Gold Nears Record High as US Economic Data Holds Key

On Wednesday, as investors ruled out the possibility of the Federal Reserve significantly cutting interest rates at its next policy meeting, the US dollar index hit an 11-week high, closing up 0.29% at 103.52. The benchmark 10-year US Treasury yield closed at 4.0180%; the two-year US Treasury yield, which is more sensitive to monetary policy, closed at 3.9500%. US stocks saw gains with the Dow Jones Industrial Average up 0.79%, the S&P 500 up 0.47%, and the Nasdaq up 0.28%. European stock indices were mixed, with the German DAX 30 closing down 0.27%; the UK FTSE 100 closing up 0.97%; and the Euro Stoxx 50 closing down 0.77%.

Risk alerts for Thursday:

- 20:15, the Eurozone will announce the ECB deposit facility rate as of October 17th, with market expectations at 3.25%, compared to the previous 3.50%.

- 20:30, the US will announce the initial jobless claims for the week ending October 12th, with market expectations at 260,000, compared to the previous 258,000.

- At the same time, the US will announce the September retail sales monthly rate, with market expectations at 0.3%, compared to the previous 0.1%.

- 21:15, the US will announce September industrial production monthly rate, September capacity utilization, September manufacturing output monthly rate, September manufacturing capacity utilization, and September industrial production year-over-year rate (seasonally adjusted %).

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- 23:00, the US will announce the EIA crude oil inventory change as of October 11th (in barrels).

According to the CME FedWatch Tool, the market currently assesses the possibility of the Federal Reserve cutting interest rates by 25 basis points in November at approximately 94.1%. This consolidation of expectations stems from weak economic data, particularly the weakening inflation data in the US and other major global economies. The strengthening of rate cut expectations has led to a general decline in yields, thereby enhancing the appeal of gold. Additionally, market expectations for future gold prices are also continuously rising.The recent continuous decline in U.S. Treasury yields has made gold, which does not generate interest, relatively more attractive. Investors' attention to future economic data has intensified, especially with the upcoming release of the U.S. retail sales data for September (colloquially known as "terror data"). This data will provide the market with important clues about the health of consumer spending.

In addition to the Federal Reserve, the policy movements of the European Central Bank (ECB) and the Bank of England are also worth paying attention to. The ECB is expected to cut interest rates again on Thursday due to weak inflation data and stagnant economic growth, which has increased market expectations for more aggressive monetary policy. The inflation rate in the UK has fallen to 1.7%, which also provides a basis for the Bank of England to cut interest rates. The interest rate cut expectations of these central banks have further promoted a loose environment in the global market, providing support for the rise in gold prices.

Goldman Sachs predicts that the Federal Reserve will conduct consecutive interest rate cuts of 25 basis points each from November 2024 to June 2025, with the terminal interest rate range falling to 3.25%-3.5%. This expectation is also reflected in the market's view of the U.S. dollar, which rose to an 11-week high on Wednesday. Despite this, the safe-haven attribute of gold still attracts the attention of investors.

In addition to economic data and monetary policy, geopolitical risks are also an important factor driving gold prices. The conflict between Israel and Lebanon continues to escalate, with recent airstrikes by Israel on southern Lebanese cities causing serious casualties. This event has intensified market risk aversion. Investors' attention to the situation in the Middle East is rising, increasing the demand for gold as a safe-haven asset.

A spokesperson for the U.S. State Department stated that the U.S. supports Israel's limited strikes against Hezbollah. Although this position may alleviate concerns about the escalation of the conflict to some extent, the market's sensitivity to geopolitical risks remains. It is widely believed in the market that ongoing geopolitical tensions will continue to provide support for gold.

Gold prices were supported on Wednesday by the softening of U.S. Treasury yields and expectations of interest rate cuts by major central banks, as well as additional safe-haven support from ongoing geopolitical conflicts. Gold prices rose towards historical highs on Wednesday, touching a session high of $2,685.15 per ounce. Today, attention is focused on the 4-hour support area of $2,670 for gold, and after a stable pullback, gold can continue to be bought.

Several U.S. economic data will be released during this trading day, including the monthly rate of retail sales in September, changes in the number of initial jobless claims, and the monthly rate of industrial output. These data will directly affect the market's expectations for future Federal Reserve policies, thereby influencing the trend of gold prices. Investors need to closely monitor the release of these data.

According to the latest data from the American Petroleum Institute (API), U.S. crude oil inventories decreased by 1.58 million barrels last week, while the market had generally expected an increase of about 1.8 million barrels. This unexpected decline in inventories has provided support for oil prices, showing that despite market uncertainties, demand still exists.

The EIA's inventory data will be released on Thursday, and the market will closely monitor this data to further assess the balance of supply and demand. Changes in inventories usually directly affect the trend of oil prices, so investors are eagerly awaiting the upcoming EIA data.The geopolitical situation in the Middle East remains tense, particularly the conflict between Israel and Lebanon. Recent airstrikes by Israel on southern Lebanese cities have caused serious casualties, triggering market concerns about disruptions in oil supply. Although these concerns have supported oil prices to some extent, expectations of Israel's retaliatory attacks on Iran have also introduced uncertainty to the market.

The market is currently awaiting clarity on two major factors: first, the fiscal stimulus package of an Asian powerhouse, and second, Israel's specific response to Iran. Both could pose upward risks to oil prices.

OPEC and the IEA have this week downgraded their global oil demand growth forecasts for 2024 and 2025, mainly due to weak demand expectations in the Asian market. The IEA predicts that global oil demand will peak at 102 million barrels per day before 2030 and then decline to 99 million barrels per day by 2035. This forecast indicates that the global energy structure is undergoing changes, with the demand for fossil fuels potentially reaching its peak within the next decade, after which it may gradually decline.

The IEA report points out that, with geopolitical tensions, especially in major oil-producing regions such as the Middle East and Russia, an excess in oil and natural gas supply could drive investment in green energy. This shift implies that while oil prices may be affected by conflicts and supply disruptions in the short term, the market may transition towards cleaner energy sources in the long term.

Recent economic data from the United States and Europe has also impacted the trajectory of oil prices. The U.S. import prices in September recorded the largest decline in nine months, indicating a favorable inflation outlook, and the market widely expects the Federal Reserve to continue lowering interest rates. Additionally, the Eurozone economy has shown some positive signs, with some economic indicators showing an improving trend, despite overall weak growth.

These positive changes in economic data help to limit the decline in oil prices, indicating that despite uncertainties in supply and demand, the recovery of the global economy may provide some support for oil prices.

In the current market environment, in the short term, oil prices may be influenced by a multitude of factors including inventory data, geopolitical risks, and global economic data. Oil prices have rebounded at present, but with the market's high attention to the situation in the Middle East and the downgraded demand forecasts from OPEC and the IEA, today's focus for crude oil should be on the support area in the 4-hour chart. After adjusting and stabilizing, consider attempting to go long on crude oil.