Gold trading reminder: The U.S. dollar becomes the ultimate safe haven, and the price of gold cannot escape the sideways curse?

During the Asian session on Tuesday (October 12), spot gold price fell slightly, trading around 1752. On Monday (October 11), the price of gold fluctuated and fell. The market bet that the Fed would not postpone the plan to curtail stimulus measures, but stagflation expectations limited Decline.

The main focus of the day is the US August JOLTs job vacancy and Fed officials' speeches.

Fundamentals are bad

[Bitcoin broke $57,000 and traders tried to push it back to record highs]

Bitcoin has risen by more than $57,000 for the first time since May, and speculators are betting that the largest cryptocurrency will retest the record high it hit earlier this year.

As with past rises, investors have given a variety of reasons for this round of gains, including easing concerns about regulatory efforts in the United States and China, and optimism that the U.S. Securities and Exchange Commission may approve a Bitcoin exchange-traded fund Reignition and so on.

Analysts who observe the price chart said that $60,000 is the next resistance level, but Bitcoin's Relative Strength Index (RSI) above 70 indicates that it is currently in the overbought zone.

[Safe-haven buying pushes the U.S. dollar to rise, hitting its highest against the yen in nearly three years]

The U.S. dollar rose on Monday, and soaring energy prices prompted investors to seek safe-haven assets. The U.S. dollar to yen hit a nearly three-year high. The market expects the Fed to announce a reduction in bond purchases next month.

(Daily chart of the US dollar index)

Driven by the rebound in global oil demand, oil prices rose to multi-year highs on Monday. Concerns that price increases may exacerbate the backlog in the global supply chain caused Wall Street to give up early gains.

Edward Moya, senior market analyst at Oanda, a foreign exchange broker, said: "Risk aversion is playing a role to some extent. We will not get any answers to the global energy crisis or inflationary pressures in the short term. These risks may make many investors in Continue to focus on hedging in the short term."

The yen, which is particularly sensitive to spreads, touched the 113 mark for the first time since December 2018.

Roberto Cobo Garcia, head of foreign exchange strategy at the Bank of Spain (BBVA), said that as the Japanese government bond yields are firmly anchored and the Bank of Japan maintains its policy unchanged, the expectation that the Federal Reserve will soon announce a reduction in quantitative easing should push up U.S. debt. Yields are expected to push the USD/JPY into a higher range.

Kathy Lien, managing director of BK Asset Management, said, “Investors need to be a little more careful. If inflation and consumer spending data this week fall short of expectations, it will be difficult for the U.S. dollar to hold on to gains.”

[The U.S. dollar seems to be the ultimate safe haven under the prospect of energy shocks and economic slowdown]

The expected Fed underweight, seasonal demand and energy-driven instability have triggered a wave of bullish bets on the dollar, making the dollar look like it will dominate in the coming months.

Right now, evidence of the dollar's dominance abounds. The dollar against the yen reached its highest point since December 2018, and CFTC data shows that leveraged funds hold the largest long positions in more than a year. In addition, the risk reversal of the Bloomberg Dollar Index shows that investor confidence is close to the strongest level since the first wave of COVID-19.

Even the disappointing US September non-farm payrolls report did not stop the dollar's momentum, because traders still expect the Fed to reduce the scale of asset purchases starting this year. In fact, the market interprets the inflation signal in the report as evidence that the Fed will have to raise interest rates early, which is good for yields and the U.S. dollar.

Rabobank strategist Jane Foley is one of the bullish ones. He expects the dollar to rise further as US Treasury yields rise and demand for assets in emerging markets is sluggish . John Hardy of Saxo Bank believes that the U.S. dollar may "make bears suffer in the fourth quarter" and predicts that the market will eventually begin to take the Fed's weight reduction seriously.

Most strategists expect that the U.S. dollar will be particularly strong against financing currencies such as the euro and the yen, because central banks in these regions are expected to raise interest rates later than the Fed.

Fundamentals are bullish

[Goldman Sachs chief economist Hatzius predicts that the Fed will not raise interest rates next year]

The chief economist of Goldman Sachs believes that the slowdown in US economic growth next year will mean that the Fed is not in a hurry to raise interest rates.

In an interview on Monday, Jan Hatzius said that although the Fed is expected to announce a reduction in asset purchases at its next meeting, the process will take several months and interest rates will not increase until 2023.

"What will happen in 2022, I think it will be a cyclical slowdown and intensification, and the inflation rate will also fall," he told Tom Keene and Jonathan Ferro. "In this environment, I don't think they will directly increase the rate of inflation. Information action", any decision will depend on economic data.

The Federal Open Market Committee maintained interest rates at near zero at its September meeting and said that if progress continues to be roughly in line with expectations, it may soon have reasons to slow down the pace of asset purchases of $120 billion per month.

The September data released last week showed that the number of non-agricultural employment in the United States recorded the smallest increase this year. Goldman Sachs has lowered its growth forecast for next year.

"In the short term, I think there are some reasons to expect the economy to grow," Hatzius said. "But then, I do think that growth will slow down significantly."

[US stocks closed lower in volatile trading, investors were nervous before the beginning of the earnings season]

The US stock market closed lower in volatile trading on Monday, and investors were nervous before the company’s third-quarter earnings report.

Supply chain issues and rising prices of commodities such as energy have exacerbated concerns about corporate profits. JPMorgan Chase will be the first to announce its earnings on Wednesday.

The three major stock indexes reversed their early gains in the afternoon and fell further before closing. The Dow fell 0.72%, the S&P 500 fell 0.69%, and the Nasdaq fell 0.64%.

(Dow daily chart)

Tim Ghriskey, chief investment strategist at Inverness Counsel, said that supply chain issues may have a greater impact on the profitability of some companies and specific industries. In the earnings season, the market is somewhat cautious.

It is expected that US companies will usher in another period of strong earnings growth. For investors who are worried about supply disruption and inflationary pressures will affect profits, earnings reports will be critical.

In general, the gold price is still expected to remain volatile in the short-term, and in contrast, the probability of a downside is greater. Intraday data cannot provide much guidance. You can pay attention to the speeches of Fed officials.

(Spot gold daily chart)

GMT+8 8:28, spot gold was quoted at $1752.12 per ounce.