Gold Market Analysis: Once it falls below $1,900, it will test the 10-day moving average support of $1,886
On Wednesday (January 18), despite the low sales and PPI data announced by the United States that day, spot gold fell for the second consecutive trading day due to the subsequent hawkish interest rate hike remarks by Fed officials, falling 0.24% on the day. It closed at $1903.70 an ounce.
On Wednesday, the United States announced that the PPI annual rate in December recorded 6.20%, the smallest increase since March 2021, lower than the expected 6.80% and the previous value of 7.40%; the core PPI annual rate in December recorded 5.50%, lower than the expected 5.70 % and the previous value of 6.20%. At the same time, the monthly rate of overall and core retail sales in the United States in December both shrank sharply by 1.10%, which were significantly lower than expectations and the previous value. The overall retail monthly rate hit the largest drop since December 2021.
Although the data further confirmed that the inflation rate in the United States is clearly falling, the data seems to have failed to provoke a further surge in gold. Because, after the data was released, a group of Fed officials made hawkish speeches on raising interest rates, and even the previously dovish officials turned their backs.
Cleveland Fed President Loretta Mester said the central bank needs to raise interest rates “just above” the 5.00%-5.25% range to keep inflation under control. St. Louis Fed President James Bullard said the central bank should raise its policy rate above 5% “as soon as possible” to combat persistently high inflation before pausing. Their comments helped push U.S. stocks lower and extended a rally in U.S. Treasuries, weighing on U.S. yields and keeping the dollar temporarily steadied.
As of now, the debate over whether the Fed’s monetary policy will turn around this year continues, and the market seems to think that the Fed will not only slow down its rate hikes this year, but may at least partially reverse it. Investors are all but certain the central bank will raise rates at least two more times this year, with rate cuts likely by the end of the year, according to CME Group’s “FedWatch” tool. But some institutions have expressed a hawkish bias towards the Fed.
Morgan Stanley expects inflation to fall to around 3% by the end of 2023 and to around 2% by the end of 2024. Economists at the investment bank also said they don’t think the Fed will consider lowering rates until inflation hits the 3% range. They lack confidence in the medium-term prospects of the market.
Standard Chartered Bank Chief Executive Bill Winters said in Davos on Tuesday (January 17) that he was cautious about the conclusion that inflation had peaked, especially when looking at the global situation. “Inflation is not over. We are experiencing decompression in energy prices, but the U.S. job market is still quite strong, there are labor shortages in general around the world, wage inflation is structural, so I don’t think the Fed is completely over, they will have more Several hikes.”
It is expected that these two opinions will continue to influence the future direction of gold in the first quarter of this year.
On the technical level, the gold daily line level: continuous negative back-testing on Monday and Tuesday, but the 10-day moving average has not fallen for the time being, and it is still in a bullish state in the short term, but the pressure at and above 1930 will gradually increase, and it is easy to back-test when it is pulled up. It is also difficult to stand firm. At present, it seems that there are many profit takings. It may test the initial support of the 1900 integer mark. Once it falls below, it will test the 10-day moving average support of 1886, and then the 20-day moving average area of 1850-1830. In the near future, we must mainly guard against the risk of profit-making pressure on gold.
Wang Gang, Guangdong Branch, Bank of China
Opinions are personal and do not represent those of the organization
