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Commodity Market: Gold heads for a weekly advance as Fed, BoE stand pat on interest rates, US NFP data in focus

Spot Gold extended gains from a day ago on Friday and looked set to register a weekly gain after two major central banks took no action on interest rates despite rising inflationary pressures, which added to the appeal of the precious metal.

An environment of low interest rates tends to keep the opportunity cost of holding non-yielding assets such as Gold low.

Earlier this week the Federal Reserve said that it would start scaling back its monthly bond purchases and it planned to end the program in 2022. However, the central bank once again confirmed its view that high inflation would probably be transitory and would not require a hasty interest rate increase.

One day after the Federal Reserve’s policy decision, which caused a retreat in 10-year US bond yields from recent highs, the Bank of England also kept borrowing costs intact.

“A lot of investor interest is still mainly in equity markets, and until gold breaks above $1,835, it might not have enough momentum to attract strong interest,” Nicholas Frappell, a global general manager at ABC Bullion, was quoted as saying by Reuters.

As of 10:20 GMT on Friday Spot Gold was edging up 0.14% to trade at $1,794.22 per troy ounce, after earlier touching an intraday high of $1,800.18 per troy ounce. The latter has been the commodity’s strongest price level since October 29th ($1,801.26).

The commodity looked set to register its fourth gain in six weeks, while being up 0.61%. The precious metal appreciated as much as 1.50% in October.

Meanwhile, Gold futures for delivery in December were edging up 0.11% on the day to trade at $1,795.55 per troy ounce, while Silver futures for delivery in December were up 0.09% to trade at $23.933 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was edging up 0.13% to 94.455 on Friday. Yesterday the DXY went up as high as 94.473, which has been its strongest level since October 13th (94.531).

In terms of macroeconomic data, today market players will be paying attention to the October report on US Non-Farm Payrolls, Unemployment Rate and Average Hourly Earnings due out at 12:30 GMT. Employers in all sectors of US economy, except the farming industry, probably added 450,000 new jobs last month, according to a consensus of analyst estimates.

Near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of November 5th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on December 14th-15th, or unchanged compared to November 4th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,786.79
R1 – $1,803.94
R2 – $1,816.10
R3 – $1,833.24
R4 – $1,850.39

S1 – $1,774.63
S2 – $1,757.49
S3 – $1,745.33
S4 – $1,733.17

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