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Market News Gold trading reminder: heavy trading day! Small non-farmers and the Fed’s decision must be closely watched

Gold trading reminder: heavy trading day! Small non-farmers and the Fed’s decision must be closely watched

In the Asian session on November 3, spot gold held steady at around 1787. Gold prices fell slightly on Tuesday, mainly because the US dollar and US stocks rose before the Fed’s decision, but the fall in US bond yields supported gold prices. In the day, we will focus on the Federal Reserve's interest rate decision and the employment data of "small non-agricultural" ADP.

2021-11-03
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On Wednesday (November 3) Asian time, spot gold held steady at around 1787. The price of gold fell slightly on Tuesday (November 2), mainly because the US dollar and US stocks rose before the Fed’s decision, but the fall in US bond yields supported gold prices.

In the day, we will focus on the Federal Reserve's interest rate decision, as well as "small non-agricultural" ADP employment, non-manufacturing PMI and factory orders, etc. All need to be closely watched. Gold prices may usher in a big market day.


Fundamentals are bad


[The U.S. dollar rises, pay attention to the results of the Fed meeting]

The U.S. dollar rose slightly on Tuesday, and the Federal Reserve began a two-day policy meeting. It is expected to announce that it will begin to reduce the large-scale asset purchase plan implemented at the beginning of the new crown epidemic.

(Daily chart of the US dollar index)

In recent weeks, investors have digested the expectations that central banks will tighten their policies. They believe that policy makers' concerns about rising inflation are enough to bring the easing policy during the epidemic to an end.

The RBA’s attitude was more dovish than investors expected, causing the Australian dollar to record its biggest one-day drop since September 29. This is the first major central bank to hold a meeting this week.

The Federal Reserve will announce its policy decision on Wednesday, and the Bank of England will announce its policy decision on Thursday.

Edward Moya, senior market analyst at Oanda, said, "The subject of out-of-control inflation and forcing central banks to take action is unfolding."

The market has completely digested the Fed’s expectation of a reduction statement and will look for any clues as to when to start raising interest rates.

Joe Manimbo, senior market analyst at Western Union Business Solutions, said: "This will be an interesting thing. Considering that the market has become a bit aggressive in digesting multiple interest rate hikes next year, we will have to see if the Fed will respond to these expectations. .

[Strong performance drives the three major stock indexes to reach a new closing high]

Major U.S. stock indexes rose to record highs on Tuesday as the strong earnings season continued to boost stock market sentiment, and investors looked forward to the outcome of a key meeting of the Federal Reserve.

The S&P 500 Index and the Nasdaq Index reached a new closing high for the fourth consecutive trading day, while the Dow Jones Industrial Index closed at a record high for the third consecutive trading day and closed above 36,000 for the first time.

(Dow daily chart)

Overall, as the economy continues to recover from the new crown pandemic, third-quarter earnings of US companies were better than expected. According to Refinitiv IBES data, about 320 companies have announced their financial reports so far, and it is expected that the third-quarter earnings of S&P 500 index companies will increase by 40.2% over the same period of the previous year.

The Federal Reserve is expected on Wednesday to approve a plan to reduce the size of monthly bond purchases by $120 billion, which is designed to support the economy during the pandemic. Investors will also pay attention to statements about interest rates and the continuity of recent inflation trends.

Randy Frederick, vice president of trading and derivatives business at Charles Schwab, said that most of the time, when the market is predictable, when the expected result is obtained, the market is happiest. I think the market expects that the Federal Reserve will gradually reduce assets. Purchase scale.

Fundamentals are bullish


[U.S. Treasury yields plummeted and the curve became steeper]

U.S. Treasury yields fell on Tuesday, and the curve became steeper. The market is waiting for the Fed's possible decision to start reducing the scale of asset purchases, while hoping to find clues about seemingly sustained inflation and future interest rate hikes.

The yield on the benchmark 10-year Treasury note fell 2.6 basis points late at 1.547%. The yield on the two-year government bond, which hit a 19-month high last week, hit its biggest drop since February. It was as low as 0.444% and fell 5.9 basis points to 0.4559% in late trading.

Kevin Flanagan, head of fixed income strategy at WisdomTree Investments, said, “In view of the strong price movements we saw last week, the market decided to consolidate slightly before the announcement of the Fed meeting tomorrow.”

Flanagan said that reducing the size of asset purchases is "almost a foregone conclusion," and the market's focus has shifted to the timing and magnitude of future Fed rate hikes, as well as the Fed's latest view on "temporary" inflation.

" What is temporary? We all think that temporary means only a few months. It has been going on for a year now ."

[Wall Street warns to prepare for a fall in U.S. stocks]

Bank of America strategists said that the era of abundant liquidity is coming to an end, and US stocks will not stay at record highs for too long. So far, several major Wall Street firms have warned that the surge in US stocks may not last forever, and Bank of America is the latest one. So far, the stock market has been largely unaffected by the bond market crash. Strong corporate profits and the lack of better investment alternatives dictate people's risk appetite.

Bank of America strategists such as Gonzalo Asis wrote in a report on Tuesday that this divergence of stocks and debts is unlikely to continue. As the monetary policy environment develops towards an unfavorable stock market, U.S. stocks will realize this sooner or later.

In general, the price of gold is still in a sideways state, and investors are waiting for the Fed's decision to be released. Prior to this, the price of gold is expected to continue to fluctuate .

(Spot gold daily chart)

GMT+8 8:23, spot gold was quoted at US$1,786.53 per ounce.
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