During the Asian session on Wednesday (January 11), spot gold fluctuated slightly and is currently trading at $1,873 per ounce. Although the speech of Federal Reserve Chairman Powell overnight did not obviously involve the outlook for monetary policy, he pointed out that the independence of the Federal Reserve is its anti-inflation The core of capabilities, coupled with the hawkish speeches of Fed officials on Monday, some analysts believe that the Fed emphasized that inflation is still too high, and there is a high probability of further interest rate hikes in the future, which helped U.S. bond yields rebound and gold prices continued to Suppressed by the 1880 mark.
The short-term risk of a pullback in gold prices has increased. However, the geopolitical situation is still tense, the dollar is relatively weak, and the market is still inclined to be bullish.
Edward Moya, senior analyst at OANDA, said: “Gold is doing well, the dollar has been weakening … the Fed will eventually abandon this hawkish stance. But until the inflation report is released, we will not see a major rebound. We One thing to see is whether U.S. Treasury yields can continue to decline. That would be very positive for the precious metals, and I think overall there is confidence that yields have peaked.”
It should be reminded that the position of SPDR, the world‘s largest gold ETF, has decreased in the last four changes. On Tuesday, it decreased by 1.16 tons to 914.17 tons, a new low since December 23, which is slightly negative for gold prices.
Markets will focus on Thursday’s U.S. Labor Department report on consumer prices.
Lukman Otunuga, senior research analyst at FXTM, said the market’s view that the Federal Reserve will be less hawkish in the new year is driving gold prices higher.
Otunuga said on Tuesday, “With Friday’s mixed jobs report fueling speculation that the Federal Reserve will slow the pace of rate hikes, gold prices could move further up. Gold’s outlook may be affected by the upcoming U.S. inflation report.” For Further cooling in prices and lower bond yields in December would be a welcome development for zero-yielding gold. From a technical perspective, the bulls are still in a good position, with the next key level of interest at $1,900.”
Powell said the Fed’s independence is the core of its ability to resist inflation and should avoid participating in social policies
Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank’s independence from political influence is central to its ability to fight inflation, but that requires the central bank not to engage in issues such as climate change that exceed its congressional mandate.
Speaking at a forum on central bank independence hosted by the Riksbank, Powell said: “Restoring price stability when inflation is high may require some measures that are unpopular in the short term, including us raising interest rates to drive a slowdown. Given that our decisions are not directly under political control, this allows us to take these necessary steps without regard to short-term political considerations.”
Referring to inflation, Powell said it was crucial that the Fed retains the ability to manage it as it sees fit, including raising interest rates to keep inflation in check, even if it means slower growth and higher unemployment.
Powell said he believed the principle was “well understood and widely accepted” in the United States, embodied in federal law that states the Fed’s mandate is to maintain full employment and price stability.
We should be ‘focused on our work’ rather than wandering off to pursue perceived social benefits that are not closely tied to our statutory goals and responsibilities,” Powell said. “Assuming new tasks without a clear statutory mandate Goals, however valuable, undermine our independence”
Powell said that while the Fed’s supervisory powers give it a “limited” role in ensuring that financial institutions “appropriately manage” the climate change risks they face, “we are not and will not be a ‘climate policymaker.'” .
“Without clear parliamentary legislation, it would be inappropriate for us to use our monetary policy or supervisory tools to promote a green economy or achieve other climate-based goals,” he told the forum in Stockholm. “Policy decisions about directly addressing climate change should be made by elected branches of government, thereby reflecting the will of the public as expressed through elections.”
Powell’s views on the Fed’s role contrasted with those of Europe’s major central banks, which have incorporated green economy efforts into their policymaking, but acknowledged greater political differences in the United States.
To maintain authority over the core task of managing inflation and demand, “we need to be worthy of that authority, and that means focusing on that task and not seeking broader work,” Powell said. “We shouldn’t be in front of the public without a specific mandate. This is especially true in the US”
U.S. Treasury yields climb as markets await U.S. December inflation data
U.S. Treasury yields rose on Tuesday as the market braced for highly-anticipated consumer price data later this week that could affect how much the Federal Reserve raises interest rates as it struggles to keep inflation under control.
Treasury prices have rebounded briefly over the past two days, with the 10-year U.S. Treasury yield plunging more than 20 basis points to as low as 3.508% on Monday after last week’s U.S. employment and service activity data showed that inflation slowed more than expected.
A report on Thursday is expected to show that consumer prices rose 6.5 percent in December from a year earlier, while core CPI is seen rising 5.7 percent, about three times the Fed’s 2 percent target.
“We think the Fed is emphasizing that inflation is still too high, too high and wants to get to terminal rates, or captive rates, sooner rather than later,” said Kim Rupert, managing director of global fixed income at Action Economics.
Concerns about reaching terminal rates early pushed Rupert to see a 50 basis point rate hike on Feb. 1, while the market saw a 75 percent chance of a 25 basis point rate hike by policymakers.
She said the final rate range is expected to be 5.0-5.25 percent, with a 25 basis point hike in March, after which the Fed will maintain that level for most of the rest of the year.
The yield on the 10-year Treasury note rose 9.8 basis points to 3.619% on Tuesday, while the yield on the two-year note, which typically tracks changes in interest rates, rose 5.2 basis points to 4.251%.
Anthony Saglimbene, chief market strategist at Ameriprise Financial, said investors may have gotten a little ahead of the curve, expecting the Fed to cut rates before the end of the year. “Markets are still pricing in lower terminal rates from the Fed than they’ve signaled.”
Saglimbene sees the Fed’s target interest rate range for this year at around 5 percent to 5.25 percent, with policymakers expecting it to be 5.1 percent.
Lou Brien, a market strategist at DRW Trading, said the Treasury Department sold $40 billion in three-year treasury bonds, and the demand was very strong. The winning bid rate was 3.977%, which was more than two basis points lower than the yield in the secondary market when the auction closed.
The bid-to-cover ratio was 2.84, the highest in about four years, and 69.5 per cent of indirect bids were awarded, the highest on record, Brien said.
He said the strength of indirect accounts, which mainly include non-U.S. entities and could indicate safe-haven buying, indicated strong interest from abroad.
Perhaps “the Fed will be less aggressive in its policy moves in the medium term than the ECB or other central banks,” he said.
Powell speech fails to boost dollar
At the beginning of the Asian market on Wednesday (January 11), the U.S. dollar fluctuated within a narrow range and is currently trading around 103.32. The speech by Federal Reserve Chairman Powell overnight did not involve too much monetary policy and interest rate hike prospects. The U.S. dollar index remained at nearly seven months The lows were choppy as traders awaited U.S. inflation data later in the week to help cement expectations for a rate hike.
The U.S. dollar has been on a downward trend recently, with investors and traders questioning whether the Fed will have to raise its target interest rate above 5% to curb stubbornly high inflation. The effect of the Fed’s aggressive increase in borrowing costs in 2022 has already begun to show.
Data last week showed that while the U.S. economy added jobs at a solid pace in December, wage growth slowed, while a separate report showed activity in the services sector weakened.
Analysts at ANZ said: “FX markets are hesitating ahead of the key US CPI data…which is not surprising given how heavily the bond market is taking the data.”
“Until a more hawkish Fed speaks, the dollar is likely to remain under pressure,” said Win Thin, head of global currency strategy at Brown Brothers Harriman, adding that the current level of dollar weakness may be overdone.
The U.S. dollar index rose 0.08 percent to 103.28 on Tuesday, after falling 0.7 percent on Monday to hit a seven-month low of 102.93. The index tracks the dollar against a basket of currencies, with the euro having the heaviest weight.
The Russian army tried to win the first victory in Ukraine in months, and the battlefield was “strewn with corpses”
Ukraine said on Tuesday its troops were still holding out their positions in the eastern mining town of Suldar against waves of Russian troops and mercenaries as Moscow clung to its first battlefield victory in months.
The Ministry of Defense said earlier that Russian troops and Wagner mercenaries may have taken control of most of the settlement in Sultar after a four-day advance.
But Ukraine’s deputy defense minister, Hanna Maliar, said late Tuesday that the battle for the city was still raging.
“The enemy continues to charge despite heavy casualties,” she said. “The road to our position is littered with dead bodies. Our fighters are bravely holding the line.”
The capture of Suledar will be Russia’s most significant gain since August last year, and the Russian army will retreat steadily for most of the second half of 2022. Russian forces have been fighting for months to capture the larger city of Bakhmut, a few kilometers to the southwest.
Moscow said seizing Bakhmut would be an important step towards taking full control of Ukraine’s Donetsk region.
Ukrainian President Volodymyr Zelensky admitted in his evening speech that the situation in Suldar was “difficult”, but he said that the persistence of the Ukrainian defenders bought more time, and Ukraine will eventually drive the Russians out of the entire eastern Donbass industrial area.
Zelensky has repeatedly urged Western supporters to provide more advanced weapons. Last week the United States, Germany and France pledged for the first time large numbers of armored fighting vehicles.Kyiv still wants Western main battle tanks
A U.S. official said Ukrainian troops would soon arrive in the United States to begin training on the Patriot anti-aircraft missiles that Washington pledged to supply Kyiv last month.
In addition to sending weapons to Kyiv, the West has repeatedly strengthened economic sanctions on Moscow. U.S. Treasury Secretary Janet Yellen said that so far, the price cap imposed by the West on Russian oil in December appeared to be achieving its goal of keeping the oil on the market while limiting its revenue.
European Commission President Von der Leyen says new sanctions will be imposed on Belarus for supporting Russia
The EU will impose new sanctions on Belarus, European Commission President Ursula von der Leyen said on Tuesday, as the bloc continues to put pressure on Russia to end its war in Ukraine and extend measures to countries that support Russia.
“We will maintain pressure on the Kremlin with a tough sanctions regime, which we will extend to countries that militarily support Russia’s war, such as Belarus or Iran,” von der Leyen told a news conference. “
“We will impose new sanctions on Belarus in response to their role in the Russia-Ukraine war.”
World Bank sees global growth of 1.7% in 2023, risk of recession
The World Bank on Tuesday cut its 2023 growth forecasts for many countries to levels on the brink of recession, as the impact of central bank rate hikes intensifies, the war between Russia and Ukraine continues and the world‘s main economic engines stall.
The World Bank said it now expects global GDP to grow by 1.7% in 2023, the slowest pace in almost three decades, excluding the recessions of 2009 and 2020.In its last Global Economic Outlook report in June 2022, the World Bank forecast global growth of 3.0% in 2023.
The World Bank slashed its growth forecasts for the U.S. and the euro zone to 0.5 percent and said a sharp slowdown in advanced economies could herald a new global recession, less than three years away from the last one. year.
In a statement accompanying the outlook report, the World Bank said, “Given the fragile economic conditions, any new adverse developments, such as higher-than-expected inflation, sudden rate hikes to curb inflation, the A comeback or escalation of geopolitical tensions.”
The gloomy outlook is particularly tough for emerging market and developing economies as they grapple with heavy debt burdens, weak currencies and income growth, and slowing business investment, the World Bank said. Business investment is now expected to grow at an annual rate of 3.5 percent over the next two years, less than half the pace of the past 20 years.
Gold technical bullish signals increase
Fxstreet analysts pointed out that there is also a new bullish signal in the long-term trend of gold, namely the impending formation of a “golden cross” on the daily chart. When the 50-day moving average crosses upwards above the 200-day moving average, it creates a bullish signal, reflecting a long-term trend reversal. Furthermore, the signal is strengthened by prices above these averages, which are expected to form a golden cross as early as this week.
Gold is currently at the intersection of the 50-day and 200-day moving averages. In July, for example, a “death cross” (50-day moving average below the 200-day moving average) sparked a 7% sell-off over the next three weeks. After forming a golden cross in February 2022, it rallied nearly 15% in the ensuing two-and-a-half weeks, a second test of all-time highs above $2,070.
This time around, the rally looks a bit tight, so we see short-term gains to the $1900-$1910 area possible before the bulls may need to replenish.
In the long-term, gold price gains are unlikely to stop above $1,900. Analysts expect another test of the 2070 all-time high before the end of 2023; this time, it will succeed. Much of the optimism is fueled by growing investor doubts about the stability of major reserve currencies amid heavy debt loads and speculation that central bankers will allow inflation to remain slightly above target, despite current assurances.
On the whole, in the short term, the rebound in U.S. bond yields and the blockage of the 1880 mark have put gold prices under pressure for a short-term correction. Focus on the support around the 5-day moving average of 1864 and the 10-day moving average of 1845 respectively, but the market may cool down on U.S. inflation Expectations, geopolitical conditions, and technical bullish signals attract bargain hunters, which are expected to limit the room for a pullback in gold prices. Before falling below the 10-day moving average, the market outlook is still biased towards bulls.
At 10:22 Beijing time, spot gold was trading at $1,873.50 an ounce.