On Wednesday (November 9), spot gold fell, off the previous session’s high of $1,716.79 an ounce since October 6. Traders awaited upcoming inflation data and the outcome of the U.S. midterm elections, which could determine whether the Federal Reserve will slow the pace of interest rate hikes, and the latter that would determine the future fiscal policy of the Biden administration.
At 20:09 Beijing time, spot gold fell 0.17% to US$1,709.18 per ounce; the main COMEX gold futures contract fell 0.22% to US$1,712.3 per ounce; the US dollar index rose 0.24% to 109.888.
The Fed’s mission is unfinished
Investors will still focus on the upcoming US consumer price index report on Thursday (November 10). Economists expect the U.S. core consumer price index to slow to 0.5 percent and 6.5 percent on a monthly basis in December, respectively.
High inflation is almost certainly the salient problem facing the economy right now. Core inflation remains more than triple the Fed’s 2% target, and many households are feeling overwhelmed even as unemployment hovers near 50-year lows, employers are hiring steadily and job openings abound.
If the data unexpectedly rises, it could disrupt market hopes that the Fed is about to finish raising interest rates. Traders now see the Fed raising rates by at least 50 basis points at its December meeting, but less than a 45% chance of a fifth straight 75 basis point hike. The Fed still has a lot of work to do to fight inflation.
Moh Siong Sim, FX analyst at Bank of Singapore, said:“We all know the dollar is likely to turn around at some point – the big question is when. My view is that the U.S. is now in a correction, not the end of the uptrend, and I don’t think the Fed is over yet in its fight against inflation, unless the data is true. Let us rest assured that inflation has subsided completely.”
Stephen Innes, managing partner of SPI Asset Management, said:“After the sharp rebound in gold prices, some bulls choose to take profits. If the U.S. CPI data is higher than expected, the price of gold may fall below $1,690, otherwise the price of gold may break above the level of $1,725.”
Republicans want to take back the House of Representatives
The final results of the U.S. midterm elections, which begin on Tuesday (Nov. 8), could take days to be announced. Markets expect the Republicans to at least retake the House of Representatives, with uncertainty about the final outcome in the Senate. Some analysts believe that Biden’s new fiscal spending is facing constraints, and Congress may be deadlocked.
High inflation is one of the top issues driving American voters to decide how to vote, according to an exit poll conducted by EDITION Research. About 60 percent of voters said soaring gasoline prices had caused them financial hardship. About 50 percent of voters said their households were in worse financial shape than they were two years ago.
Survey data show that while voters are divided on who is responsible for the rapid price increases, a larger percentage of independent voters believe Republican policies will be better for the economy and their finances.
Political scientists say the stimulus to the state of the economy is enough to prompt some to vote for change, even if the other side does not offer a significantly better solution. The question is not whether inflation will be a factor driving votes, but whether it will be the deciding factor.
Elaine Carmack, a senior fellow in the Governance Studies Program at the Brookings Institution, said skyrocketing gas and grocery prices are a ubiquitous reality for most households. “
Republicans are expected to retake the House of Representatives, which should be enough to cause a gridlock in Congress. But in terms of market impact, the U.S. dollar and gold markets are not going to be rocked, with high inflation already reducing the likelihood that further spending plans will pass.
Republican Policy
Republican Senate Campaign Committee Chairman Scott suggested cutting spending and increasing domestic energy production. “First, the government must spend money on the same level as ordinary households and make ends meet. And most importantly, we have to figure out how to do this safely in this country. produce energy.”
Shortly after Biden took office, both houses of Congress, controlled by Democrats, quickly passed a $1.9 trillion economic relief bill that included direct payments of $1,400 to most adults, as well as expanded unemployment benefits and new parenting taxes. credit. As an economic stimulus, it was successful, with employers adding more than 10 million jobs. But Republicans have accused the relief bill of being too aggressive and fueling runaway prices.
Gasoline prices are a powerful indicator of inflation, and whenever oil prices rise, presidential approval ratings seem to drop. The U.S. faces a mismatch between available energy supply and growing demand, putting upward pressure on prices. In June, the national average gasoline price hit a record high of $5.01 a gallon.
Biden’s decision to authorize the release of millions of barrels of crude from the U.S. Strategic Petroleum Reserve did not significantly help drive down prices. The average weekly price for regular-grade gasoline in the U.S. was about $3.74 a gallon as of Oct. 31, still higher than the average for the week of Jan. 18, 2021, days before Biden took office, according to the Energy Information Administration. out about $1.36.
The Fed spent most of last year arguing that high inflation would cool on its own once supply chain disruptions caused by the pandemic were resolved. But upward pressure on prices has proven higher and more persistent than the central bank had expected. The Fed has raised interest rates by a cumulative 375 basis points since March this year, and has raised interest rates by 75 basis points four times in a row recently.
A Rystad study found that implementing a range of federal policies could spur nearly $200 billion in direct investment, create more than 225,000 jobs by 2035, and provide consumers with more energy.
Spot gold at $1729
On the hourly chart, the price of gold has started an upward iii wave from $1,664, with the upper resistance looking at the 85.4% target at $1,720 and the 100% target at $1,729. Wave iii is a sub-wave of the up (i) wave that started at $1616.