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Price of Gold Could be Headed to $2,040 Per Ounce

Miguel A. Rodriguez
Miguel A. Rodriguez
28 November 2023

While the price of the US Dollar has been declining, gold has reached levels not seen since May. Read on to see what else has been happening in the markets and what hot economic events are coming up. 

The S&P 500 Index Gained More Than 10% in November

The week began with a stock market struggling to find direction. This struggle came after it reached technical overbought levels in a November-long rally that saw the S&P 500 index gain more than 10%. The rise is one of the biggest monthly advances in recent years.

The S&P 500 was hesitant yesterday after weaker-than-estimated new home sales data led bond yields to give up several basis points. The 10-year bond was trading at 4.42% from 4.47% on Friday.

Energy, industrial, and financial stocks were the worst performers of the day. Retail chain stocks were mixed as yesterday was Cyber Monday. Amazon.com Inc. was up just over 1% and Best Buy Co. fell slightly. The market is waiting to see the sales result after some of these companies announced predictions of a drop in demand.

Wall Street's "fear indicator", the VIX, stopped declining yesterday. It gained slight advances after the volatility indicator recently reached the lowest levels since the start of the pandemic in a clear sign of the improvement in investors' risk sentiment.

Investors Are Keen to See US PCE Results on Thursday

This week will bring to light some important economic data. One of the most anticipated is the US Personal Consumption Expenditure (PCE) results that will be published on Thursday. The release will provide important clues about the evolution of inflation and therefore the future of interest rates. Whatever the case, the market is clearly betting on the end of the cycle of rate increases and rate cuts for the second quarter of next year.

The Price of Gold Has Risen to Highest Level Since May

This rate forecast together with the decline in the price of the US Dollar, is influencing the price of gold, which has risen to levels not seen since May. Gold has an inverse correlation with interest rates and the price of the US Dollar. Only weak PCE data could stop the rise of gold, which technically points to further advances towards the area of $2,040 per ounce.

gold chart.png

Gold daily chart, November 28, 2023. Source: CAPEX.com WebTrader

OPEC+ Expected to Announce Further Production Cuts After Meeting on Thursday

The other relevant event the market is looking forward to this week is the OPEC+ meeting on Thursday.

After last week's meeting was postponed due to discrepancies between the producing countries, many analysts expect announcements of additional production cuts. According to experts if this is the case, and depending on the cut’s size and duration, the price of crude oil could stop falling and move above the level of $80 per barrel.

Key Takeaways

  • The S&P500 index gained more than 10% in November.
  • The 10-year bond fell and was trading at 4.42%.
  • Amazon.com Inc. was up just over 1% while Best Buy Co. slightly fell on Cyber Monday.
  • The VIX index stopped declining yesterday, showing an improvement in investors’ risk sentiment.  
  • Investors are keen to hear the PCE results on Thursday.
  • The US Dollar declined, bringing the price of gold up.  
  • Gold could be on its way towards the area of $2,040 per ounce.
  • Analysts expect announcements of additional production cuts after the OPEC+ meeting on Thursday.
  • These kinds of announcements could bring the price of crude oil back above the level of $80 per barrel.

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Sources: Bloomberg, Reuters 

 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.