The US government "shutdown" crisis is only suspended! Gold hedge charm is not reduced

In the first half of the European session on Thursday (November 13), spot gold continued its upward trend for a third consecutive day and climbed to a three-week high. Investors generally believe that delayed US macroeconomic data due to the prolonged US government shutdown will show signs of economic weakness, which will prompt the Federal Reserve to further cut borrowing costs in December. This expectation further provided upward momentum for the non-yielding gold.

In addition, the current US dollar index is showing an accelerated downward trend, which has also become another important factor supporting the price of gold.

The optimism generated by the positive development of the US federal government restart does not appear to have affected gold bulls - although government restarts usually support market risk appetite, and rising risk appetite tends to weigh on safe-haven gold, government restart optimism is limited, and the risk of a potential shutdown remains.

The US government may shut down again, highlighting financial and economic concerns

The US Senate passed a funding bill to end the longest government shutdown in history, boosting investor confidence and supporting market risk appetite overall.

But a closer look at the details of the government's restart shows that the debate over the extension of health insurance subsidies is the main difference between the two parties. This difference has not been resolved. According to convention, Congress needs to pass 12 appropriations every year. The bill passed by the Senate on the evening of the 10th only contains 3 annual appropriations. This means that 9 annual budgets have not been finalized, that is, more than two months later, the US federal government may face another "shutdown" crisis.

After the restart of the US government, market attention has turned back to the deteriorating fiscal outlook and concerns about the weakening of economic momentum. Economists predict that the prolonged government shutdown may have reduced quarterly GDP growth by about 1.5% to 2.0%.

This expectation, in turn, continues to weigh on the dollar bulls.

The job market is showing signs of deterioration, and signs of economic weakness are strengthening

In addition, data released last week by workforce analysis firm Revelio Labs showed that the U.S. lost 9,100 jobs in October, and government employment fell by 22,200 last month.

More notably, the Federal Reserve Bank of Chicago estimated that the unemployment rate in the United States rose slightly last month, suggesting that the labor market has shown signs of deterioration.

The Federal Reserve's interest rate cut may lack a basis, and the probability of interest rate cuts has declined

While Stephen Milan, the Fed governor, clearly reiterated the need to cut borrowing costs to hedge against weakness in the labour market, San Francisco Fed President Daley said a lack of labour supply could support a steady rate cut, and Atlanta Fed President Rafael Bostic said on Wednesday that real-time indicators showed an exceptional balance in the labour market and that he did not think a serious downturn in the short term was the most likely outcome.

Bostic further added that there are few signs that price pressures will resume, so lowering policy rates will not fuel inflation momentum, and a sustained upward trend in medium- and long-term inflation expectations could raise systemic risks.

But the latest statement from the White House has raised concerns that even if the government reopens, October's consumer price index and employment data may be permanently missing.

The lack of key economic data will complicate the management of the Federal Reserve's monetary policy, leaving policymakers in a dilemma of lack of reference.

Affected by this, CME FedWatch interest rate futures showed that the probability of interest rate cuts fell back to 51%, which was seen as an important resistance to suppress the trend of the dollar, and provided some support for non-yielding gold in the European session on Thursday.

Follow-up focus on FOMC members' speeches

Although the divisions within the Federal Reserve Committee have not yet been bridged, the market has begun to recalibrate expectations for Fed easing in December.

And Atlanta Fed President Rafael Bostic warned that a sustained upward trend in medium- and long-term inflation expectations could lead to systemic risks.

Traders will continue to closely monitor the speeches of several influential FOMC members for more clues about the path of future rate cuts by the Federal Reserve.CXM ForexThe Federal Reserve's policy outlook, in turn, will become a key factor affecting demand for the dollar.

Technical analysis:

After breaking through the middle of the ascending channel on Wednesday, gold prices stopped before the key level of 4239.26.

The current pressure level is the upper rail of the ascending channel and 4239.26, the support level is 4157.96, and the middle rail of the channel is followed by the 5-day line.

The follow-up point of the gold price is whether it can digest the previous ETF lock-up, and then sort it out and get out of the fifth wave of a new high, or become a second high and then the gold price falls to form a double-headed pattern.

(Daily chart of spot gold, source: Internet)

At 19:37 Beijing time, spot gold was trading at $4225.07 per ounce.