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On June 16th, European Central Bank (ECB) Chief Economist Lane stated that although the inflationary pressures stemming from the Middle East conflict have not yet fully materialized, the ECB must be prepared for them. Lane noted that despite the agreement reached between the US and Iran to reopen the Strait of Hormuz, oil prices have not simply returned to their pre-crisis trajectory. "Four months of high energy prices mean that, in terms of the inflation transmission chain, we will see inflation exceeding 3% in the future. This year and next, energy prices will indirectly affect food, goods, and services prices." Investors and economists generally expect the ECB to raise interest rates by at least another 25 basis points, bringing the rate to 2.5%, and anticipate inflation to remain above the 2% target level for some time. Even if shipping returns to normal, it will take months for oil supplies to return to normal, and high energy costs are likely to increasingly be passed on to consumer prices. Lane stated that oil prices are unlikely to fall significantly from their current level of $80 to $81 per barrel.June 16 - Kpler analysts stated that tanker activity is likely to see an initial surge following the reopening of the Strait of Hormuz. Approximately 118 fully loaded vessels previously stranded in the strait are expected to depart first, driving a significant but brief spike in transit volume in the initial 10 to 15 days. The main uncertainty lies in how quickly new vessels will re-enter the area. Analysts Matt Wright and Panagiotis Krontiras stated that in the most optimistic scenario, if security concerns are completely eliminated, traffic could rebound rapidly, even briefly exceeding pre-war levels, although this outcome is considered unlikely. In the baseline scenario, the recovery will be more gradual, with transit volume increasing from approximately 15 vessels per day initially to 40 by the end of the month, of which tankers will account for about 60%.SpaceX (SPCX.O) shares rose 15%, surpassing Microsoft (MSFT.O) to become the worlds fourth-largest company by market capitalization.According to Hong Kong Stock Exchange documents, Shenzhen Kubo Energy Co., Ltd. has submitted a listing application to the Hong Kong Stock Exchange.According to Semafor: Netflix (NFLX.O) lost out to Fox in its attempt to acquire Roku.

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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