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On July 29th, Berenberg Bank analyst Andrew Wishart noted in a report that the Bank of England is likely to maintain its key interest rate at 3.75% on Thursday. However, the central bank may warn of a potential rate hike if energy prices rise sharply or a second round of inflation occurs. However, this warning does not necessarily mean a rate hike is highly probable. He stated that the mere threat of a rate hike, coupled with rising oil prices, would be enough to push up interest rate expectations and mortgage costs, thereby reducing the risk of inflation. Instead, Wishart believes the Bank of England may actually resume rate cuts in December, subsequently lowering the policy rate to 3.0% by mid-2027. He pointed out that wage and service sector inflation are trending downwards, and US President Trump will want to avoid rising oil prices as the midterm elections approach.Yemeni diplomatic missions: The Saudi-US attack on Iraq is a blatant violation of international law. Iraq and its people have the right to legitimately retaliate against this crime.Russian Defense Ministry: Russian troops have taken control of Svetly and Novasich in eastern Ukraine.July 29th, Futures News: 1. According to feedback from cotton regulatory warehouses/delivery warehouses in Aksu, Kashgar, and Kuitun, the transfer of Xinjiang cotton to inland areas has slowed since mid-to-late July, and the pressure on loading and shipping at storage warehouses has decreased. This is particularly evident at warehouses in Shihezi, Changji, and Kuitun in northern Xinjiang. Industry insiders believe that in addition to the start of sales of central reserve cotton, this is also related to factors such as the increasingly obvious off-season trend for domestic sales in June and July, the continued increase in the proportion of production restrictions and reductions by small and medium-sized textile mills in inland areas, and the continuous weakening supply of high-quality, high-grade cotton ("double 29/double 30/double 31") in Xinjiang warehouses. 2. According to surveys/estimations of some cotton-related enterprises in Xinjiang, as of July 20, the commercial cotton inventory in Xinjiang may have dropped to around 1.45 million tons. Moreover, the resources from Kashgar, Kizilsu, Hotan and Aksu in southern Xinjiang account for a relatively high proportion. Meanwhile, the inventory of bonded warehouses in Xinjiang, such as Western Pearl Bonded Logistics, is mainly cotton from Kazakhstan, Afghanistan and Turkey. Therefore, it is expected that more Xinjiang textile enterprises will participate in the auction of the 2026 central reserve cotton in August and September, and increase the replenishment of high-index and high-spinnability cotton such as "double 29/double 30" to safely get through the "supply gap period".Italys average hourly wage rose 2.4% year-on-year in June, up from 2.40% previously.

Gold Price Prediction: XAU/USD treads water below $1,700 due to pre-Fed jitters

Alina Haynes

Sep 20, 2022 14:34

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During Tuesday's early European morning, the gold price (XAU/USD) trades near $1,676 as it attempts to preserve Friday's rebound from the two-year low. In doing so, the bullion reflects the market's uneasiness preceding significant central bank statements, as well as trade and geopolitical concerns emerging from Russia and China.

 

Fears that the US dollar has already priced in the Fed's 0.75 percentage point rate hike and that there is no more room for the greenback to appreciate have recently impacted on the US currency. There may be a connection between the dismal US housing data and inflationary expectations and the anxieties.

 

The US NAHB Housing Market Index decreased for the ninth straight month to 46, compared to 48 anticipated and 49 previously. In spite of this, US inflation expectations, as measured by the 10-year breakeven inflation rate according to the St. Louis Federal Reserve (FRED) statistics, fell for the third consecutive day to a two-month low near 2.34 percent by the end of the North American trading session on Monday. Moreover, according to FRED statistics, the 5-year breakeven inflation rate plummeted to its lowest level since September 2021, at 2.44 percent. Concerns were raised regarding the market's unexpected reaction to the Fed's hawkish wagers.

 

On the other hand, the European Commission's willingness to use emergency power to prevent a supply crisis seems to have combined with hawkish statements from European Central Bank (ECB) policymakers to support the XAU/USD upward via a weaker USD. In addition, the relative quiet surrounding the US-China conflict over Taiwan and China's covid unlocks is beneficial for metal prices.

 

Nonetheless, multi-day high yields and general forecasts of increased interest rates in the face of economic slowdown worries appear to put the gold price under pressure. In addition, the news that the holdings of the SPDR Gold Trust, the largest gold-backed exchange-traded fund in the world, fell to 30,799,131 ounces on Monday, the lowest level since March 2020, adds to the negative catalysts for XAU/USD traders.

 

However, the second-tier US housing data may provide timely guidance prior to the FOMC meeting on Wednesday. Given the Fed's heightened expectations, any disappointment will not be taken lightly and may offer the XAU/USD with the much-needed boost from its yearly low.


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