Spot gold fell close to the 1900 mark, the FED hawks were full of confidence, and the market focus turned to it
On Tuesday (August 15), spot gold prices fell to a new low of $1,901.88 an ounce since June 30, as the market expected that U.S. interest rates may remain higher for a longer period of time, and 10-year U.S. bond yields rose. It reached a new high of 4.242% since early November last year.
At 20:05 Beijing time, spot gold fell 0.19% to $1,903.73 an ounce; the main COMEX gold futures contract fell 0.46% to $1,935.0 an ounce; the U.S. dollar index fell 0.09% to 103.069.
The 10-year U.S. bond yield rose to a new high of 4.242% since early November last year, and the market increasingly agrees that the Fed will maintain high interest rates for a longer period of time. Indeed, investors seem confident that the Fed will stick to its hawkish stance, and have not ruled out raising rates by 25 basis points before the end of the year.
Last week, the U.S. PPI rose slightly more than expected in July, supporting the prospect of further interest rate hikes by the Federal Reserve. Market focus turned to the upcoming US retail sales data for July at 20:30 Beijing time – showing the performance of consumer spending against the backdrop of rising interest rates.
Recent economic data has topped economists’ forecasts, with the unemployment rate at 3.5 percent the lowest in decades. Although the CPI weakened slightly in July, it cannot be ruled out that inflation will become overheated again and prices will rise again.
Michael Hewson, chief market analyst at CMC Markets, said: “U.S. economic data has proven to be quite resilient, which supports expectations that the Fed will maintain a higher level of interest rates for a long time. If this trend continues, gold prices are likely to fall Again hitting the June lows around $1,895 to $1,890.”
Kelvin Wong, senior market analyst for Asia Pacific at OANDA, said that if the data surprises to the upside, gold could face further downward pressure amid more evidence of a resilient U.S. economy.
Fed economist: Try to avoid premature rate cuts
The Fed’s chief economist, Jan Hatzius, said in a report released on Sunday that the Fed’s first rate cut could begin in May 2024, possibly by 25 basis points, but the pace of rate cuts after that remains unclear.
The report noted that Fed Chairman Jerome Powell may be overly cautious and ensure that inflation has subsided before implementing further rate cuts. “Fed officials will want to minimize the risk of cutting rates prematurely if inflation remains too high.”
The report noted that the Fed’s main concern remains inflation and does not factor in a potential recession. “…once inflation approaches target, expect interest rates to move from restrictive levels to normalization rather than recession.”
Monetary policy moves will depend on incoming data, as Fed policymakers have repeatedly said. High-impact data releases from the U.S. could prompt markets to re-price the Fed’s interest rate outlook, adding to volatility in gold prices.
But Americans are optimistic about the inflation outlook
Americans said last month they expect inflation to be weak in the coming years, with inflation likely to hit 3.5% a year from now, compared with expectations in June, a New York Fed survey showed on Monday (August 14). was 3.8%. The new figures were the lowest since April 2021.
The survey also found more positive expectations about personal finances and the job market. Compared with a year ago, more respondents rated their personal finances positively and fewer rated their finances negatively, the New York Fed said. Those expecting life to be better a year from now rose to the highest level since September 2021.
Economists at TD Securities noted that the past few weeks have seen a growing consensus that rates will stay elevated for longer. Nonetheless, they do not expect more algo sell orders until the price of gold falls below $1,900.
Spot gold looks at $1871
On the daily chart, the price of gold is in the downward C-wave that started at $1987, and the lower support is looking at the 61.8% target at $1871. Wave C is a sub-wave of the downward (ii) wave that started at $2082.
2023-08-15 12:09:00
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