On Friday (October 15) Asian time, spot gold held steady at around 1795. The price of gold rose slightly on Thursday (October 14). As the yields of the U.S. dollar and U.S. Treasury fell to support spot gold prices, the small PPI data was expected to be bullish for gold prices, but the high inflation triggered the expectation of early interest rate hikes and the best beginning since the epidemic. Please show that the increase in the price of gold is limited.
The main focus of the day is the US retail sales in September and the initial value of the University of Michigan Consumer Confidence Index in October.
Fundamentals are bullish
[U.S. producer prices slowed down in September]
The US producer price index rose at a more moderate rate in September, indicating that the pressure on the supply chain that pushed up production costs and the shortage of raw materials were slightly eased.
Data released by the US Department of Labor on Thursday showed that the producer price index for final demand in September increased by 0.5% from the previous month and 8.6% year-on-year, and is expected to be 8.7%. Excluding the volatile food and energy components, the core PPI increased by 0.2% month-on-month and 6.8% year-on-year, which is expected to be 7.1%. The median estimate of the economists surveyed is that the overall PPI will increase by 0.6% month-on-month.
PPI has been climbing steadily this year because of supply network disruptions and shortages of raw materials and labor that have pushed up production costs. Companies have passed on at least part of the rising costs to customers, leading to an accelerated increase in consumer prices recently.
A report on Wednesday showed that the consumer price index rose more than expected in September, the largest annual increase since 2008.
Countries all over the world are experiencing rising inflation rates. In China, the world's largest exporter, the ex-factory price of Chinese industrial producers broke through double digits and rose to a 26-year high.
The recent U.S. inflation data reinforces the Fed’s plan to withdraw monetary policy support soon, especially when the economic bottleneck shows little signs of abating. The minutes of the Fed’s policy meeting last month showed that officials estimated that if the economic recovery stays on track, “it may be appropriate to end the underweight process around the middle of next year.”
[The U.S. dollar moves lower in volatile trading]
The U.S. dollar fell slightly in volatile trading on Thursday, after regaining most of its early losses, as investors bet that the Fed will begin to reduce asset purchases next month and turn their attention to the timing of interest rate hikes.
(Daily chart of the US dollar index)
The U.S. dollar has risen sharply since the beginning of September, as the market expects the Fed to tighten monetary policy at a faster rate than previously expected as the economy improves and inflation soars.
But the U.S. dollar reversed its trend on Wednesday. Earlier, the Fed’s September 21-22 policy meeting minutes confirmed that it may start reducing stimulus measures this year, and data shows that price pressures are still hitting American consumers.
Shaun Osborne, chief foreign exchange strategist at Scotia Capital, said: "I think there has been some profit-taking in the past one or two days."
"I don't think it is close to a major reversal of the dollar. In fact, I think what we are seeing today may be a signal that the correction we have seen in the past one or two days may be over," he said.
Osborne added that the market expects that the Fed will begin to reduce the scale of asset purchases as early as next month, and the reduction of large-scale bond purchase programs will be quite rapid.
He said: "This seems to be moving to a certain extent towards when and how quickly the Fed will raise interest rates, so this may be another positive factor for the US dollar."
Fundamentals are bad
[The number of first-time jobless claims in the U.S. dropped to the lowest since March 2020]
The number of people applying for unemployment benefits for the first time in the United States dropped to the lowest level since March 2020 last week, indicating that employers are striving to retain existing staff in a tight labor market.
Data from the U.S. Department of Labor on Thursday showed that as of the week of October 9, the number of people claiming unemployment benefits for the first time in each state totaled 293,000, a decrease of 36,000 from the previous week . The median forecast of the economists surveyed dropped slightly to 320,000.
However, on an unadjusted basis, the number of people applying for unemployment benefits for the first time increased by about 16,000 from the previous week. California, Michigan, Missouri and New Mexico had the largest increases. Tennessee, Texas and Florida led the declines.
As of the week of October 2nd, the number of continuous claims for unemployment benefits fell to 2.6 million.
As the economy recovers, companies need more manpower to meet consumer demand, resulting in a decline in the number of first-time jobless claims . Because companies want to hire more employees and retain existing employees, the latest surge in coronavirus cases has not led to large-scale layoffs.
However, September was the slowest month of employment growth in the United States this year. The end of the epidemic unemployment benefit program and the return of students to campus did not bring about a significant increase in employment. Coupled with ongoing supply chain issues, some economists have therefore lowered their forecasts for economic growth in the third quarter, which will be released later this month.
[Brad hopes to complete the reduction before the end of the first quarter of next year, thinking that inflation may remain high]
St. Louis Fed President Brad said that under the circumstances of a strong US economy and tight labor market, the sharp rise in inflation this year is likely to continue. Most central bank officials think this is a temporary situation.
Brad said in a video seminar hosted by Euro 50 Group on Thursday: "Although I do think this situation has the potential to dissipate naturally in the next six months, I will not say that the probability is high enough that we can count on it. , I think the possibility of dissipating and lasting each account for 50%."
Brad said that he supports the Federal Open Market Committee to reduce the size of asset purchases from next month and complete the process before the end of the first quarter of next year, so that policymakers can raise interest rates as soon as necessary to control inflation. This is faster than the support of many of his colleagues.
Brad said that inflation indicators are at a 30-year high. The August personal consumption expenditure price index excluding food and energy rose 3.6% year-on-year, the largest increase since 1991.
"I think this is worrying," Brad said. He added that some indicators of inflation expectations have also risen sharply.
Although the Fed’s goal is to moderately exceed 2% to make up for the impact of failing to reach the goal in the past, Brad said, "This is not the real problem. The problem now is that we will overdo it and inflation is too high."
[San Francisco Fed Chairman Daley said it is time to reduce debt purchases, but it is “too early” to talk about raising interest rates]
San Francisco Fed Chairman Mary Daly said on Thursday that enough progress has been made in inflation and employment to allow the Fed to start reducing its monthly bond purchases, but it is far from ready to raise interest rates.
"It's too early to talk about raising interest rates." Daley said in an interview with CNN International that the current high inflation stems from the supply chain shock related to the new crown epidemic. When the epidemic cools, inflation will subside. "If we remove the easing measures that help the economy...I bet it will not solve the supply chain bottleneck."
[S&P 500 index hits the biggest percentage increase since early March]
The U.S. stock market's S&P 500 index surged on Thursday, setting the biggest one-day percentage gain since early March. Companies such as Morgan Stanley and UnitedHealth climbed after reporting strong results, while employment and inflation data eased concerns about the prospect of interest rate hikes. .
Technology stocks jumped 2.3%, giving the S&P 500 the most boost, with shares of Microsoft and Apple rising.
Citigroup, Bank of America and Morgan Stanley also rose, after these companies reported quarterly earnings that exceeded expectations. The economic recovery has allowed them to release more reserves for losses due to the epidemic, while the M&A boom, equity financing and trading businesses have increased their profits. The S&P Bank Index rose 1.5%.
Shares of the medical insurance company UnitedHealth Group (UnitedHealth Group) rose 4.2% after the company announced its results and raised its adjusted full-year profit forecast due to the strong performance of the Optum unit, which manages drug benefits.
The S&P 500 rose 1.71%. The Dow rose 1.56% and the Nasdaq rose 1.73%.
(S&P 500 daily chart)
[Wall Street bigwigs have expressed concerns about inflation: this is "obviously not temporary"]
Recently, more and more Wall Street bigwigs are talking about rising inflation. Goldman Sachs President John Waldron and JPMorgan Chase CEO Jamie Dimon are among the ranks.
Bank of America CEO Brian Moynihan and BlackRock CEO Larry Fink both said that inflation is "not temporary." Waldron said inflation is his number one risk now, and Dimon pointed out that inflation may not fall in the next few quarters.
Their concerns echoed the speech of St. Louis Fed President Brad, who believes that the current problem lies in "inflation is too high." He said that under the circumstances of the strong US economy and tight labor market, the sharp increase in inflation this year is likely to continue. He supports the start of the reduction next month and completes it before the end of the first quarter of next year, so that policymakers can Raise interest rates as soon as possible to control inflation. Richmond Fed President Barkin also said that the current inflation base looks "broader."
The code reduction may be the first stage of the Fed's tightening of monetary policy. The interest rate swap market does not expect the Fed to raise interest rates for the first time before November 2022. After reports on Wednesday showed that consumer prices in the United States rose more than expected in September, traders were fully betting that the first interest rate hike would occur in September 2022 at a certain time of the day.
In general, the price of gold is currently under pressure at the resistance of the 1800 mark. If it can effectively break through 1800, it will further rise in the future. The short-term bulls are relatively strong, but the fundamentals are still under pressure, and the trend may gradually slow down.
(Spot gold daily chart)
GMT+8 8:41, spot gold was quoted at $1,794.76 per ounce.
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