EUR/USD 1.18175
0.041%
Gold 3665.53
0.155%
Oil 63.668
0.097%
USD/JPY 146.960
-0.014%
GBP/USD 1.36242
0.005%
GBP/JPY 200.223
0.000%
Browse More
  • English
  • 简体中文
  • 繁體中文
  • Tiếng Việt
  • ไทย
  • Indonesia
Subscribe
Real-time News
On September 18th, CICC Research Report stated that, looking ahead, due to weak employment data, we expect the Federal Reserve to cut interest rates by another 25 basis points in October. However, rising inflation will raise the bar for rate cuts, limiting the scope for monetary easing. The current crux of the US economy is not insufficient demand, but rising costs. Excessive monetary easing will not only fail to address the employment problem but could also exacerbate inflation, plunging the economy into a quasi-stagflationary situation.Gold prices rose in early Asian trading on September 18th, as the Federal Reserve may cut interest rates further, which will enhance the appeal of the non-interest-bearing precious metal. ANZ analysts said in a research note that investors cheered the start of a rate-cutting cycle. However, the analysts added that Fed Chairman Powells remarks were not as dovish as the market expected, which curbed the rise in gold prices.Japans core machinery orders month-on-month rate in July was -4.6%, in line with expectations of -1.70% and the previous value of 3.00%.Japans core machinery orders in July were 4.9% year-on-year, in line with expectations of 5.4% and the previous value of 7.60%.On September 18, Federal Reserve Chairman Powell, in response to questions about the central banks statutory requirement to achieve "moderate long-term interest rates" at a press conference following the interest rate decision on Wednesday, explained why the three missions given to the Federal Reserve by Congress can be reduced to two major tasks in practice. Central bank officials have long positioned their mission as a dual task, with monetary policy focusing on keeping inflation low and stable and ensuring a continued strong job market, with little emphasis on the third task. Powell told reporters that the third task is real, but in the eyes of central bankers, it is a derivative of the two more well-known goals stipulated by law. He said: "We believe that moderate long-term interest rates are the result of achieving low and stable inflation and maximum employment." For some time, Federal Reserve officials did not believe that the third task required "independent action."

As the United States enters a recession, the price of gold increases by 1.8%, its greatest increase since March

Charlie Brooks

Jul 29, 2022 11:11

19.png


A U.S. recession means a variety of things to different investors.


It was an opportunity for investors to bid up stock prices on the idea that the Federal Reserve may be more lenient with future interest rate hikes. Given the correlation between the economy and energy use, proponents of long-term oil reserves should be less enthusiastic about demand. It was a hint to gold bulls that possibly significant hedging with the yellow metal would now occur.


Consequently, gold experienced its largest one-day increase since March on Wednesday, following the Commerce Department's first of three estimates indicating that the U.S. gross domestic product likely fell 0.9% in the second quarter, following a previously established decrease of 1.6% in the first quarter.


The successive quarterly decreases in GDP strengthened months of speculation that the United States would enter a recession. In addition, it unleashed a bullish impetus in gold, a market that had been restricted for weeks by sluggish price fluctuations of sometimes just a few dollars.


After hitting a session high of $1,755, gold futures for August delivery on the New York Comex ended the day up $31.20, or 1.8%, at $1,750.30 per ounce.


Now that Treasury interest rates have hit their peak, gold is seeing a breakout. The continuation of stagflation should be favorable for gold prices. As long as Wall Street anticipates a slower pace of Federal Reserve tightening, gold should once again draw safe-haven flows.


Ed Moya, an analyst at the online trading platform OANDA, said, "Gold's biggest risk was that the economy remained robust and that the Federal Reserve may need to increase its rate hikes more aggressively."


Moya said that the likelihood of the Fed increasing interest rates by one percentage point has long ago gone. "Gold is breaking out now that Treasury interest rates have peaked. The continuation of stagflation should be favorable for gold prices. As long as Wall Street anticipates a slower pace of Federal Reserve tightening, gold should once again draw safe-haven flows.


Since it hit record highs above $2,100 in August 2020, gold has failed to live up to its reputation as a hedge against inflation for the most of the previous two years. One explanation for this is the Dollar Index's 11 percent climb this year, which follows a 6 percent increase in 2021.


Contrarian to gold, the dollar has lost approximately 1 percent against a basket of six other major currencies over the last two days.


Moya believed, however, that gold might see considerable resistance at $1,800.

Suggestion