Gold market analysis: the dollar index fell from a high level, gold rebounded to recover the decline provider FX678

On Wednesday (November 17), it rebounded, basically regaining the overnight decline, and closed at $1,861 per ounce.

On Tuesday, gold rebounded, mainly due to the high retreat of the U.S. dollar index. The future direction of gold will still be constrained by the Fed’s interest rate hike expectations.

Both hawks and doves have opinions on the expectation of the Fed to raise interest rates. The public debate among Fed policymakers on how to deal with high inflation heated up on Tuesday. For the Fed, this is an old problem in the new situation-the global supply chain is knotted everywhere, the U.S. labor market is indistinct and may have shrunk, coupled with rising prices, these may make the Fed unable to wait. When the U.S. economy returns to the employment and labor level before the epidemic, it has to raise interest rates to slow down economic growth. At the same time, rising prices have begun to arouse public grievances, which have become concerns across parties and income classes in public opinion polls, and have caused Biden’s approval rating to fall to its lowest level since taking office.

The dovish opinion is: raising interest rates now will slow down the economic recovery. San Francisco Fed President Daley called on the central bank to be patient on Tuesday, saying that as the epidemic cools, price pressures may subside on their own, and “reacting to things that are unlikely to continue will move us farther from our goals, not closer.” She said that raising interest rates now will not solve supply chain bottlenecks and other temporary problems that push up prices, but will lead to a slowdown in employment growth and recovery. There is uncertainty about how long the epidemic will continue to disrupt the economy. This makes it difficult to predict how long high inflation will last, and it is also difficult to predict how quickly people who leave the workplace due to pandemic concerns will return to the labor market.

The opinion of the hawks: do not want families to feel pressure on rising prices. St. Louis Fed Chairman Brad urged the Fed to end its asset purchase program as soon as possible on Tuesday so that it can raise interest rates as early as next spring. The Fed should adjust to a “more hawkish direction” in the next few meetings to prepare in case inflation does not start to ease.

The currency market currently predicts that the Fed is likely to start raising interest rates in June 2022. Chicago Mercantile Exchange (CME) “Fed Observation” data shows that the probability of the Federal Reserve raising interest rates by at least 25 basis points in June 2022 is 69%, and the probability of accumulatively raising interest rates by at least 75 basis points before the end of 2022 is more than 50%. At present, it depends on which of the two factions will dominate. In the short term, as inflation is still rising, the macro background still supports gold, but the continued strength of the U.S. dollar inhibits gold’s upside.

The price of gold is currently fluctuating at a high level, and the market outlook is still expected to challenge the 1900 mark, but short-term downward pressure still exists, and the price of gold may fall into a sideways state. If the price of gold falls further, the initial support below will focus on the May 10 high of 1845.49, and further focus on the September 3 high of 1834.03 and the November 10 low of 1822.42. From a technical point of view, the price of gold has now gotten rid of overbought, and the pressure on the callback has been reduced. Currently in a unilateral market, the price of gold is easy to rise but hard to fall. The initial resistance above focuses on the high of 1863.31 on June 16, and further attention on the high of 1877.15 yesterday and the high of 1890.10 on May 19.

Bank of China Guangdong Branch Wang Gang

Original title: 202111118—The U.S. dollar index fell from a high level, and gold rebounded to recover its decline

Source: Bank of China official website