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June 17th - The Federal Reserve will announce its first interest rate decision this Wednesday under the leadership of new Chairman Kevin Warsh. What he says and doesnt say will provide clues to the market, offering a glimpse into the Feds communication style he promises to change. Market observers will closely watch the wording of the post-meeting statement and any stylistic adjustments the new chairman may make. They also want to know if Warsh intends to continue holding post-meeting press conferences. Furthermore, it is expected that Warsh will push forward several reforms he has previously promised, including reducing the Feds balance sheet and refocusing the Fed on monetary policy. James Grant, editor of Grant Interest Rate Watch, believes that Warsh should confront and clean up the most unsavory aspects of the Feds own finances. He also suggests storing some gold in the Feds underground vaults to make it look more respectable. The Fed currently does not hold any gold. Grant also stated that if the Treasury stopped covering the Feds losses, it would have gone out of business long ago; the Fed is effectively insolvent. A closer look reveals that the Federal Reserves losses on fixed-income assets and bonds far exceed the amount it lists on its shareholders equity books.On June 17, the International Energy Agency (IEA) stated that the oil supply shock in the Gulf region is expected to cause a significant drop in global oil demand before oil supplies in the Strait of Hormuz gradually normalize, with supply projected to rebound to 8 million barrels per day by 2027. The IEA noted that while the interim agreement to be signed this week by the US and Iran represents the most significant breakthrough in negotiations since the outbreak of the war, a full restoration of supplies through this vital waterway is expected to take several months. The organization now projects that global oil demand will decline by 1.1 million barrels per day this year due to high oil prices and severe supply disruptions, compared to a previous forecast of a 420,000 barrel per day decline. With the normalization of trade, lower oil prices, and an improved economic outlook, demand is expected to rebound to 2 million barrels per day next year. The IEA stated, "While the details of the agreement are still pending clarification and several issues remain unresolved, this is an encouraging step forward. However, a full restoration will not happen overnight, as mines need to be cleared from major shipping lanes and supply chains will need time to return to normal."Intel (INTC.O) shares rose 5.2% in pre-market trading as the companys new manufacturing technology entered the initial production phase.On June 17th, the Shanghai Stock Exchange announced that companies producing large-scale AI models will be eligible for the fifth set of listing standards for the Science and Technology Innovation Board (STAR Market). Issuers should hold a prominent and leading position in the field of large-scale AI models, occupy an important position in the industry chain, play a leading and exemplary role in the industry, and gain high recognition from relevant market players. The issuers large-scale AI model business or products should have a clear target market with significant current or potential demand, outstanding competitive advantages in R&D progress and key indicators, a large market space, and strong future growth potential. Issuers should formulate clear commercialization plans for their large-scale AI model business or products. Issuers should not have any matters that could have a significant adverse impact on their ability to continue operating, such as insufficient commercialization expectations for their large-scale model business or products.The Hang Seng Index closed down 181.79 points, or 0.74%, at 24,312.16 on Wednesday, June 17; the Hang Seng Tech Index closed up 10.42 points, or 0.22%, at 4,669.07 on Wednesday, June 17; the H-share Index closed down 96.02 points, or 1.17%, at 8,144.03 on Wednesday, June 17; and the Red Chip Index closed down 78.32 points, or 1.84%, at 4,171.83 on Wednesday, June 17.

Gold Price Prediction: XAU/USD bears anticipate a Fed rate hike near $1,660

Alina Haynes

Sep 21, 2022 14:35

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Wednesday's Asian session gold price (XAU/USD) reflects pre-Fed nervousness as bears flirt with $1,665 inside an immediate trading range. In addition to geopolitical concerns, the hawkish Fed bets create downward pressure on the metal. However, the market's consolidation prior to significant central bank announcements and the already-priced 0.75 basis point Fed rate hike appear to be testing the bears.

 

Reuters reported that the Federal Reserve began a two-day meeting on Tuesday, with rate futures traders pricing in an 83% chance of a 75 basis point raise and a 17% possibility of a 100 basis point tightening. The news adds to rising expectations that a positive surprise will weigh on the XAU/USD exchange rate. The previous day, global economist Nouriel Roubini endorsed metal bears and joined the band of supporters for the Fed's 1% rate hike.

 

In addition, the news of a sudden shutdown in the steel center of Tangshan due to China's zero covid policy recently rocked market confidence and boosted demand for the US dollar. In a similar vein might be the revelation that US Senators are seeking secondary sanctions on Russian oil.

 

In addition, the Asian Development Bank (ADB) lowered its growth predictions for emerging Asia in 2022 and 2023 on Wednesday, citing growing risks from increased central bank monetary tightening, the consequences from the conflict in Ukraine, and COVID-19 lockdowns in China. The news exerts a downward impact on mood and the XAU/USD exchange rate.

 

Regarding US statistics, the yields appeared to support DXY bulls on the back of generally positive US housing data. The nine-month decline in the US NAHB Housing Market Index preceded the August decrease in Building Permits to 1.517M from 1.61M expected and 1.68M previously. However, Housing Starts increased to 1.575 million compared to the market consensus of 1.445 million and previous readings of 1.404 million.

 

During the pre-Fed period of apprehension, the 2-year US Treasury yield reached its highest level in 15 years, while the 10-year yield reached its highest level in 11 years. Consequently, Wall Street's benchmarks closed in the negative, while the S&P 500 Futures remain undecided.

 

While the market's hesitation is mostly attributable to pre-Fed jitters, other central banks are also scheduled to influence the markets and gold prices. However, the focus will be on their ability to prevent recession while attempting to control inflation. If the Fed can persuade optimists of their capacity, a XAU/USD comeback cannot be counted out.


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