Problems for gold | 17 November 2023

#SP500:

The Federal Reserve has been relatively quiet with limited operations, the only significant change being the FDIC's repayment of $8.5 billion of debt to the Fed. The Treasury curve has continued to correct, but the correction appears to have run its course. Meanwhile, liquidity in the US Treasury market remains extremely low and aggressive borrowing is planned from the 29th. However, another interesting event is scheduled for 17 November - the expiration of the temporary measures. If no budget deal is reached, more 'stopgap measures' are likely, but a government shutdown cannot be ruled out. There has been an increase in the amount of dollars in the system, which supports the markets. The Fed continues to underperform in terms of quantitative tightening, and within a week liquidity may weaken due to tax payments (a significant portion of which are made mid-month). A large amount of bond issuance is expected in late November or early December - it will be interesting to see how the Treasury curve reacts to such a situation.

Trading recommendation: buy 4380 and take profit 4425.

XAUUSD:

The Federal Reserve plans to keep interest rates at current levels until summer 2022 and then gradually reduce them. It is possible that rate cuts could begin as early as the spring if credit conditions continue to deteriorate. In any case, the Fed does not want to cut rates in the next 3-4 months and does not plan to do so for gold, which is negative. Gold tends to fall when the Fed funds rate is higher than the underlying inflation rate, which is the case today with a difference of 1.8%. This indicator may rise in the coming months as inflation slows.

Trading recommendation: sell 1947 and take profit 1925.

#WTI:

Recently, oil prices have fallen despite a supply/demand imbalance in the global oil market. OPEC+ countries have significantly reduced production this year, resulting in a supply deficit of almost 1.5 million barrels per day in the third quarter. The International Energy Agency, which is often conservative in its forecasts, predicts that the deficit could reach 2 million barrels per day in the fourth quarter. Despite this, prices are still falling. The market is worried about a change in the OPEC+ agreement and believes that Saudi Arabia will start increasing production in 2022 due to its falling GDP. Initially, Saudi Arabia wanted to bring prices back up to $100 a barrel by cutting oil production, but nothing has happened and now the market fears that the Saudis will gradually increase production or face a significant drop in GDP.

Trading recommendation: sell 79.00 and take profit 77.10.