Gold’s delayed reaction to FOMC is the byproduct of dollar weakness

As of 5:35 PM EDT, December gold the most active futures contract is moderately higher up six dollars or 0.30%, and fixed at $1993.50. Yesterday the November FOMC meeting concluded which strengthened the dollar dramatically, taking gold lower. Today it seems there has been a slight delayed reaction as market participants have had time to evaluate all the information presented yesterday in the release statement and press conference by Chairman Jerome Powell.

Powell as he does at most press conferences following a FOMC meeting threaded the needle as he attempted to soften news that could have a strong impact on the financial markets. Powell’s conference yesterday was no different. Although he emphatically stated that committee members were not focusing on rate cuts at all, much of what the Chairman said had a more pronounced dovish slant to it.

While it was anticipated that the Federal Reserve would continue to press the pause button in regard to rate hikes, there remained uncertainty as to whether they would implement one last rate hike in December. He suggested that the Federal Reserve’s likely path through the remainder of the year would not include additional rate hikes.

According to the CME’s FedWatch tool, there is an 80.2% probability that the Fed will leave its benchmark interest rate at its current level, which is between 5 ¼% and 5 ½%. The probability of a pause in December has remained roughly at 80% this week. Just last month, the probability of a rate hike pause in December was only 54%.

Today’s moderate gains in gold of 0.30% were made due to dollar weakness combined with moderate selling pressure. The dollar declined by 0.56% almost double the percentage gain in gold today taking the index to 106.075.

Spot gold is currently fixed at $1985.10 after factoring in today’s gain of $2.60. According to the Kitco Gold Index (KGX), dollar weakness created strong tailwinds moving gold $9.70 higher only to be deluded by selling pressure which accounted for a decline of $7.10.

Traders and market participants are fully focused on tomorrow’s jobs report. Considering that September’s jobs report contained a surprise coming in at almost double of economist’s projections, which were anticipating that 250,000 new jobs were added in September with the actual report revealing that 336,000 new jobs were added to payrolls.

Consensus estimates for tomorrow’s October jobs report are much softer, anticipating an additional hundred and 80,000 jobs were added last month. The forecasts are also expecting the unemployment rate to remain at its current 3.8%.

There are also a few unknowns that could emerge from tomorrow’s report as analysts wonder how sizable the effect of strikes by workers in the auto, entertainment, and healthcare industries will affect the numbers.

Wishing you as always good trading,