Federal Reserve Policy Disagreements Trigger Sharp Fluctuations in New York Gold; Next Week's Non-Farm Payroll Data Will Be the Key Turning Point

New York Gold Experiences Significant Volatility on Wednesday, Fed Divergences as the Main Driver

On Wednesday during the New York trading session, the gold market experienced a rollercoaster. Spot gold prices initially surged to a daily high of $4132.86 per ounce after opening, then sharply declined, falling to a low of $4055.53 per ounce, a drop of as much as $77 in a short period. Although gold rebounded to around $4090 per ounce afterward, it faced renewed pressure following the release of the Federal Reserve October meeting minutes, ultimately hovering around $4070 per ounce.

By the close on Wednesday, New York gold had only risen slightly by 0.26%, ending at $4077.93 per ounce. The session saw a peak over 1% intraday gain, but ultimately failed to hold the gains, reflecting market participants’ hesitation and uncertainty.

Fed October Meeting Minutes Reveal Major Internal Divisions

The Federal Reserve released the minutes of its October 28-29 meeting on Wednesday, revealing stark differences in views among policymakers regarding the outlook for monetary policy. Although the Fed approved a 25 basis point rate cut last month, there was a clear split among officials on whether to continue easing policy.

The core disagreement centers on whether a soft labor market or persistent inflation poses a greater economic threat. The minutes show policymakers warning that lowering borrowing costs could undermine efforts over the past four and a half years to tame inflation. U.S. inflation has consistently hovered above the Fed’s 2% target, which has made officials cautious about further rate cuts.

Regarding the December rate cut, the minutes’ language indicates an internal tendency to maintain policy stability. The minutes state: “Many officials indicated that if economic performance in the coming weeks aligns with expectations, some participants judged that it would be appropriate to further lower the federal funds rate target range in December. However, many participants also judged that it would be appropriate to hold the rate unchanged for the remainder of the year.” In the Fed’s language, “many” often suggests an internal inclination to hold steady.

Fed Chair Jerome Powell has also previously stated that a rate cut in December is far from a certainty, with the FOMC internally holding “divergent views.” This attitude is fully reflected in the minutes.

December Rate Cut Expectations Drop Significantly, US Dollar Index Rises

Market expectations for a December rate cut by the Fed have been notably revised downward. According to the CME(FedWatch) tool, traders now see only about a 30% chance of a rate cut in December, well below previous market consensus.

The hawkish stance of the Fed has supported the dollar’s strength. The US Dollar Index(DXY) rose 0.54% to 100.13, hitting a two-week high. The dollar’s strength directly offset the support for gold from the decline in US Treasury yields.

FXStreet analyst Christian Borjon Valencia pointed out that although falling US Treasury yields should have been positive for precious metals, the dollar’s rally completely offset this benefit, leading to a significant reduction in New York gold’s gains.

Geopolitical Easing Signals Weigh on Safe-Haven Demand

In addition to Fed policy divergence, new developments regarding Ukraine also exerted downward pressure on gold prices. According to the Financial Times, US and Russian officials are secretly negotiating a new plan to end the Ukraine war. The US news website Axios further disclosed that the Trump administration has engaged in secret talks with Russia, advancing a 28-point plan led by Trump envoy Vitekov.

The plan roughly falls into four categories: Ukraine peace, security guarantees, European security, and the future direction of US-Russia and US-Ukraine relations. A senior Russian official told Axios that they are optimistic about the plan, although reactions from Ukraine and its European supporters remain unclear.

For the gold market, easing geopolitical tensions mean reduced safe-haven demand, which undermines gold’s appeal as a safe asset. Valencia believes that these rumors have put considerable pressure on gold prices.

Next Week’s Non-Farm Payroll Data to Be Market Focus

Market participants are now eyeing the release of the US November 2023 non-farm payroll report on Thursday(November 21). Economists expect the US to add about 50,000 jobs in September, higher than August’s 22,000.

Latest unemployment benefit data already show signs of softening in the labor market. The US Department of Labor reported that initial jobless claims for the week ending October 18 reached 232,000. Meanwhile, continuing claims rose to 1.957 million, the highest since early August. These figures suggest the employment market is beginning to cool.

Notably, the Bureau of Labor Statistics announced that the non-farm payroll data for October and November will be delayed until December 16, after the Fed’s final meeting of the year. This schedule will further extend market uncertainty regarding employment conditions.

Technical Outlook for New York Gold Still Shows Room for Rebound

From a technical perspective, the overall upward trend of New York gold remains intact, but recent price movements reflect cautious buying. Currently, gold is trading above the 20-day simple moving average(SMA) at $4044 per ounce, which is considered an important technical support level. The Relative Strength Index(RSI) indicates that market momentum remains bullish, suggesting further upside potential.

Valencia believes that if New York gold breaks above the key resistance at $4100 per ounce, traders may test $4200. Conversely, if the price falls below the 20-day moving average support at $4044, gold could face a correction back toward $4000, and possibly test the October 28 low of $4886.

Market expectations for New York gold are shifting. Uncertainty around Fed policy, signals of geopolitical easing, and upcoming economic data will be key drivers of gold price movements. Traders should closely monitor these variables to seek trading opportunities amid volatility.