During the Asia-Europe session on Wednesday (October 5), the high level fluctuated within a narrow range, and it is currently trading around US$1,718 per ounce. Such a radical way of raising interest rates.
Bob Haberkorn, senior market strategist at RJO Futures, said: “The market is pricing in the expectation that the Fed will back off a little bit, and that’s why gold and silver are recovering.”
Looking ahead, U.S. nonfarm payrolls data to be released on Friday may provide more clues on the Fed’s tightening policy.
Haberkorn added: “If the jobs data is weaker than expected, gold will rebound. If the data is much stronger than expected, the market may understand that and the Fed will continue to raise interest rates.”
Gold-supplying banks have cut back on shipments to India ahead of major holidays, focusing instead on China, Turkey and other markets with higher premiums, three bank officials and two vault operators said.
Manufacturing data eases U.S. rate hike fears
The U.S. September ISM purchasing managers’ index showed manufacturing activity grew at the slowest pace in 30 months and new orders even fell, suggesting a tightening of the Federal Reserve’s currency could have an impact on demand. Gold prices rose more than 2% overnight on weaker-than-expected manufacturing data that may have eased concerns about the path of aggressive U.S. interest rate hikes.
In a note to clients, analysts at Mitsubishi UFJ Financial said the dollar’s moves appeared to partly reflect market participants’ comfort that the Fed may be closer to the end of its rate-hike cycle. “Market expectations for the Fed’s interest rate next year have dropped to 4.39% from around 4.75% previously.”
U.S. job market continues to have little room for expansion
Preliminary estimates of U.S. nonfarm payrolls for September discounted market participants. As expected, the U.S. economy created 250,000 jobs in September, down from 315,000 in August. The U.S. economy has remained at full employment, so there is little room for more jobs to be created. In addition, the Fed’s continued interest rate hikes have also limited companies’ continued rapid hiring plans.
Lower economic growth and higher unemployment are likely side effects of the Fed’s anti-inflation mandate, Williams said. Economic activity is likely to be close to flat this year, with only modest growth next year, with unemployment currently at 3.7% and likely to rise to 4.5% by the end of 2023, he said.
Williams also added that the Fed will do everything it can to bring down inflation, “to help keep demand in line with supply — and thus lower inflation — monetary policy needs to work, and the FOMC is taking strong steps to that end. Powerful action.”
Fed eyes spillovers from policy action
Global financial markets have been facing high volatility, with the dollar in particular surging against major non-U.S. currencies, raising concerns that the Fed’s domestic mandate could cause major problems elsewhere in the world.
“We are concerned about financial vulnerabilities that could be exacerbated by the emergence of additional adverse shocks,” Brainard said, adding that the Fed is closely watching how its policy actions affect the global economy and the financial system, with Fed officials and the Policymakers in other countries are keeping in touch.
A September University of Michigan consumer confidence survey found that the public’s inflation expectations over the next five years have cooled. The relative stability of long-term inflation expectations suggests that the public is confident that the central bank will eventually achieve its goal of returning inflation to 2 percent, and it is also expected to ease the need for the Fed to remain aggressively hawkish.
Brainard also pointed out that the current target point for the Fed to raise interest rates is unclear. play a role across the economy and will continue a data-driven style of conduct in future policy actions.
The Fed will get further investor attention as the market enters its final quarter of the year. Policymakers will not change their aggressive rate hikes, but the Federal Reserve has paid attention to the potential spillover effects of its actions on global markets, which may constitute a limit to gold’s downward momentum.