5 min readAn outage at the exchange operator CME halted trading in futures and options for several hours. Gold futures prices were frozen at $4221.30 per troy ounce. As a result, XAU/USD spreads widened to $10 as spot liquidity providers lost confidence in pricing.
The CME, the world’s largest derivatives exchange, saw trading halted for several hours this morning due to a data centre fault. The disruption came as US markets were set to open on Thursday following the Thanksgiving holiday. The market was already experiencing thin liquidity post the US Thanksgiving holiday, and today’s half-day of US trading, combined with this morning’s outage, could make trading more volatile.
Fed rate cut expectations lift Gold
Gold trades modestly higher today at $4160 and trades 2.4% across the week, the strongest weekly gain since early October. The Gold price has been boosted this week by rising expectations that the Federal Reserve will cut interest rates again in December after softer data and dovish comments by Federal Reserve officials.
Earlier this week, US retail sales confirmed stagnant consumer demand, rising just 0.2% MoM in September, down from 0.6% in August. Moreover, the Conference Board consumer confidence index tumbled to its lowest level since April and the second-lowest since the pandemic. The expectations sub-index fell to 63.2, a level that has historically preceded a recession. The grim data has fueled concerns about the health of the US economy.
The market is now pricing in an 85% chance of a 25-basis-point rate reduction in December, up from 30% last week. Furthermore, White House economic advisor Kevin Hassett is a frontrunner for the Fed Chair position. His policy stance aligns with looser monetary policy. Should Trump announce Hasset as the next Fed Chair, this could reinforce expectations of further easing ahead. Trump could announce the new Fed Chair as soon as next month.
Lower rates weaken yields, making non-yielding assets such as Gold more attractive relative to bonds.
Meanwhile, the US dollar is on track for its worst weekly performance since July. This is also helping support Gold prices, as it makes Gold cheaper for buyers using foreign currencies.
Central Bank & ETF demand are supportive
Central banks are still adding gold to their reserves. According to Morgan Stanley, for the first time since 1996, Gold now accounts for a larger share of central bank reserves than US Treasury’s, which is a powerful signal of confidence in the metal’s long-term value.
Exchange-traded funds (ETFs) have also been strong buyers of gold amid renewed institutional investor interest. ETFs backed by physical gold posted record inflows of $26 billion in Q3.
While gold could still see short-term volatility, expectations of looser monetary policy continue, with central bank and ETF buying means, the longer-term outlook for the precious metal remains positive.
Gold technical analysis
XAU/USD is attempting to break out of the symmetrical triangle pattern. Buyers, supported by the RSI above 50, will look to extend gains towards 4200 to confirm the breakout. A rise above this level could see bulls extend gains towards 4380.
On the downside, the rising trendline support is at 4100. A break below here breaks down the triangle pattern to the downside and would be confirmed by a move below the 4040 support zone. Below here, 3890 comes into focus.
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