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January 22 – As Japan prepares for next months snap election, Munehito Kamiya, leader of a newly emerging minority party, stated that the Bank of Japans (BOJ) interest rate hikes may be too rapid and could harm the economy. He said the partys priority is to revitalize the economy through tax cuts, particularly the consumption tax, and loose fiscal policy. Kamiya said the BOJ should proceed cautiously with interest rate hikes given the still fragile economy. "I think the pace of interest rate hikes is a bit too fast," Kamiya said, warning that raising borrowing costs too early could harm the economy and small businesses. "Im not against the BOJs policy direction; the problem is the speed." Kamiya stated, "The division of power between the government and the central bank is quite important. On the other hand, in Japan, fiscal and monetary policies havent reached the level of cooperation they should." "Overemphasizing the BOJs independence could have a negative impact on the economy," he added.The yield on Japans 30-year government bonds fell 10 basis points to 3.62%.The yield on Japans 20-year government bonds fell 7.0 basis points to 3.185%.January 22 - Soaring freight rates have prompted some shipowners to use new tankers to transport Russian oil. This trade is typically carried out by older vessels nearing or exceeding their service life. By the end of 2025, the US and EU will blacklist hundreds of tankers involved in the Russian oil trade, leading to supply shortages and a surge in freight rates. Reputational risks and the threat of sanctions have deterred some shipowners, but at least two Greek companies find the enormous profits from transporting Russian crude too tempting. Transporting Russian oil is not entirely illegal, but if the transport price exceeds the so-called "price cap," it means that Western suppliers (such as dominant players in the insurance industry) will be unable to support the trade. Fears of exceeding the price cap often hinder legitimate operators, while a "dark fleet" fills this gap. Now, sanctions have caused Russian oil prices to plummet, providing a buffer against the price cap and giving Greek companies the confidence to participate in the oil trade, profiting from it using three tankers less than a year old.Shares of Tokyo Electric Power Company (TEPCO) continued to fall, currently down 3.0%. The company stated that an alarm sounded during control rod removal operations at Unit 6 of the Kashiwazaki-Kariwa Nuclear Power Plant, which was restarted on the 21st, and the removal operation was halted.

Gold Price Forecast: The XAU/USD pair's decline is moderating as the price recovers from recent lows

Daniel Rogers

Aug 22, 2022 14:41

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As analysts at TD Securities explained, Chair Powell's remarks will likely be "a key avenue for the Fed to push back against the notable easing in financial conditions sparked by his last remarks, which has seen markets price in rate cuts immediately following the rate hiking cycle and is likely inconsistent with the Fed's inflation mandate." As market expectations for rate reduction diminish, speculative demand for precious metals should diminish more.

 

A chorus of Fed speakers has addressed us in the lead-up to the event. In an interview with CNN, Mary Daly, president of the Federal Reserve Bank of San Francisco, stated that it was far too early to declare victory on inflation and that a 50 basis point or 75 basis point increase would be reasonable.

 

Daly's bluster stirred up the dust and pushed the US dollar up 0.12% on the day to 106.78; since then, it has skyrocketed to 108.285 in Tokyo's opening hour. US bond yields continue to rise, following Europe's selloff, and the yield curve steepened. Yields on 2-year government bonds increased from 3.23% to 3.24% thru 3.29%, while yields on 10-year government bonds increased from 2.90% to 2.97%. The rising interest rates are particularly bad news for gold investors, as the yellow metal is extremely sensitive to rising US interest rates, which increase the opportunity cost of holding non-yielding bullion.

 

Fed funds futures traders assign a likelihood of 55% that the Fed will raise rates by 50 basis points in September and a probability of 45% that rates will be raised by 75 basis points. According to calculations by Reuters and data from the US Commodity Futures Trading Commission published on Friday, speculators' net long positioning on the US dollar continues to expand, while net short positions on the euro increase. The value of the net long dollar position increased to $13.37 billion during the week ending August 16, according to statistics from the CFTC. Since four weeks ago, net long dollar positions have climbed for the first time.

 

Core PCE will be significant in data preceding the Jackson Hole Symposium. According to analysts at TD Securities, prices likely slowed significantly in July and at an even slower rate than the core CPI (0.1% vs. 0.3%).

 

"Shelter weights continue to be a major contributor to this disparity. The YoY rate likely decreased to 4.6% from 4.8% in June, indicating that the series has reached its apex. Separately, personal expenditure likely fell to a still robust 0.6% MoM pace after seeing an even greater 1.0% MoM increase in June.


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