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On April 3, Kimberly Clausing, a former Biden administration official and nonresident senior fellow at the Peterson Institute for International Economics, called Trumps tariff announcement on Wednesday "very stubborn and much worse than I expected." "I expected things to be bad, but I didnt expect this level of self-harm. Its shocking that anyone thought this was a good idea. Id be shocked if we can get through this without a recession and Trump doesnt have to reverse his policies."On April 3, some economists worry that if Trump does not quickly cancel the latest round of tariffs, it may push the US economy into a recession. "If the US government implements these higher tariffs without major exemptions, it will be difficult for the economy to digest this. A recession seems more likely." said Mark Zandi, chief economist at Moodys Analytics. Zandi said, "In many ways, the tariffs announced by Trump are even worse than the worst case scenario he envisioned. If they stick to it, I will buckle up and prepare for the impact." Zandi added that on a static basis, tariffs account for nearly 2% of GDP (not considering the impact of tariffs on the economy and taxes), which makes this round of tariffs the largest tax increase since the tax increase used to finance the war during World War II.German Automobile Industry Association VDA: The EU must now speed up and make up its mind on the issue of free trade agreement.On April 3, the Reserve Bank of Australias latest report for the banking industry warned that continued uncertainty in US trade policy "could have a chilling effect on business investment and household spending decisions, and pose a significant headwind to the outlook for global economic activity and inflation." The Reserve Bank of Australia said there was also considerable uncertainty about the impact of possible changes in fiscal, regulatory and other government policies on global growth and inflation.The Hang Seng Index in Hong Kong opened on April 3 (Thursday) down 564.32 points, or 2.43%, to 22,638.21 points; the Hang Seng Technology Index opened on April 3 (Thursday) down 168.53 points, or 3.11%, to 5,257.91 points; the CSI 300 Index opened on April 3 (Thursday) down 219.05 points, or 2.57%, to 8,312.46 points; the H-share Index opened on April 3 (Thursday) down 61.24 points, or 1.59%, to 3,800.76 points.

Gold Price Prediction: The XAU/USD pair recovers towards the $1,930 barrier as the US Dollar retreats amid contradictory signals

Daniel Rogers

Jan 19, 2023 15:07

Gold price (XAU/USD) gains bids to trim yesterday's losses, breaking a three-day downtrend, as the US Dollar struggles to defend late Wednesday's corrective bounce off the lowest level since May 31, 2022. Recent remarks by Dallas Federal Reserve (Fed) President Lorie Logan could provide more support for the XAU/USD recovery.

 

In her maiden statement as a Fed representative, Fed's Logan advocated for a slower rate hike pace but also acknowledged the possibility of a higher stopping point, whereas the majority of Fed policymakers appeared bullish on Wednesday.

 

Previously, James Bullard, president of the Federal Reserve Bank of St. Louis, stated that US interest rates must increase further to reduce inflationary pressures. In the same vein, Loretta Mester, president of the Federal Reserve Bank of Cleveland, lauded the Fed's efforts to manage inflation. In addition, the president of the Kansas City Fed, Esther George, stated that the central bank must restore price stability, "which includes reverting to 2% inflation."

 

Notably, the disappointing US data allowed gold markets to restore upward momentum and challenge the Fed hawks. US Retail Sales had a 1.1% MoM decline in December, compared to market predictions of -0.8% and prior readings of -1.0%. This decline was the largest in a year (revised). On the same note, the Producer Price Index plummeted to its lowest level in six months with a -0.5% MoM figure, compared to a -0.1% MoM figure that was anticipated and a 0.2% MoM result from the previous month (revised).

 

In addition, the Bank of Japan's (BOJ) unexpected inaction and diminishing fears of the Federal Reserve's (Fed) aggressive monetary policy activities weighed on United States Treasury bond yields and the Gold price on Wednesday. In spite of the BOJ's inaction on monetary policy and interest rates, 10-year US Treasury bond yields reached their lowest level in four months as of press time, hovering around 3.37 percent.

 

Analysts at Goldman Sachs anticipated greater China development and preferred chances for a rise in energy demand from the dragon kingdom. However, elsewhere, contradictory concerns about China appeared to have hampered Gold purchases. In recent times, though, worries about the US-China friction have outweighed optimism. US Treasury Secretary Janet Yellen and Chinese Vice Premier Liu He met in Germany on Wednesday, which initially bolstered risk appetite with the BOJ's inactivity. However, the diplomats' mention of the disagreements sparked market fears of a new round of friction between the United States and China. Prior to this, the South China Morning Post (SCMP) stated that Beijing'should be cautious' as the United States and Taiwan seek stronger economic ties.

 

In light of these performances, markets remain cautiously hopeful on Thursday, resulting in a Gold price recovery. Mildly bid US stock futures, a weakening US Dollar Index (DXY), and declining US Treasury bond yields could be indicative of market sentiment.


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