On Thursday, the US Dollar Index closed up 0.24% at 103.77, as data showed an increase in US retail sales in September, strengthening expectations that the Federal Reserve will cut interest rates at a slower pace over the next year and a half. The benchmark 10-year US Treasury yield closed at 4.0850%; the two-year US Treasury yield, which is more sensitive to monetary policy, closed at 3.9890%. The Dow Jones Industrial Average closed up 0.37%, while the S&P 500 Index and the Nasdaq Composite almost closed flat. TSMC (TSM.N) rose by 9.7%, stabilizing at a market value of over one trillion dollars.
Risk warnings for Friday:
☆ Time to be determined, the 2024 Financial Street Forum Annual Conference opens, with the Chairman of the China Securities Regulatory Commission, Wu Qing, and the Director of the Financial Regulatory General Bureau, Li Yunze, attending the opening ceremony and delivering speeches;
☆ 20:30, the initial value of the US September building permits monthly rate (%), the US September new housing starts annualized monthly rate (%).
☆ 22:00, the 2026 FOMC voter and Minneapolis Federal Reserve President Kashkari delivers a speech;
☆ The next day at 00:10, Federal Reserve Governor Waller delivers a speech.
The recent strong economic data from the United States, with retail sales in September increasing slightly more than expected and the Labor Department report showing an unexpected decline in unemployment, have to some extent solidified market expectations for future interest rate cuts by the Federal Reserve. Nevertheless, the market still expects the Federal Reserve to cut interest rates by 25 basis points again in November, which will keep borrowing costs relatively low, thereby reducing the opportunity cost of holding gold.
At the same time, the European Central Bank announced its third interest rate cut of 25 basis points this year this week, marking a shift in its policy focus from reducing inflation to protecting economic growth. Although the rate cut may push the US Dollar Index higher, it also provides support for gold prices. A rate-cutting environment usually promotes an increase in gold prices, as gold, as a non-interest-bearing asset, is more attractive in a low-interest-rate environment.Israel's military operations in the Gaza Strip continue, with Israel announcing on Thursday the killing of Hamas leader Sinwar. While Western leaders believe this event may provide an opportunity to end the war, Israeli Prime Minister Netanyahu has stated that the war will continue. This ongoing geopolitical tension undoubtedly strengthens the market's demand for safe-haven assets, driving up gold prices.
Additionally, the US State Department has also expressed hope to use this opportunity to initiate ceasefire negotiations in Gaza, although the future situation remains unclear. The increase in geopolitical risks makes investors more inclined to invest funds in safe-haven assets such as gold.
Gold prices have been driven higher due to investor demand for safe-haven assets amid uncertainty surrounding the Middle East war, and a loose monetary policy environment has kept gold prices at high levels. Driven by the prospect of further rate cuts by the Federal Reserve after a 50 basis point cut last month, as well as ongoing geopolitical uncertainties, gold has soared more than 30% this year, repeatedly setting new highs. Gold prices hit a historical high of $2696.63 per ounce on Thursday. Considering that the current gold prices are relatively high, there is a possibility of profit-taking, so today investors are patiently waiting for gold prices to pull back without breaking the upward trend line, and then attempt to go long on gold.
At the same time on this trading day, investors need to pay attention to the data on the total annualized number of US building permits and new housing starts in September. These data will further reveal the health of the US economy and affect market expectations for future Federal Reserve policies. Although recent retail sales data have been strong, there is still a divergence in overall market confidence in the economy.
According to data released by the US Energy Information Administration (EIA), in the week ending October 11, US crude oil inventories decreased by 2.2 million barrels to 420.6 million barrels, far below analysts' expectations of an increase of 1.8 million barrels. This inventory decline indicates that market operations are becoming more efficient, possibly due to the recovery of demand. However, the EIA also revealed that US crude oil production reached a historical high of 13.5 million barrels per day, a figure that has intensified market concerns about increased supply.
In addition, the resumption of crude oil production in Libya and OPEC and its allies (OPEC+) plan to further relax production cuts in 2025, also bringing pressure to the market. Although a short-term inventory decline may support oil prices, in the long term, the expectation of increased supply may limit the upside potential of oil prices.
The geopolitical situation in the Middle East remains complex, with Israel's military operations against Hamas drawing widespread international attention. Israel killed Hamas leader Sinwar in Gaza, and although Western leaders believe his death may provide an opportunity to end the war, Israeli Prime Minister Netanyahu has stated that the war will continue. This situation has increased market uncertainty about future oil supplies, particularly concerns that Israel may retaliate against Iran, disrupting Iran's oil exports.
The slowdown in the global economy poses pressure on oil demand. With the economic slowdown and the popularization of electric vehicles, the global oil demand growth in 2025 will slow down from 1 million barrels per day this year to 900,000 barrels per day. The potential impact of new economic stimulus plans in major Asian countries on oil demand is still unclear, and market confidence in future demand is being challenged.
At the same time, the European Central Bank announced its third rate cut this week, stating that inflation in the eurozone is increasingly under control, while the economic outlook is deteriorating. Rate cuts usually lower borrowing costs, thereby stimulating demand, but in the current context of high global economic uncertainty, this stimulus effect may be limited.
Recently, the US dollar has strengthened, reaching an 11-week high, which has somewhat suppressed demand for crude oil priced in dollars. The strength of the dollar makes it more expensive for buyers using other currencies to purchase crude oil, which may reduce their demand. This factor has offset the rise in oil prices to some extent due to inventory declines and geopolitical risks.Oil prices may be influenced by a combination of inventory data, geopolitical risks, and the trend of the US dollar. Crude oil prices began to rise after stabilizing in the 1-hour support area. Today, continue to focus on the 1-hour support area for crude oil. After the second adjustment stabilizes, continue to go long on crude oil.