Dollar and US Treasury yields tumble as FED hints of peak rates

Gold has been trading close to $2000 and has strong chance of breaking higher. As US yields decline, the risk is still skewed upward. The Fed Chair Powell’s remarks following the FOMC meeting on Wednesday reinforced rumours that the Fed is finished raising interest rates. As a result, the dollar was under pressure on Thursday. The dollar’s losses quickened with the release of U.S. economic data on Thursday, which revealed dovish considerations for Fed policy, including a higher-than-expected increase in Q3 nonfarm productivity and weekly initial jobless claims.

Numerous economic reports, and decisions from central banks, including the official US jobs report were released publicly. At their respective meetings, the Federal Reserve, the Bank of England, and the Bank of Japan made decisions consistent with expectations, maintaining the current course of monetary policy.

October’s US non-farm payroll data, which came in below expectations at 150k, was the primary cause of the sell-off in the US bond yield and Dollar Index. With the currency and treasury yields continuing their downward trend, it appears that the recent bond market sell-off may have peaked. Furthermore, Fed funds futures point to a much-reduced likelihood of another rate hike before the year ends, with the possibility of a rate decrease inching closer. The belief that US interest rates may have already peaked will be reinforced by any deterioration in future economic data, which is why markets will be closely monitoring it.

The US dollar’s decline has given international investors of precious metals an instant discount, which has caused gold to see a sizable increase as well, albeit upward. Although this effect has been less noticeable since the Israeli Prime Minister stated the war will be extended, gold could gain higher after seeing an increase of bids into the weekend as traders prepare for any future conflict escalations in the Middle East.

Technically, Gold has created a triple top pattern around $2080 (~ Rs 63000) in the last three years, so that is very important resistance for prices to clear. A lot of positive news, follow-through buying and fear would be required for prices to surpass that level. But once it does, then the sky is the limit and the bull run won’t stop before $2250 – $2300 (~Rs 68000 – Rs 69000). On the downside, prices have formed a base around $1900 (Rs 58000), which would act as the floor of this bull run.

Indian Gold Weekly Chart

Silver has very strong support at $21 (~ Rs 66000). I don’t think, prices to trade below this level in the next few months. On the upper side, resistance is $23.5 -$24 (~ Rs 73500 – 75000), if prices manage to clear and sustain above these levels, targets would be $26 (~Rs 80000) and $28 (Rs 85000).

Indian Silver Monthly Chart






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