In a week marked by sharp sell-offs in global markets, gold prices have struggled to find the expected support as a safe haven. After a two-day rally, spot gold retreated back below the $4,100 level in Asian trading on Friday, November 6.
As of 04:22 Turkey time, spot gold was trading at $4,083.31, while U.S. gold futures pulled back to $4,092.67. Gold had tested its highest level in over two weeks on Thursday, November 5, rising as high as $4,146.63.
The backdrop for the pressure on the markets was a strong wave of selling in U.S. stock exchanges. The technology-heavy Nasdaq Composite Index fell 5.5%, while the S&P 500 lost 4.4% and the Dow Jones Industrial Average dropped 3.4%. The Nasdaq's decline of over 10% since its October peak has pushed the index into technical correction territory.
Despite the losses in stock markets, it was notable that gold did not exhibit a strong rally. Gold, which typically stands out during periods of risk aversion, faced selling pressure this time due to liquidity needs and a tendency to generate cash in portfolios. It is assessed that the sharp losses in technology and artificial intelligence stocks may have led some investors to reduce their gold positions.
MARKET EYES ON U.S. DATA
The main headline in the gold market will be the U.S. October employment report, which will be released at 16:30 Turkey time. According to the U.S. Bureau of Labor Statistics calendar, non-farm payrolls, the unemployment rate, and average hourly earnings will be closely watched in the report.
The data is expected to influence expectations regarding the U.S. Federal Reserve's (Fed) interest rate decision in December. Strong employment and wage growth could support the possibility of interest rate hikes, creating pressure on gold through the dollar and bond yields. Weak data, on the other hand, could reduce interest rate hike expectations and provide short-term support for gold.
Despite short-term price pressure, interest in gold funds has not completely weakened. According to data released by the World Gold Council on November 5, there was a net inflow of $2.7 billion into physical gold-backed investment funds in October. The amount of gold held by the funds increased by 19 tons to reach 4,275 tons, hitting a record as of the end of the month.
In terms of regional outlook, a divergence stood out. While there was an outflow of $512 million from gold funds in North America, a net inflow of $1.8 billion was recorded in European funds and approximately $1.3 billion in Asian funds.
For gram gold investors in Turkey, two indicators remain important: spot gold and the dollar/TL exchange rate. Spot gold remaining below $4,100 could create pressure on gram gold; however, a rise in the dollar/TL rate could lead to this effect being limited in Turkish lira terms. For this reason, the U.S. data to be released during the day will be closely monitored for both global gold prices and the short-term direction of gram gold.
News Source: 12punto
