Gold Short Order Guide: The survey shows that nearly 60% of analysts believe that the Fed will announce the reduction of QE provider FX678 in August or September

According to a Reuters survey, the Fed may announce a strategy to reduce its large-scale bond purchase plan in August or September, but it is not expected to start reducing the scale of monthly purchases until early next year.

Many Fed observers also said that the Fed will wait until later this year before announcing cuts. With the end of the epidemic in the United States in sight, the current market is mainly worried about rising inflation.

The strong demand after the restart of the US economy is expected to continue and push up consumer prices this year. A Reuters survey of more than 100 analysts conducted on June 4-10 showed that expectations for economic growth and inflation have both risen.

Among the analysts who answered an additional question, nearly 60%-29 out of 50-said that it is widely expected that the Fed will announce a balance sheet reduction in the next quarter, even though the labor market recovery has been unstable in recent months.

Among them, 13 analysts are expected to announce at the Jackson Hole Global Central Bank Annual Meeting in August. High-level central banks of various countries often issue major policy hints at this annual meeting.

The remaining 21 analysts predict that the Fed will announce cuts to its quantitative easing program after the third quarter.

James Knightley, chief international analyst at ING, said, “We expect to hear clear hints at the Jackson Hole meeting that the Fed is discussing the benefits of reducing quantitative easing and will be disclosed in the U.S. federal government four weeks later. It will be further developed at the FOMC meeting. At that time, we speculate that the Fed will hint that the market should prepare for the formal announcement of the December FOMC meeting to reduce the balance sheet and give the future path.”

The Fed’s monetary policy outlook survey chart:

Nearly 60% of analysts, or 26 out of 45, said that the reduction will begin in the first quarter of next year.Analysts trying to guess how much the size of monthly bond purchases will shrink have a median estimate of $20 billion, of which public bonds and mortgage-backed securities (MBS) each account for half. Analysts expected the highest to be US$40 billion in public bonds and US$20 billion in MBS respectively.

The Fed currently buys $80 billion in public debt and $40 billion in MBS every month. Affected by the large-scale government spending plan and the rapid advancement of vaccination, the seasonally adjusted annual growth rate of the US economy is expected to be 10.0%, 7.0%, and 5.0% in the second, third, and fourth quarters, respectively. The estimates in the previous survey were 9.5%, 6.7%, and 4.7%.

ING’s Knightley added, “The United States is expected to make up for all lost output in the current quarter, and by the end of the year, the economy will exceed the level where there is no epidemic and the economy will maintain the growth trend of 2014-19.”

Analysts predict that the unemployment rate in the United States will gradually decline before the end of next year. The average value this year is expected to exceed 5% and the average in 2022 will be above 4%. This is still higher than the 3.5% level before the epidemic crisis.

A survey chart on the outlook for inflation, economic growth and unemployment in the United States:

The Fed’s preferred measure of inflation, the core personal consumption expenditure (PCE) price index, rose 3.1% year-on-year in April, the largest year-on-year increase since July 1992. According to a Reuters survey, the average year-on-year increase in the index is 2.5% this year and 2.2% next year, which is higher than the Fed’s 2% target. Last month’s survey estimated the year-on-year increase in core PCE for this year and next year was 2.1%.

Philip Marey, senior U.S. strategist at Rabobank, said, “Although many of the situations we are seeing are indeed temporary, structural changes are taking place in the global economy and domestic fiscal policies, which may lead to longer-lasting high inflation.”

Twenty-three of the 38 analysts, or more than 60%, said that higher inflation is the biggest risk facing the US economy, and only six believe that high unemployment is the biggest risk. About two-thirds of analysts said they are worried about rising inflation in the United States.

Sal Guatieri, senior economist at BMO Capital Markets, said, “You get a big-print message: the aggressive advancement of stimulus plans and vaccination is causing U.S. demand to rebound much faster than supply. This is causing many unpleasant side effects. For example, inflation…imbalances only appeared in the quarters after the economic collapse, not years after the usual recession. This is a bad omen: the Fed’s temporary inflation mantra sounded more outdated this week.”

What needs to be reminded is that in most cases, the Fed’s reduction in debt purchases or the release of interest rate hike signals will put pressure on gold prices. The gold price trend after the 2008 financial crisis is also the same. From the current market expectations, investors can consider 8 Gradually lay out the medium and long-term space of gold after the month, which is also more consistent with the time when the gold price peaked in 2011.

At 21:01 Beijing time, spot gold is now quoted at US$1,884.41 per ounce.