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International oil prices rose for the third consecutive trading day. A chart provides a quick overview of the pre-market conversion of domestic and international crude oil prices.Spot gold and silver traded in a volatile range. A chart provides a quick overview of the pre-market prices of precious metals, converted between domestic and international prices.As of 8:30 AM Beijing time, spot platinum rose 0.43% and spot palladium rose 0.37%.The yield on Japans 5-year government bonds fell 3 basis points to 1.92%.On July 15th, CICC Research Report stated that the seasonally adjusted CPI in the United States fell by 0.4% month-on-month in June, and the year-on-year increase fell back to 3.5%; the core CPI showed zero month-on-month growth and rose by 2.6% year-on-year, both lower than market expectations. The decline in energy prices is the main reason for the cooling of inflation. Looking ahead, the situation between the United States and Iran has escalated again, and the outlook for energy inflation is subject to fluctuations. At the same time, the AI inflation effect is gradually emerging. The mismatch between supply and demand of upstream hardware, the price increase of software and peripheral products, and the boost to aggregate demand from AI capital expenditure may all make core inflation more sticky. In terms of policy, the cooling of inflation in June supports the Federal Reserve to keep interest rates unchanged at the July meeting, but Wallers recent statements show [1] that the Federal Reserve is reassessing the possibility of "precautionary rate hikes". We maintain our baseline judgment of no rate hikes this year, but suggest that the threshold for rate hikes has already decreased. Once one or two overheated inflation data appear, it may prompt the Federal Reserve to further discuss the option of raising interest rates.

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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