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Federal Reserves Logan: Inflation risks are tilted to the upside, and the robust job market is strengthening slightly.On July 31, Bank of England Chief Economist Hugh Peele stated that the sharp fluctuations in energy and commodity prices caused by the Iran war could continue into 2027, highlighting the risk that inflation may remain high for an extended period, forcing policymakers to take action. Peele said that developments in the Middle East and how they will ultimately impact the UK economy remain "extremely uncertain" and difficult to predict. He added that the Bank of England cannot currently determine the duration or scale of the conflict, as evidenced by the recent erratic nature of US-Iran negotiations. He said, "In April, one might have hoped that, despite the significant uncertainty, at least by July we would know where things were headed. But that uncertainty remains, and we may face continued sharp fluctuations in energy and commodity prices by the end of this year and into next year." Peele is one of the most hawkish members of the Bank of Englands Monetary Policy Committee and one of the three members who voted for an interest rate hike this week.The final reading of the University of Michigan Consumer Sentiment Index for July was 55.2, below the expected 54 and the previous reading of 54.4.The final reading of the University of Michigan Current Conditions Index for July was 54.8, below the expected 54.7 and the previous reading of 54.9.The final reading of the University of Michigan Expectations Index for July was 55.4, compared to a forecast of 53.8 and a previous reading of 54.

Gold Price Prediction: XAU/USD bears at $1,650 on Fed hawkishness and China news

Daniel Rogers

Sep 19, 2022 14:34

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During early Monday morning in Europe, the gold price (XAU/USD) maintains a position close to the intraday low at $1,670. In doing so, metal prices endure the weight of a stronger U.S. dollar amidst a sluggish session caused by Japanese and British vacations. The cause may be related to the Fed's hawkish bets and China-related news stories.

 

US Dollar Index (DXY) reverses a two-day slump while posting intraday gains of 0.18 percent at 109.85 as of press time. Indicators of the U.S. dollar's value versus the six major currencies have recently been buoyed by the University of Michigan's September consumer sentiment report and the market's positive expectations on the Fed's next move. Consequently, the probability of a 75-basis-point (bps) rate hike by the Federal Reserve increased to 80%, while the market's estimates of a one-percentage-point increase in the Fed rate rose to 20% at the latest.

 

US President Biden stated elsewhere, "I'm more positive than I've been in a long time." The national leader also claimed that inflation will be brought under control. On the same line are the covid updates from China, which have unlocked Dalian and Chengdu while observing zero coronavirus cases in Beijing and one, as opposed to zero the day before, outside of Shanghai's quarantine zone. However, US President Biden's willingness to support Taiwan in the event that China assaults Taiwan and hawkish expectations for the Federal Reserve appear to weigh on the steel price ahead of the major monetary policy pronouncements.

 

In addition, the People's Bank of China (PBOC) reduces the 14-day reverse repo rate by 10 basis points to 2.15 percent. "With no maturing reverse repos on Monday, the Chinese central bank injects 12 billion yuan," reports Reuters. The same might have indicated that the dragon nation is not in recovery mode and requires more rate cuts than rate raises, which could have caused the gold price to plummet. The cause is China's position as one of the world's largest gold consumers.

 

In light of this, the S&P 500 Futures post modest losses while mirroring Wall Street's Friday close. Notably, the selling in Japan curbs bond movements in Asia, but yields are robust near the multi-day high due to fears of a recession and hawkish Fed views.

 

Moving forward, a light economic calendar and important market holidays may limit intraday XAU/USD price fluctuations. However, bears are expected to maintain control because to aggressive Fed expectations, which, if dashed, might defy the bearish chart pattern and spark the long-awaited rally.

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