Gold Trading Reminder: Geopolitical Risk Premium Drops, Gold Prices Fall to New Low in Nearly Three Weeks

On Wednesday (November 8), investors searched for new clues about the stance of the Federal Reserve's interest rates, and gold prices fell for a third consecutive session on Wednesday.

(Spot gold trend chart)

Spot gold closed down $18.91 an ounce, or 0.96%, on Wednesday at $1950.16 an ounce.

COMEX December gold futures closed down $15.70 an ounce, or 0.80%, at $1957.80 an ounce.

COMEX 12-month silver closed up 0.62% at $22.728 an ounce.

[Market News Analysis]

The political risk premium accumulated in precious metals is starting to fall back. This is because the situation in the Middle East, while unpredictable, is not a broader conflict.

Another factor contributing to the weakness in precious metals is reduced demand for safe-haven positions. Recently, the dollar has continued to rise. As a result, the fear of missed opportunities has prompted traders to turn their attention to equities rather than non-yielding assets.

Despite recent market developments, there are reasons to be optimistic about precious metals. That said, one catalyst that could put upward pressure on their prices is a pullback in interest rates. Last month, the US 10-year Treasury yield topped 5.0%, but has since pulled back sharply, with the 10/30-year Treasury yield falling by at least 5 basis points today. If this correction accelerates in the short term, then the backdrop for gold and silver will become more constructive. But Treasury yields remain elevated, but have fallen back to more than a decade highs, cutting off the main bullish channel for spot gold prices.

Gold prices came under renewed selling pressure on Wednesday amid hopes that the Federal Reserve could hit its target of curbing inflation amid recent hawkish rhetoric from Fed policymakers. Market participants had hoped that Federal Reserve Chairperson Jerome Powell would take a different tone in his speech at the Fed's statistical meeting. However, the Federal Reserve chairperson failed to touch on monetary policy, but he will continue to speak tomorrow, when monetary policy may still be touched. But as investors became cautious ahead of Fed Powell's speech, gold prices may struggle to recover.

"Traders are going to start looking at economic data and potential action from the central bank," said Daniel Ghali, commodities strategist at TD Securities. "Gold is going to react based on what the data shows."

"If state agencies get directly involved in the conflict, I would see a big jump in gold prices," said Rich Checkan, president and chief operating officer of Asset Strategies International. "We could see $2,200 an ounce. But I don't see a big jump."

Investors need to be aware that the weekly unemployment claims report will be released this Thursday. The next big report in the US will be the consumer price index on November 14.

Thursday will focus on financial data and events (Beijing time).

① 09:30 China's October CPI annual rate

② 16:35 Bank of Japan Governor Kazuo Ueda interviewed

③ 21:30 The number of initial jobless claims in the United States until November 4

④ 22:30 Federal Reserve Bostick and Barkin give speeches

⑤ The next day at 00:00, Federal Reserve Barkin delivered a speech

The next day at 01:30, European Central Bank President Christine Lagarde delivered a speech

The next day at 03:00, Federal Reserve Chairperson Powell delivered a speech