Last week, the financial market was hit by major events and economic data in turn. Due to the hawkish wording of the Fed meeting minutes, the hawkish remarks of many Fed officials, and the fact that the Fed’s favorite inflation indicator exceeded expectations, the market’s interest rate hike expectations rose sharply. Back to the 105 high. Suppressed by the surge in the U.S. dollar, spot gold fell by more than $30 this week.
Looking back at the situation last week, both the economic data and the attitude of the Federal Reserve officials have stimulated the expectation that the US dollar interest rate will continue to rise and maintain high interest rates for a long time. The minutes of the Federal Open Market Committee (FOMC) meeting released on Wednesday (February 22) showed that Fed officials believe that U.S. inflation is still above the 2% target level, and the labor market is still very tight, and wages and prices are facing upward movement pressure. Fed officials said that while inflation data for the past three months showed a moderation in monthly price growth, more evidence of a broad-based pullback in prices was needed to determine that inflation was on a sustained downward path. The minutes also pointed out that not all officials supported the decision to raise interest rates by 25 basis points, and a small number of non-voting committee members hoped to raise interest rates by 50 basis points to demonstrate greater determination to reduce inflation. The reason why the Fed internally expressed the intention of raising interest rates hawks is that since the meeting in early February, new data have shown that the US economic activity is stronger and the progress of reducing inflation is slower than expected, which may make the Fed raise interest rates. The interest period is longer than previously expected. Just last Friday, the Federal Reserve’s favorite inflation indicator “exploded the table”. The data released by the US Department of Commerce on Friday showed that the US personal consumption expenditures (PCE) price index rose by 0.6% month-on-month in January, higher than the market’s expected 0.4% That was the biggest gain since last June, compared with a revised 0.2 percent. The U.S. PCE price index rose 5.4% year-on-year in January, far higher than the market’s expected 5% and the revised 5.3%. After excluding volatile food and energy prices, the Fed’s more important inflation indicator-the core PCE price index rose 4.7% year-on-year in January, higher than the expected 4.3% and slightly higher than the revised 4.6%. Spending is the largest increase since 2021. In order to achieve the goal of reducing inflation to 2%, the pace of interest rate hikes by the Fed still cannot stop. For gold, which is extremely sensitive to interest rate movements, the longer the Fed keeps monetary policy tighter than expected at the end of last year, the more pressure it will suffer.
In terms of technical graphics, gold has been falling after hitting the pressure level above 1845. After several rounds of trials at 1817, it finally reached a low point last Friday, reaching the lowest line of 1808. The integer support mark of 1800 seems to be in jeopardy. If economic data from the United States this week (such as durable goods orders in January, existing home sales, and the final value of MARKIT manufacturing PMI in February, etc.) continue to show strength, it will be difficult to ease the downward pressure on gold. After the 1800 mark goes downhill, the support strength of the 1788 and 1763 levels will be tested below. The initial resistance above is at 1827, and the key to reversing the decline depends on whether it can break through the 1845-1850 level.
Wang Gang, Guangdong Branch, Bank of China
Opinions are personal and do not represent those of the organization