Gold Shines, Dollar Surges with Global Tensions (11.22.2024)

Gold Gains Momentum with Ongoing Tension

Gold rose to $2,680 per ounce on Friday, marking its fifth consecutive increase and setting it on track for a nearly 5% gain this week as investors sought safe-haven assets amid escalating geopolitical tensions. Earlier in the week, Ukraine launched its second Western-supplied missile into Russia, and on Thursday, Kyiv's air force reported that Russia fired its first intercontinental ballistic missile at Ukraine in retaliation.

Meanwhile, markets continued to assess the Federal Reserve’s monetary policy outlook after US jobless claims unexpectedly decreased, fueling speculation about a slower pace of Fed rate cuts. Traders also analyzed comments from Fed Bank of Chicago President Goolsbee, who suggested that interest rates could decrease "a fair bit" and expressed confidence that inflation is moving toward the target. Most of the market still anticipates a 25 bps rate cut in December, which would reduce the opportunity cost of holding non-interest-bearing gold.

For XAU/USD, the first resistance level is at 2,692, followed by 2,712 and 2,750, respectively. On the downside, the first support level is at 2,665, with subsequent levels to watch at 2,630 and 2,590, respectively.

GBP/USD Slides as UK Inflation Rises

The British pound is trading around 1.2570 as of this morning, nearing the six-month low it reached last week amid escalating tensions between Russia and Ukraine. Reports indicate that Ukraine has launched UK-supplied cruise missiles into Russia for the first time. Earlier in the week, the pound briefly touched $1.271 after a stronger-than-expected inflation reading, which reaffirmed the Bank of England's cautious stance on future interest rate cuts.

In October, the UK’s annual inflation rate rose to 2.3%, the highest in six months, up from 1.7% in September. This exceeded both the Bank of England’s target and the market’s forecast of 2.2%. Inflation in services, a key indicator of domestic price pressures closely monitored by the central bank, edged up slightly to 5% from 4.9%. As a result, markets are now pricing in only a 14% chance of a rate cut this year, with expectations for just two cuts in 2025.

The first resistance level for the pair is at 1.2620, followed by 1.2680 and 1.2720, respectively. On the downside, the first support level is at 1.2550, with subsequent levels to watch at 1.2520 and 1.2475.

Silver Prices Rebound with China Demand

Silver prices are trading around $31 per ounce on Friday morning, rebounding from losses in the previous session. On Wednesday, Ukraine launched a series of UK-made missiles into Russia, following an earlier strike using US-made missiles. Meanwhile, geopolitical tensions intensified as the US blocked a UN Security Council resolution calling for a ceasefire in Gaza.

Regarding monetary policy, Federal Reserve governors Michelle Bowman and Lisa Cook offered differing views on inflation and the future trajectory of interest rates in separate statements on Wednesday. In China, the People's Bank of China (PBOC) kept key lending rates steady this week, aligning with expectations and providing no new signals likely to affect demand in the world's largest metals consumer.

For XAG/USD, the first resistance level is at 31.60, followed by 32.50 and 32.80, respectively. On the downside, the first support level is at 30.80, with additional levels to watch at 30.20 and 29.80.