Gold has rebounded $30 from its yearly low. On Monday, November 2, the spot price is holding around $3,906.39 per ounce. That is up $30.55 (+0.79%) from Friday's close of $3,875.84.
The spot price is the price of metal for immediate delivery; this is what is called the gold quote. Reuters recorded $3,900.05 (+0.6%) at the start of the Asian session. The rebound came after Friday's plunge of almost 3.5% to a yearly low.
What matters to the trader is something else. Gold is currently being driven not by metal buyers, but by oil and expectations for the Fed rate.
What happened on Friday?
Gold hit a yearly bottom, and silver and US stocks fell along with it.
- $3,870.25 - the week's low according to Kitco
- About 6% was lost by silver, which dropped to $49
- -1.8% - S&P 500
- -2.9% - Nasdaq
Why were metals sold off?
- Tech selloff. The drop in stocks hit leveraged accounts and triggered a chain of selling.
- Margin calls. Investors closed out their most liquid positions, and gold got caught in the selloff. A margin call is a demand to add funds to leveraged positions.
No support was found. Even the drop in the yield on 10-year US Treasuries to 4.93% did not help the metal.
Where did the rebound come from?
The impulse came from oil, not gold. Brent fell more than 3% on Monday and moved below $110. The reason is negotiations between Iran and Qatar on ending the war.
- Oil is getting cheaper. Costs across the economy are falling.
- Inflation is weakening. Future price growth looks more modest.
- The rate is in question. The argument for raising it is becoming weaker, and this supports gold.
What does the Fed decide?
Last week the regulator left the rate unchanged, but a split emerged within the committee.
- 3.75-4.00% - the current rate range
- Two members voted for a hike
- About 75% - the market-estimated probability of a hike in December
- GDP 3.4% and PCE 3.6% - Thursday's data that took gold above $4,000
It is more convenient to follow the regulator's decisions in the economic calendar.
What's next?
The week is packed with data.
- Monday. ISM manufacturing.
- Tuesday. US midterm elections and JOLTS job openings.
- Wednesday. ADP and ISM services.
- Thursday. Bank of England meeting.
- Friday, November 6. US October employment report.
Price levels. Resistances are $3,920.31 and $3,951.69, with the average around $4,023.54 above that. Supports are $3,869.48, $3,828.37 and $3,793.
Key point: as long as the price is below $3,951.69, this is a rebound, not a reversal. For moves like these, you can pick a challenge by trading style.
Did you buy gold from the yearly bottom?
The move was simple and readable. On Friday there was a 3.5% flush, and in the morning a $30 return upward. But on an account of a couple thousand, those $30 per ounce turn into the cost of a taxi ride. Prop trading addresses exactly the question of notional size: you pass a paid evaluation, gain access to the company's account, stay within its risk limits and share the result. Ahead are the US elections and the November 6 employment report - it is better to understand the mechanics before them.