Gold enjoyed the end of shutdown news as expected now pushing upward above 4150. The recent remarks from New York FED President Williams and one of the candidates for FED chair Waller gave more fuel to gold. Many FED members speak about the December rate cuts after the FOMC and rate cut odds fell to 30% ahead of this week. First, Williams saying he sees room for lower interest rates, then Waller saying his main concern is labor market and expecting a cut in December push the odds back to 70%. In our view, the cut is still a fifty fifty. 

(High Repo Rate) 

The repo rate is still higher than it is supposed to be, but the end of the shutdown has reduced liquidity risks and given gold a boost as expected. In just a few days, the FED’s quantitative tightening will end, and rates will most likely return to normal, which should be bullish for gold. 

Higher Japanese yields, correction risk in the US stock market, and a possible strong US labor market will be the main downside risks for gold going forward. 

XAUUSD 

After the initial jump, gold felt the pressure of a hawkish FED but has managed to stay within the uptrend channel. The channel is divided into two areas from the middle. When gold trades in the lower half, its movements are more stable and show lower volatility. When gold trades in the upper half, price swings become more explosive in both directions. 

So, if gold pushes above 4170 and moves back into the upper area, sharper bullish moves may begin. Until that happens, or until there is a downside break of the trend, we expect fifty to one hundred dollar swings to continue in a relatively calm manner.