Gold trading reminder: Consumer confidence in the US unexpectedly strengthened in October, and gold prices fell below 1,000, but the outlook remains positive

On Wednesday (October 27) Asian time, spot gold held steady at around 1793. On Tuesday (October 26), the price of gold gave up all the gains on Monday. Consumer confidence in the United States unexpectedly strengthened in October, which boosted the US dollar and US stocks and put pressure on gold prices. But the fall in U.S. Treasury yields supported the price of gold.

The main focus of the day is the US durable goods orders in September, and the Bank of Canada's decision also needs proper attention.

Fundamentals are bad

[Dow and S&P 500 index record highs]

The U.S. stock index closed slightly higher on Tuesday, and the Dow Jones Industrial Average and the S&P 500 hit new highs, but the gains were limited due to the decline in Facebook's quarterly results.

Facebook fell 3.92%, causing the biggest drag on the S&P 500 and Nasdaq. Prior to this, the company warned that Apple’s new privacy regulation adjustments would put pressure on its digital business. Facebook's stock price closed below the 200-day moving average for the first time since March 8. A break below this technical support level may indicate a further decline.

Ken Polcari, managing partner of Kace Capital Advisors, said: "Facebook has other problems, and of course the financial report is not that good."

The S&P 500 index hit a new high due to a boost from large-cap stocks. Nvidia rose 6.70%, setting a record closing high of $247.17, while Amazon and Apple rose 1.68% and 0.46%, respectively.

(S&P 500 index daily chart)

The third-quarter earnings of S&P 500 index companies may increase by 35.6% year-on-year. Market participants are trying to figure out how companies will deal with supply chain bottlenecks, labor shortages and inflationary pressures.

Although the 11 major S&P stocks rose almost across the board, defensive stocks such as utility stocks and real estate stocks performed best, indicating that the market is somewhat cautious.

Data show that consumer confidence in the United States unexpectedly strengthened in October, and concerns about high inflation were overshadowed by the improvement in the labor market outlook. The US Department of Commerce stated in a report that in September, new home sales surged by 14.0%.

[The U.S. dollar climbed slightly, and the market remained stable before many central banks held their meetings]

The U.S. dollar index rose slightly on Tuesday, and trading fell into a narrow range. The market awaits the upcoming central bank meetings, which may trigger volatility.

(Daily chart of the US dollar index)

Analysts said that before a series of central bank meetings and economic data are released, the U.S. dollar may continue to stabilize. These meetings and data may change people's views on interest rates, inflation and growth rates.

FXStreet.com senior analyst Joseph Trevisani said: The market is just taking a breather.

The Bank of Canada will meet on Wednesday, and the European Central Bank and the Bank of Japan will meet on Thursday. The central banks that will meet next week include the Federal Reserve, the Bank of England, the Reserve Bank of Australia, and the Norges Bank.

When the Bank of Japan meets on Thursday, it is expected to maintain its large-scale stimulus plan and revise its inflation forecast for this year, indicating that it has no intention to follow the policies of other central banks preparing to exit the crisis mode.

[U.S. consumer confidence unexpectedly strengthened in October]

US consumer confidence unexpectedly strengthened in October, and concerns about high inflation were overshadowed by improved labor market prospects, suggesting that economic growth is picking up after a turbulent third quarter.

A survey conducted by the World Large Corporation Research Council on Tuesday showed that consumers are eager to buy high-priced goods such as homes and motor vehicles and large home appliances in the next six months. The proportion of Americans planning a vacation was the highest since February 2020, and the first wave of new coronavirus infections broke out in the United States shortly thereafter.

"Consumers are more optimistic after the downturn in the third quarter, which supports the view that the economy will perform strongly in the last quarter of 2021," said Christopher Rupkey, chief economist at FWDBONDS. "Consumers know that the tight labor market will support them. , Those who expect an economic recession due to a decline in consumer confidence in the late summer will have to change their minds."

The World Enterprise Research Institute's Consumer Confidence Index rose to 113.8 in October, ending the previous three-month consecutive decline. It was 109.8 in September . This indicator, which focuses more on the labor market, hit a peak of 128.9 in June. In sharp contrast, the University of Michigan survey showed that consumer confidence declined in early October.

As consumer confidence is picking up, a new wave of viral infections is fading. Consumers are optimistic about the status quo and short-term prospects. Economists interviewed previously predicted that the index will drop to 108.3 in October.

[U.S. new residential sales rose to the highest in six months in September]

The sales of new homes in the United States rose to the highest level in six months in September, highlighting strong potential demand.

Government data released on Tuesday showed that the sales of new single-family houses increased by 14% month-on-month, reaching an annual rate of 800,000 units. Economists surveyed expected a median value of 756,000 sets.

These data show that in recent months, demand for home purchases is stabilizing after high housing prices and insufficient housing have pushed the number of contracts to fall below pre-epidemic levels. However, due to the continued supply chain and labor shortages, housing construction has slowed down, and the rise in mortgage interest rates is putting pressure on home buyers, hindering factors still exist.

Pulte CEO Ryan Marshall said in a statement: "Demand in the housing industry continues to be strong, but the production and supply of many building materials have been severely interrupted, and the overall construction cycle is being extended."

Fundamentals are bullish

[October 26 gold ETF holdings: SPDR gold holdings increased by 1.74 tons]

According to the data of gold ETFs on October 27, the world's largest gold ETF-SPDR Gold Trust held 979.81 tons of gold as of October 26, an increase of 1.74 tons from the previous trading day.

[Long bond yields fell to a one-week low]

U.S. Treasury yields were lightly traded on Tuesday, and long-term bond yields fell for the third consecutive trading day. Investors focused on the Fed meeting next week for clues on the timing of the Fed’s first interest rate hike since December 2018.

A series of better-than-expected US data boosted short-term bond yields and flattened the yield curve, as investors expected the Fed to raise interest rates soon. The yield gap between the US five-year and 30-year Treasury bonds narrowed to 86.9 basis points.

Data released on Tuesday showed that consumer confidence in the United States unexpectedly strengthened in October, and concerns about high inflation were overshadowed by improved labor market prospects, suggesting that economic growth is picking up after a turbulent third quarter. In September, new home sales surged by 14.0%, with an annual rate of 800,000 households after seasonal adjustment.

Steve Feiss, managing director of fixed-income business at brokerage Etico Partners, said: "I think the current situation is that US short-term debt is accelerating the digestion of concerns about US interest rate hikes ."

The factor that further pushed the Fed to raise interest rates ahead of schedule was the sharp rise in the U.S. inflation rate.

Federal funds rate futures show that the Fed has a 70% chance of raising interest rates in June, although the Fed’s plan to reduce asset purchases may end in June if it starts in November.

In general, interest rate futures dealers remanded to indicate that there will be two interest rate hikes this year, the second time in December.

In general, despite the short-term adjustment of gold prices, the overall trend is relatively strong, and the upward trend is still expected to continue. At the same time, we need to pay attention to the impact of a series of important data this week on gold prices.

(Spot gold daily chart)

GMT+8 8:40, spot gold was quoted at $1,793.56 per ounce.