Gold trading reminder: U.S. inflation data creates a “tragedy” for the U.S. dollar, and the weekly gold price is expected to welcome four consecutive positives
During the Asian session on Friday (January 13), spot gold fluctuated within a narrow range and is currently trading around $1,897.80 an ounce, holding most of the overnight gains. On Thursday, U.S. CPI data showed cooling inflation, boosting market bets on the Fed’s slowdown in rate hikes. The U.S. dollar index fell nearly 1% and hit a seven-month low. U.S. bond yields also weakened sharply to a near The four-week low helped gold prices rise to near the 1900 mark. So far this week, gold prices have risen 1.6%, and the weekly line is expected to record four consecutive positives.
Investors see regarding a 90% chance of a 25 basis point rate hike to a range of 4.50% to 4.75% at the next Fed meeting.
“Falling real yields and a weaker dollar boosted gold as two key factors holding back gold in 2022 show signs of fading,” said Standard Chartered analyst Suki Cooper, adding that the Fed might raise interest rates by 25 months in February. basis points, then pause, followed by a rate cut in the second half of 2023.
At present, the upward momentum of gold prices still exists, and the market outlook is expected to break through the resistance of the 1900 mark, and further test the resistance near the 1920 mark of the April 29 high.
However, the short-term upside of gold prices may also be limited.Because Fed officials were quick to speak out, emphasizing that while the CPI numbers are heading in the right direction, theThey are sticking to their stance of bringing inflation back to 2%. They see interest rates rising “slowly, but over a longer period of time, and possibly higher”.
Philadelphia Federal Reserve Bank President Harker and St. Louis Fed President Bullard believe that interest rates will reach above 5% to curb inflation. Inflation peaks at 9.1% in June 2022.
In addition, IMF Chairman Georgieva said that the United States may be able to avoid economic recession in 2023 and achieve a “soft landing”.
Moreover, the world’s largest gold ETF – SPDR holdings data show that its holdings on Thursday still fell by 0.29 tons, a new low since December 19, and nearly six changes have all decreased, which means that institutional investors and professional investors Still not particularly optimistic regarding the medium and long-term performance of gold.
This trading day needs to pay attention to the initial value of the University of Michigan consumer confidence index in January and the import price index in the United States in December, and pay attention to the speeches of Federal Reserve officials such as Philadelphia Fed Chairman Harker.
Fundamentals are mainly bullish
[U.S. consumer prices fell for the first time in more than two and a half years in December]
U.S. consumer prices fell in December for the first time in more than two-and-a-half years, as gasoline and motor vehicle prices retreated, offering hope that inflation is now on a sustained downward path even though the labor market remains tight.
Price pressures on Americans shopping at supermarkets also eased further in December, with a report from the Labor Department on Thursday showing the smallest monthly increase in food prices since March 2021. But rents are still high, and utility bills are up.
Cooling inflation might see the Fed further scale back its pace of rate hikes next month. The Federal Reserve is in the midst of its fastest rate hikes since the 1980s.
“Inflation has peaked, but the question is how steep the downhill slope is,” said Sung Won Sohn, a professor of finance and economics at Loyola Marymount University in Los Angeles. It will take some time to achieve the inflation target.”
The consumer price index (CPI) fell 0.1% month-on-month in December, the first decline since May 2020,The economy was being hit by the first wave of the new crown epidemic. CPI rose by 0.1% in November.
Economists had forecast the CPI would remain unchanged. It was the third month in a row that the CPI fell short of expectations, boosting consumers’ purchasing power and hopes that the economy will avoid a dreaded recession this year.
James Bentley, director of Financial Markets Online, said: “The current trajectory may lead to a softer landing for the economy, a stronger labor market and a less aggressive Fed, but only time will tell.”
The CPI rose 6.5% in the 12 months to December. This is the smallest increase since October 2021,It rose 7.1 percent in November. The annual CPI peaked at 9.1% in June, the biggest increase since November 1981. Inflation remains well above the Fed’s 2% target.
Excluding the volatile food and energy components, the core CPI climbed 0.3 percent in December following rising 0.2 percent in November.Core CPI rose 5.7% in the 12 months to December, the smallest gain since December 2021,It rose 6.0 percent in November.
Price pressures are easing as higher borrowing costs cool demand and supply chain bottlenecks ease.
Easing inflation would be welcomed by Fed officials, although they may want to see more convincing evidence of easing price pressures before pausing rate hikes.
[U.S. inflation slows, the dollar plummets to a new low in more than seven months]
In the early Asian market on Friday (January 13), the U.S. dollar index continued its decline on Thursday, hitting a new low since June 6 to 102.06, extending the delay. The U.S. dollar index fell nearly 1% on Thursday to a near seven-month low of 102.07 as data showed that U.S. inflation is slowing, prompting bets that the Federal Reserve will raise interest rates less aggressively in the future.
“Three consecutive months of annual declines in core inflation are starting to form a trend … that might spur the Fed to ease the pace of tightening further on Feb. 1,” said Sal Guatieri, senior economist at BMO Capital Markets.
Fed policymakers expressed relief that price pressures are easing, paving the way for a possible slowdown in rate hikes, they said, but signaled the Fed’s target rate might still rise above 5 percent and remain there for some time. That level, despite market bets to the contrary.
[U.S. bond yields fell to a new low in nearly four weeks]
U.S. Treasury yields fell in choppy trade on Thursday, dragged down by inflation data, with U.S. 10-year and 30-year yields falling to four-week lows.
The two-year/10-year spread, a closely watched part of the U.S. Treasury yield curve, narrowed its inversion to minus 68.5 basis points from earlier in the session. The yield spread hit negative 85.80 basis points at one point following the inflation data, the worst inversion in four weeks.
The narrowing of the inversion of the curve suggests that investors are pricing in fewer Fed rate hikes.
Jamie Cox, managing partner of Harris Financial Group, said, “The Fed’s super-large rate hikes are over – the CPI data put the Fed back on track for 25 basis points of rate hikes. These data show what everyone already knows – inflation is at a few It peaked a few months ago, and we are back on the path to stabilizing prices. If the data continues to decline at the current pace, the Fed does have a chance of achieving a soft landing – inflation will likely fall back to 2% by the middle of the year.”
As of Thursday’s close, the U.S. 10-year Treasury yield fell 12 basis points to 3.447%, the lowest intraday hit 3.424%, a new low since December 14. The U.S. two-year Treasury yield slipped 9.2 basis points to 4.136%. The U.S. 30-year Treasury yield slipped 12 basis points to 3.562%.
[Ukraine says it is still sticking to Suledar, which is bleeding like a river, and Russia has not officially declared victory]
Ukraine said on Thursday its forces were still holding out under Russian fire to defend the eastern salt-mining city of Suldar, where drone footage showed it completely destroyed and buildings reduced to smoking shells.
“The enemy’s goal was to break through our defenses and occupy the city…Our soldiers bravely held their positions and inflicted heavy losses on the enemy,” Ukraine’s Deputy Defense Minister Hanna Maliar said on Telegram.
The Russian Wagnerian mercenaries claimed that following fierce fighting, they captured Suledar, which was littered with Ukrainian corpses.
But Moscow has held off on formally declaring victory, which would be its first major gain in six months.
“Currently, there is still some sporadic resistance in Suldar,” Russian-backed local politician Andrei Bayevsky said in an online broadcast.
Serhiy Cherevatyi, spokesman for Ukraine’s eastern military command, told Ukrainian television that Sultar was shelled 91 times in 24 hours.
Ukraine acknowledges Russian progress, but Maliar says fighting remains fierce and Russians ‘moving on their own dead bodies’
The increased investment by Western countries seemed unimaginable just a few months ago, with the United States, Germany and France last week pledging to provide armored combat vehicles – and the focus has now shifted to main battle tanks.
Polish President Duda has pledged to provide Ukraine with a company of 14 German-made Leopard main battle tanks as part of what he called an international alliance.
Poland’s move would require permission from Germany, which appeared to back down on Thursday. German Deputy Chancellor Habeck said: “Germany should not hinder other countries from making decisions to support Ukraine. This has nothing to do with Germany’s decision.” The United Kingdom also stated that it is considering providing tanks.
The fundamentals are mainly negative
[The U.S. labor market remains tight]
The labor market remains tight, with the unemployment rate returning to a five-year low of 3.5 percent in December, compared with 1.7 job vacancies for every unemployed person in November.
Initial claims for state unemployment benefits fell by 1,000 to a seasonally adjusted 205,000 for the week ended Jan. 7, the Labor Department reported on Thursday.
Economists had forecast 215,000 applications in the latest week. Applications have remained low despite mass layoffs in the tech sector, as well as in rate-sensitive sectors such as finance and real estate.
Economists say companies are now reluctant to lay off workers following suffering hiring woes during the pandemic. Continuing claims, a barometer of hiring, fell by 63,000 to 1.634 million in the week ended Dec. 31, the data showed.
The government reported last week that the economy created 223,000 jobs in December, more than double the 100,000 jobs the Fed wants to see confident inflation is cooling.
“Until labor supply and demand become more balanced, the Fed will be concerned that inflation will pick up sooner rather than later,” said Will Compernolle, senior economist at FHN Financial in New York.
[Fed policymakers hinted that they will further slow down the pace of interest rate hikes, but the anti-inflation stance has not softened]
Fed policymakers on Thursday expressed relief that price pressures were easing, opening the door to a quarter-point rate hike at the central bank’s meeting in less than three weeks.
Richmond Fed President Barkin said: “We are actually containing the economy and may be in the process of suppressing inflation. I think this means that I can be more delicate in responding.” He also said that according to the performance of inflation , he “would, in concept, support a slower but longer path with potentially higher terminal rates”. The Fed raised interest rates by 50 basis points at its December meeting.
“A 25 basis point rate hike going forward would be appropriate,” Philadelphia Fed President Harker said.Once rates are a little bit above 5%, I expect that … will be sufficiently restrictive that we will leave rates on hold and let monetary policy do its thing. “
Recent data has raised hopes of a “soft landing” for the Fed, leading policymakers to talk more openly this week of narrowing rate hikes to 25 basis points, the pace the central bank has more often adopted in recent decades.
St. Louis Fed President James Bullard said, “It’s encouraging that some of the information we’re getting today is going in the right direction.”
Bullard noted that inflation remains well above the Fed’s 2% target,He reiterated his view that he would like to see policy rates above 5% “as soon as possible”.The current policy rate range is 4.25%-4.50%.
Bullard, however, has not opposed slower rate hikes in the future, having been an outspoken advocate of bigger hikes the previous year.
Still, Fed policymakers are unanimous in agreeing to raise rates further — by whatever margin — and eventually to above 5 percent.
In a speech to the Virginia Bankers Association, Barkin said, “We have work to do, inflation is too high, and we will need to hold on until inflation sustainably returns to our 2 percent objective.”
He noted that despite the slowdown in growth, the economy continued to add employment. If anything, recent activity data has pushed back the risk of a recession, he said.
U.S. stocks rallied following the CPI data, with traders in futures tied to the federal funds rate betting heavily on a 25 basis point rate hike from the next meeting, also expecting rates to peak at just under 5%, with the Fed expected to close later this year rate cut sometime.
The bets remain the opposite of what Fed policymakers have insisted: They expect terminal rates not only to be slightly higher than market expectations, but to likely remain there for an extended period until inflation moves convincingly toward The Fed’s target fell back.
Barkin said on Thursday that while inflation has been moving in the “right direction” over the past three months, “care must be taken not to declare victory prematurely … Inflation will be more durable and will not easily fall back to 2 percent”,This may require interest rates to remain at restrictive levels for a longer period of time than expected.
Fed policymakers said they did not expect the unemployment rate to rise by more than a percentage point from the current 3.5 percent in the current battle once morest inflation.
The Fed raised its policy rate target range by 425 basis points last year, from near zero to 4.25%-4.50%, the highest level since late 2007. The Fed projected in December that borrowing costs would rise by at least another 75 basis points by the end of 2023.
[IMF Chairman Georgieva: The United States may be able to avoid economic recession in 2023 and achieve a “soft landing”]
International Monetary Fund (IMF) chief Kristalina Georgieva said on Thursday there was growing evidence that the U.S. might avoid a recession in 2023 and achieve a “soft landing.”
Georgieva told reporters that despite U.S. interest rates being raised to fight inflation, the labor market remained resilient and consumer demand remained strong. She said there had been a healthy shift from excess purchases of goods to demand for services, and that the sources of economic growth had become more diverse.
“This gives some arguments to the expectation that the U.S. will avoid a recession,” Georgieva said at her first news conference in 2023. “In fact, I would say that even if the U.S. were technically in recession, it would be It’s a very mild recession.”
She noted that the verdict of a recession is usually the subject of heated debate, but said she favored a soft landing scenario for the United States.
The IMF forecast in October that U.S. gross domestic product (GDP) would grow by 1.0% in 2023 will be updated this month. World Bank on Tuesday forecasts U.S. GDP growth of 0.5% in 2023
[IMF Chairman: It is not expected to lower the forecast for global economic growth of 2.7% in 2023]
International Monetary Fund (IMF) chief Kristalina Georgieva said on Thursday that the IMF is not expected to cut its forecast for global economic growth of 2.7% in 2023, citing fears of soaring oil prices that have not materialized and job market tensions. Still going strong.
Georgieva said 2023 will remain a “difficult year” for the global economy with inflation remaining high, but she doesn’t expect a series of downgrades to economic forecasts like last year, barring unforeseen circumstances .
“Economic growth continues to slow in 2023,” she told reporters at the IMF’s headquarters in Washington. “The more positive side is that the labor market is resilient. As long as people have jobs, people will spend even if prices are high … and that has a positive impact on economic performance.” helpful.”
She added that the IMF does not expect to cut (growth forecasts) significantly, “which is good news.”
Georgieva said the IMF expects the slowdown in global economic growth to “bottom out” and “begin to pick up in late 2023 and early 2024.”
But Georgieva said there remained a great deal of uncertainty, including the danger of a major climate event, a major cyber attack or an escalation of the war between Russia and Ukraine.
“We’re in a more shock-prone world now, and we have to keep an open mind that there might be risk turns that we didn’t even think regarding,” she said. “That’s what the last few years have been all regarding. The incredible has happened. Twice.”
On the whole, although Fed officials’ emphasis on anti-inflation departure and the possibility of maintaining a higher interest rate level for a long time has suppressed the rise in gold prices, and concerns regarding the U.S. economic recession have eased, the market is still optimistic that the Fed will relax The lingering expectation of a slow rate hike and a rate cut at the end of the year is expected to provide opportunities for further volatility in gold prices.
At 09:50 Beijing time, spot gold was quoted at US$1,897.80 per ounce.
