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On November 11th, economists at ABN AMRO stated in a report that the politicization of US institutions and pressure on independent agencies under the Trump administration pose a risk to the dollars dominance as the global reserve currency. They pointed out that the decline of US institutions has continued rapidly since the beginning of the year, raising serious concerns about the reliability of the dollar reserve system. The White House is firing oversight agencies, prosecuting political opponents, dismantling regulation, and restructuring institutions in a deeply partisan manner. They stated that this raises questions about whether the US can continue to maintain its rule-abiding, diversified institutions and strong markets—factors that attract investment to the US and support the dollar.On November 11, a Turkish prosecutor called for a more than 2,000-year prison sentence for Istanbul Mayor Ekrem Imamoglu in a corruption case, potentially barring President Erdogans strongest challenger from running in the next presidential election. The 3,900-page indictment names 402 suspects and describes Imamoglu, the most prominent opposition figure, as the "founder and leader of a criminal organization." Charges include bribery and accepting bribes. Following the news, the Turkish stock market plummeted, with Istanbuls benchmark index falling 3.1% by the afternoon local time. The index is heading for its biggest one-day drop since early September.Russian Foreign Minister Lavrov: Russia is ready to discuss its concerns with the United States regarding Russias "suspicious underground activities."Russian Foreign Minister Sergey Lavrov: Russia is concerned about the United States claim that it will use nuclear tests for geopolitical purposes.Russian Foreign Minister Lavrov: It is possible that the new Strategic Arms Reduction Treaty could be extended for another year at any time before it expires on February 5.

Gold Price Prediction: XAU/USD rises on Powell's dovish speech

Daniel Rogers

Dec 01, 2022 14:59

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The price of gold is increasing as a result of Jerome Powell's dovish speech on Wednesday, which weakened the US Dollar. At the time of writing, the Gold price is up approximately 0.6% and has risen from a low of $1,744.95 to a daily high of $1,765.

 

Earlier in the day, the price of gold reduced gains as US bond yields rose in anticipation of a highly anticipated speech by Federal Reserve Chair Jerome Powell. Powell stated, however, that policy will likely need to stay tight for some time and that it makes sense to slow the rate of interest rate hikes. The time to reduce the pace of rate hikes could arrive as early as the December meeting, according to him.

 

As a result, the gold price is on course for its best month since May 2021, thanks to the dollar's decline. Last observed, the US dollar index, DXY, was down 0.5% to 106.29, while the yield on the US 10-year note was down to 3.694%, not far from the November 28th low of 3.62%. The greenback is poised for its largest monthly loss since September 2010 as investors anticipate the Federal Reserve to reach its target interest rate in the first quarter of 2019. After four consecutive 75 bps rate hikes, the markets are now pricing in a 75% possibility of a lower 50 bps boost in December.

 

Moreover, evidence revealed that the labor market began to cool. In October, the number of job opportunities in the United States decreased to 10.3 million. The number of hiring and total separations remained relatively stable at 6 million and 5.7 million, respectively. "Job vacancies have decreased from their peak of just under 12 million in March, but with 1.7 job postings per unemployed person in the United States, the gap between labor demand and supply remains considerable," ANZ Bank analysts explained.

 

TD Securities analysts contend that a bull trap is being set in precious metals markets. "Over the past few days, systematic trend followers have substantially covered their gold shorts, while the strong price action has likely continued to draw additional long interest from discretionary money managers seeking a recession hedge amid peak central bank hawkishness."

 

"However," stated the analysts, "narrative is chasing prices, and we see many events on the docket that could spark a renewed leg lower as CTAs run out of dry powder on the bid. Alongside inflation and employment data, Chair Powell's speech is a prime possibility for a catalyst.

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