International gold price hits 11-week high and radical FED hawks need to cooperate with it to relax
The international price of gold hit a new high of $1,764.22 an ounce since August 25 on Friday (November 11) and is expected to continue its overnight rally of nearly 3% as US data showed inflation has decreased, increasing the Federal Reserve’s aggressiveness rate hikes Slowdown on expectations.
As of 3:36 pm Beijing time, spot gold was up 0.32% to $1,761.16 an ounce; the main COMEX gold futures contract rose 0.60% to $1,764.3 an ounce; the US dollar index fell 0.11% to 107.740.
Open interest in the COMEX overnight gold futures market increased for the fourth consecutive trading day, an increase of about 4,700 lots, according to the latest data from CME Group; trading volume increased by approximately 81,700 lots. The sharp increase in gold prices is accompanied by an increase in open interest and trading volume, indicating that gold prices will continue to rise in the near term, with a short-term target of $1,800.
The annual rate of core and basic consumer prices in the United States in October was lower than expected and the expected value was lower than the previous value, indicating that inflation has been slower than expected.
Market participants now see the Fed hike rates by at least 50 basis points at its December meeting, but a fifth consecutive 75 basis point hike is likely by less than 20%. Gold is seen as a hedge against inflation, but rising interest rates increase the opportunity cost of holding the non-productive asset gold.
Christopher Wong, foreign exchange strategist at OCBC Bank, said: “The lower than expected CPI data supports the hypothesis that the Fed will slow the pace of interest rate hikes at its December meeting, which could translate into a selling pressure on the dollar,” providing a modest recovery window for gold. If the market continues to hold optimistic, gold prices could rise sharply.”
But given the persistent nature of rising inflation, the Fed is expected to continue its tightening policy measures. Philadelphia Fed Chairman Harker said interest rates above 4% are considered a tight policy stance for the Fed. When the federal funds rate hits 4.5%, rate hikes could be halted. But he added that monetary policy is “about a year” behind.
With the release of the University of Michigan’s long-term inflation expectations gauge for November in the US, the market faces another test later in the day. The Fed has consistently reiterated that long-term inflation expectations are anchored around 2%. If this economic indicator rises, it could affect the market sentiment in the market outlook.
International Monetary Fund (IMF) Chief Executive Kristalina Georgieva (Kristalina Georgieva) said on Thursday (November 10) that the biggest challenge facing central bankers now is to reduce inflation.
