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On April 26, according to the Wall Street Journal, in order to simplify the negotiations on reciprocal tariffs, US negotiating officials plan to use a new framework developed by the Office of the United States Trade Representative (USTR), which lists major categories of negotiations, such as tariffs and quotas, non-tariff trade barriers, digital trade, product origin principles, economic security and other commercial issues. In these categories, US officials will put forward specific requirements for individual countries, but people familiar with the matter emphasized that this document may also be adjusted at any time. People familiar with the matter said that the United States initial plan is to negotiate with 18 major trading partners in turn over the next two months. The initial plan is to alternately participate in the talks with six countries per week for three weeks (six countries in the first week, another six countries in the second week, and another six countries in the third week) until the deadline of July 8. If US President Trump does not extend the 90-day suspension period he set by then, those countries that cannot reach an agreement will begin to face reciprocal tariffs.On April 26, after the United States announced additional tariffs on goods from many countries, Peruvian business people expressed concerns that the US governments extreme measures would disrupt the global trade order and may even trigger a global economic recession. Alvaro Barrenechea Chavez, vice president of the Peruvian-Chinese Chamber of Commerce, said that the negative impact of the US tariff policy has begun to emerge and hoped that the US government would rethink. Recognizing the importance of countries working together to promote development, I think this is the best way to become a true "world citizen."Market news: Musks xAI company plans to raise about US$20 billion in a financing round.Conflict situation: 1. Ukrainian top commander: Russia tried to use air strikes as a cover to increase ground attacks, but was repelled by Ukraine. 2. Ukrainian Air Force: Russia launched more than 103 drones in the night attack on Ukraine. 3. Local officials said Ukraine launched an attack in the Belgorod region of Russia, killing two people. 4. The local governor said that Russia launched an attack on the Dnipropetrovsk region of Ukraine, killing one person and injuring eight people. Peace talks: 1. Trump: ① The situation between Russia and Ukraine is gradually becoming clear, and they are "very close" to reaching an agreement. ② Ukraine is unlikely to join NATO. ③ Ukraine has not yet signed the rare earth agreement and hopes that the agreement can be signed immediately. ④ It is foreseeable that the United States will conduct commercial cooperation with Ukraine and Russia after reaching an agreement. 2. Russian Foreign Minister: Russia is "ready to reach an agreement on Ukraine." 3. Russian Presidential Assistant Ushakov: Russia and the United States will continue to maintain active dialogue. 4. Russian Presidential Assistant: Putin discussed the possibility of resuming direct negotiations between Russia and Ukraine with the US envoy. 5. The differences between the United States, Europe and Ukraine are clear. The documents show that European countries and Ukraine have raised objections to some of the US proposals to end the Russia-Ukraine conflict. 6. Market news: As part of the peace agreement, the United States asked Russian President Putin to abandon the demilitarization requirement. Other situations: 1. President of Hungarys OTP Bank: We hope to return to all business areas in Russia after the (Russia-Ukraine) conflict ends. 2. Ukrainian President Zelensky: US ground forces are not necessary for Ukraine. 3. Trump said Crimea will remain in Russia, Zelensky: Never recognize it. Agreeing with Trumps view, Crimea cannot be recovered by force. 4. NATO Secretary-General Rutte met with Trump and senior US officials to discuss defense spending, NATO summit, and the Ukrainian conflict.Rising global trade risks, overall policy uncertainty and the sustainability of U.S. debt top the list of potential risks to the U.S. financial system, according to the Federal Reserves latest financial stability report released on Friday. This is the first time the Fed has conducted a semi-annual survey on financial risks since Trump returned to the White House. 73% of respondents said that global trade risks are their biggest concern, more than double the proportion reported in November. Half of the respondents believe that overall policy uncertainty is the most worrying issue, an increase from the same period last year. The survey also found that issues related to recent market turmoil have received more attention, with 27% of respondents worried about the functioning of the U.S. Treasury market, up from 17% last fall. Foreign withdrawals from U.S. assets and the value of the dollar have also risen on the list of concerns.

In this historically negative cycle, the price of gold is breaching market structure to the downside

Daniel Rogers

Jul 15, 2022 11:39

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A stronger US dollar and hawkish feeling around the Federal Reserve, which is generally anticipated to raise the federal funds rate by 75 basis points at its meeting on July 26–27, put pressure on the price of gold (XAU/USD) on Thursday. The price has fallen from a high of $1,736.60 to a low of $1,697.64, trading at $1,710.10 at the time of writing. Overall, there has been a downward technical and fundamental bias.

 

The daily market structure disruption, the likelihood of a strong US currency, and greater yields—which gold does not provide to investors—have all been negative factors for the precious metal. When the US economy performs better than its counterparts as well as when it appears to be struggling, the greenback has a tendency to gain.

 

The Gold Price is approaching pre-pandemic levels, and there is a chance of a large capitulation event in precious metals, despite worries that the Federal Reserve is in a difficult position. First off, both the headline and core measures of US inflation surprised to the upside in June, rising from 8.6 percent in May to a fresh four-decade high of 9.1 percent. The market anticipates that the Fed will not be hasty to announce a change from its present course of aggressive rate rises and is pricing in higher hikes of 100bs pints for both the July and September meeting, which is supportive of global rates and the US currency as a headline for gold prices. At the June FOMC meeting, Chair Powell said that in order for the Fed to shift direction, there must be "compelling evidence" of declining inflation, which he characterized as "a string of decreasing monthly inflation readings."

 

Fears of a global and domestic recession may continue to bolster the US dollar. Despite the current slowdown in demand and the possibility of a recession, the Fed is undoubtedly more concerned about a de-anchoring of inflation expectations, which would be considerably more difficult to manage. The second-largest economy in the world, China, which is struggling with Covid infections, may be the source of a worldwide recession. Just six weeks after Shanghai fully ended a lengthy and strictly enforced quarantine, the virus has resurfaced in China's largest metropolis.

 

Fears of a US and Eurozone recession are merging with worry that the Middle Kingdom may not meet its official growth prediction for this year. The supporters of the US dollar are anticipated to benefit from this going forward. Since the introduction of Covid, the US dollar grin hypothesis has been in action and is consuming the world's resources.

 

The usage of the dollar as a medium of exchange and the significant quantities of USD-denominated debt issued by non-US citizens both contribute to the currency's safe haven status. Simply put, many market participants take steps to protect their access to USDs during uncertain periods. The drag on the price of gold is therefore expected to continue, at least until the front-loaded policy tightening cycle of the Fed is almost complete.

 

There is no getting around the fact that the Fed has an inflation problem on its hands and that the USD will continue to rule the foreign exchange market, according to analysts at TD Securities.

 

According to TD Securities analysts, "the single largest speculative cohort in gold looks to be maintaining a complacent position, with the typical trader keeping double their predicted position size."

 

The focus of the speculative gold market has switched from money managers to the sometimes underappreciated prop-trader group. The fact that their length was amassed in 2020 and does not seem to be tied to inflation or the Fed's narrative suggests that this legacy posture has become complacent.

 

The most recent data indicates that prop-trader bulls were still buying on the drop as the breadth of traders long rose, but if prices trade below their pandemic-era entry levels, pressure is mounting towards a surrender. These large holdings are most vulnerable in a vacuum of liquidation, indicating that the yellow metal is still vulnerable to additional declines.