanksgiving. The US market will be closed on Thursday, and the exchange will close early on Friday.
The USD/JPY fell to a five week low, closing down 1.43% at 150.91. The weakening of the US dollar boosted the euro by 0.74% to $1.0564. The euro/dollar hit a new high in the past week, "said Amo Sahota, Executive Director of Klarity FX in San Francisco." Today's trend may be more due to some profit taking, at least for the United States before the long weekend. As I said, the dollar had a very amazing performance before and remains very strong.
In addition, the revised data shows that the year-on-year growth rate of the US gross domestic product (GDP) in the third quarter was 2.8%, which is in line with expectations and the same as the initial valuation released last month. However, this does not provide much justification for the Federal Reserve to relax its policy again next month, although traders are still leaning towards it, slightly increasing their bets on the possibility of a rate cut to 67%.
Consumer spending data also did not provide support for interest rate cuts. The data shows that progress in reducing inflation in recent months seems to have stalled, despite the economy maintaining a steady growth momentum at the beginning of the fourth quarter. Peter Cardillo, Chief Market Economist at Spartan Capital Securities in New York, said, 'We all expected inflation to rebound, but it hasn't gotten out of control.'. This is the key point, which paves the way for a 25 basis point rate cut in December and a possible pause in the rate cut. But the reason for the suspension may not be inflation data, but the uncertainty of Trump's tariffs. I think the Federal Reserve will become increasingly cautious.
The Personal Consumption Expenditures (PCE) price index of the US Department of Commerce increased by 0.2% month on month in October, which is the same as the uncorrected increase in September. The PCE price index increased by 2.3% year-on-year in October, and by 2.1% in September. Durable goods orders in October increased by 0.2% month on month, a growth rate lower than expected. The number of initial jobless claims last week was 213000, slightly lower than the previous week's revised 215000, indicating a stable labor market.
Some analysts believe that the inflation risks brought by tariffs and proposed tax cuts may prevent Trump from taking more destructive measures. Recently, the significant appreciation of the US dollar has greatly reduced the value of US dollar assets outside the United States, thereby increasing the rebalancing demand for selling US dollars at the end of the month, "said Sheryl Dong, foreign exchange strategist at Barclays Bank
The Japanese yen performed well, benefiting from bets on Japan's December interest rate hike and position adjustments. The USD/JPY fell below the 200 day moving average of 151.99, "Sahota said." I think this is also quite important in today's market, just technically. Analysts point out that Japan may not be affected by Trump's tariff policies, which has to some extent eased the pressure on the yen. Jane Foley, senior foreign exchange strategist at RaboBank, said, "Japan has a significant advantage in addressing US trade concerns
She added that Japan is the largest overseas holder of US Treasury bonds and the largest provider of foreign direct investment to the United States.
According to an agreement aimed at ending hostilities along the Israel Lebanon border, a ceasefire between Israel and Iran backed Hezbollah came into effect on Wednesday. The war between the Middle East and Ukraine, although not the main factor affecting the foreign exchange market on Wednesday, has always supported the safe haven status of the US dollar.
USC/CAD fell 0.18% to CAD 1.4027, hitting a four-and-a-half-year high of CAD 1.4177 on Tuesday. The exchange rate of the US dollar against the Mexican peso remained relatively stable, at 20.622, close to Tuesday's high, which is the highest since July 2022. GBP/USD rose 0.81% to 1.267; AUD/USD rose 0.34% to 0.6494; NZD/USD rose 1.06% to 0.5896.
international news 
The accelerated rise of inflation indicators that the Federal Reserve is concerned about supports the cautious stance of the central bank towards interest rate cuts
The core inflation indicator that the Federal Reserve focuses on accelerated year-on-year growth in October, providing more support for policymakers' cautious attitude in lowering interest rates. According to data from the Bureau of Economic Analysis on Wednesday, the core personal consumption expenditure (PCE) price index rose 2.8% year-on-year and 0.3% month on month. The increase of this indicator is largely influenced by the rise of stocks. Adjusted for inflation, consumer spending increased slightly by 0.1%, with a revised upward increase of 0.5% in September, consistent with the uneven demand throughout the year. The core PCE price indicator has increased at a three-month annualized rate of 2.8%, which economists say can more accurately depict the trajectory of inflation. These data support many recent comments from Federal Reserve officials that they are not in a hurry to cut interest rates. They believe that as long as the labor market remains healthy and the economy continues to be strong, there is no need to cut interest rates in a hurry.
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Four Trump nominated government officials say they received threats at home
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The United States imposes sanctions on individuals associated with the President of Venezuela
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Canada's Labour Minister says unable to end postal strike due to significant differences on key issues
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Musk calls for the abolition of the US Consumer Financial Protection Board (CFPB)
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China News
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