Thursday's Markets Update (November 16, 2023)

16 Nov 2023 by rate3

On Thursday, the Nasdaq hesitated near its one-year highs as traders digested recent economic data. Weekly jobless claims rose to a three-month high, indicating a cooling jobs market. Import and export prices also declined sharply in recent months. With no rate hike expected in December, markets see a higher chance of a rate cut next year. Meanwhile, BTC and ETH corrected on profit-taking, reaching 36.2K and 1.98K, respectively.

The Philadelphia manufacturing index rose in November but stayed negative, indicating slowing growth. New orders and shipments fell, while employment was flat. Costs increased at a slower rate. Expectations for future growth remained weak, according to the survey. Overall, the index showed the manufacturing sector continued to struggle despite some improvement.

The housing market index from NAHB/Wells Fargo fell 6 points to 34 in November, well below expectations of 40. This was the fourth straight monthly decline, taking the index to its lowest since December 2022, as high mortgage rates have significantly hurt builder optimism and consumer demand. In particular, the index for current single-family home sales fell 6 points to 40 and the future sales index dropped 5 points to 39.

The number of people applying for unemployment benefits increased to 231K, the highest in almost three months, exceeding market expectations. Continuing claims also rose to 1,865,000, the highest in nearly two years, indicating that jobseekers are struggling to find work. These statistics suggest a weakening US labor market, supporting the Fed's warnings of an economic slowdown and showing that businesses are feeling the impact of higher interest rates.

Import prices fell 0.8% in October, exceeding forecasts of a 0.3% decline. This was the largest monthly drop since March, led by a 6.3% fall in fuel import prices as petroleum and natural gas costs decreased.

Commodities

Gold prices rose above $1,980 an ounce as new economic data strengthened expectations that the Fed would finish raising interest rates soon and could begin monetary easing by mid-2024. Meanwhile, Moody's lowered its US credit rating outlook to negative, citing growing budget deficits and political conflicts in Washington, which supported gold prices.

Comment

Is gold subsiding its role to BTC?

The gold market has experienced several major periods of fluctuation and stability over the years. In the 1970s, there was a sharp rise in gold prices, when gold rose from its low 30 to almost 900 USD per ounce, driven by geopolitical conflicts and a weakening dollar due to the Federal Reserve's low-interest rate policy. This period was followed by a decline and a long stagnation until 2000, characterized by a volatility and a lack of significant increase in gold prices, which ranged from ~200 to ~500.

From 2000 to 2014, there was another significant rise in gold prices (reaching above 1900), attributed to geopolitical tensions, a weakening dollar, and the Federal Reserve's low-interest rate policy. However, a correction occurred until 2017, influenced by a strengthening dollar due to high Fed rates. In 2020, gold experienced a small rise back to all-time highs, but in the past three years (2020-2023), gold has stagnated due to a sharp rise in the dollar, attributed to high Fed rates.

The role of gold has remained significant, particularly during times of uncertainty, geopolitical tension, and economic turmoil. Gold has traditionally served as a hedge against inflation and a safe haven asset.

However, the rise of cryptocurrencies has introduced a new dynamic to the investment landscape. While gold and cryptocurrencies are both considered hedges against monetary inflation, the two assets have distinct characteristics. Gold has a long history of being a hedge against fear and geopolitical instability, while cryptocurrencies are a relatively new asset class that has gained attention for its potential as a store of value and investment only recently.

As economic and geopolitical landscapes continue to shift, the future role of gold and its relationship with cryptocurrencies will undoubtedly evolve. Cryptocurrencies are likely to assume a more prominent position in investment portfolios, particularly among younger investors as a response to the growing global instability.