Gold Trading Reminder: The US Dollar Five Lian Yang hit a three-month high, and the price of gold fell by more than 1.5% to the 4000 mark! Is ADP data a lifesaver?

On Tuesday (November 4), spot gold fell 1.7%, closing at $3,931.78/ounce. In December, U.S. gold futures fell 1.3% simultaneously, and the settlement price was $3,960.50. The internal divisions among Federal Reserve officials increased, and the market cooled down expectations for the Federal Reserve to cut interest rates in December, helping the dollar index rise above the 100 mark and refresh more than three-month highs, which significantly depressed the price of gold. However, the fear of a bubble in the U.S. stock market and the longest shutdown in the history of the U.S. government still provide safe-haven support for gold prices. In the short term, gold bears have a slight advantage, and the price of gold faces the risk of further correction in the short term. However, if the ADP private employment data explodes on Wednesday, the price of gold may usher in a dramatic reversal. On Wednesday (November 5), in early Asian trading, spot gold fluctuated narrowly, currently trading at $3,936.59 per ounce.

The Federal Reserve's December interest rate cut expectations cooled, and the dollar index broke 100 to a three-month high

Last week, the Federal Reserve cut interest rates by 25 basis points as scheduled, but Chairperson Powell poured cold water on the subsequent press conference: "Another interest rate cut in December is not a DingTalk on the board." As soon as this statement came out, the market's confidence in the easing path was instantly shaken. Superimposed that the US government shutdown has entered its 35th day, matching the record for the longest time in Trump's first term, the official economic data is completely "disconnected", and the interpretation of the same set of private data by Federal Reserve officials is very different. Some people worry about the economy overheating, and some people worry about policy mistakes in the data vacuum.

A week ago, CME Group's FedWatch tool showed that the probability of a rate cut in December was close to 100%, but now it has fallen to 70%; another calculation method shows that it is only 65%.

The cooling of interest rate cut expectations has provided a strong rebound in the dollar, which in turn has suppressed the trend of gold prices.

The dollar index broke through the 100 mark on Tuesday and ended trading at 100.21, a five-day rise and a three-month high of 100.22 since early August. The surge in the dollar has directly pushed up the cost of buying gold against holders of non-US currencies, deterring global buying.

David Meger, head of metals trading at Gaoling Futures, said: "The dollar hit a new high, and the gold market is naturally under pressure. The deeper reason is that the probability of a rate cut in December has plummeted."

The stock market bubble alarm sounded, and funds fled to US debt en masse

Wall Street bosses collectively sounded the alarm: the CEOs of Morgan Stanley, Goldman Sachs, and JPMorgan Chase took turns warning that stock market valuations were too high and the risk of AI technology stock bubbles was imminent. The Nasdaq index tumbled 2.04% in a single day, the Philadelphia Semiconductor index plunged 4.0%, and the shares of six of the tech seven fell. The S & P 500 and Dow fell 1.17% and 0.53% respectively, their biggest one-day losses since October 10. Panic quickly spread, and funds were withdrawn from risky assets and poured into US Treasuries. The yield on the 10-year US Treasury bond fell 1.8 basis points to 4.089% in late trading, and the 30-year bond fell 2.1 basis points to 4.669%.

Greg Faranello, head of interest rate strategy at AmeriVet Securities, said: "AI stocks are falling, risk aversion is hanging over the market, and Treasuries are a good haven." Gold should have been a part of the safe haven wave, but it has both been eclipsed by the strength of the dollar and the high interest rate expectations.

35-Day government shutdown, ADP reports'all-or-nothing 'bellwether

The U.S. government shutdown has lasted for 35 days, and the Labor Department's monthly jobs report is definitely absent on Friday. Investors can only pin their hopes on the ADP national jobs report released on Wednesday.

If the ADP data in October is significantly less than expected (the market consensus is about + 25,000), it will confirm the cooling signal of the labor market, and the probability of interest rate cuts in December may rise to more than 80% in an instant, and the price of gold is expected to take the opportunity to rebound; on the contrary, if the data exceeds expectations, the dollar will continue to advance, and gold may explore the $3,900 integer mark.

PepperstoneMichael Brown, a senior strategist, put it bluntly: "It's just traditional safe haven buying, but the dollar is still king."

In addition, the Ministry of Finance will also announce a quarterly refinancing plan on Wednesday. If the huge issuance of bonds pushes up long-end yields, the pressure on gold will be exacerbated.

Conclusion: Short-term bear binge, long-term inflation and geopolitics

In the short term, the ADP report will become a key node that determines the life and death of gold prices - if weaker than expected, the bears will cover, and if stronger than expected, the bears will continue to crush.

However, looking at the long term, with the unabated momentum of global central bank gold purchases, the undercurrent of geopolitical risks in the Middle East, and the stickiness of inflation remaining, the strategic value of gold as the ultimate safe-haven asset has not wavered.

Investors may wish to ambush low-interest opportunities near $3,900. Once risk aversion reverses, the bulls may counterattack immediately.

In addition, investors should also pay attention to the US ISM non-manufacturing PMI data for October, which the market expects to be 50.8. In addition, pay attention to the US Supreme Court's trial on the legality of Trump's "reciprocal tariffs".

(Daily chart of spot gold, source: Internet)

At 07:29 Beijing time, spot gold was quoted at $3937.49 per ounce.