Home » Spot gold is under pressure, and when the US CPI is released, dollar bulls must pay attention to another thing Provider FX678

Spot gold is under pressure, and when the US CPI is released, dollar bulls must pay attention to another thing Provider FX678

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Spot gold is under pressure, and when the US CPI is released, dollar bulls must pay attention to another thing Provider FX678
Spot gold is under pressure, and when the US CPI is released, another thing for dollar bulls

On Tuesday (November 8), spot gold continued to be under pressure, with resistance near $1,680. Cautious investors continue to await U.S. inflation data due later this week, which could affect the pace of future rate hikes by the Federal Reserve. Traders are also awaiting the upcoming U.S. midterm elections later in the day, predicting a result that could be bearish for the dollar.

At 19:39 Beijing time, spot gold fell 0.18% to US$1,672.44 per ounce; the main COMEX gold futures contract fell 0.32% to US$1,675.1 per ounce; the US dollar index rose 0.14% to 110.334.

The Fed’s rate-setting committee raised interest rates by 75 basis points last week, and Chairman Powell said he would continue to raise interest rates, leading the market to adjust peak interest rate expectations. Aggressive U.S. interest rate hikes have sent U.S. Treasury yields higher and pushed the dollar to multi-year highs against most major currencies, but speculation is growing that the trend is coming to an end.

The U.S. consumer price index report will be released on Thursday (November 10), which may affect the Fed’s future monetary policy outlook. According to preliminary estimates, the U.S. headline CPI is expected to fall to 8.0% in December from 8.2% previously, while the core CPI is expected to fall to 6.5% from 6.6% previously.

Fed policymakers have raised interest rates by a rapid 375 basis points this year in an attempt to bring down the 40-year high of inflation, even at the cost of slowing economic growth. Core inflation is still more than triple the Fed’s 2% target.

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Yeap Jun Rong, market strategist at IG, said,Gold prices have retreated from resistance near $1,680, which may keep some on the sidelines to wait for a stronger market catalyst. “A higher-than-expected inflation reading could raise concerns about continued aggressive rate hikes by the Fed, which would provide a negative backdrop for gold.”

Is the Fed raising rates too much?

U.S. monetary policy has tightened more than the Fed’s policy rate would suggest, with financial conditions through September 2022 equivalent to a 5.25% policy rate, according to research released Monday (Nov. 7) by the San Francisco Fed. The actual policy rate at that time was 3%-3.25%; even after last week’s rate hike, the Fed’s benchmark rate was only 3.75%-4%.

In its economic letter released Monday, the higher proxy rate announced by the San Francisco Fed incorporated a range of financial market variables, including mortgage rates and credit spreads, to reflect the Fed’s forward guidance and its continued balance sheet reduction.

“Considering the broader policy stance and comparing proxy rates with simple rules, U.S. monetary policy is tightening faster and more aggressively than is generally believed,” the letter said. The new research could inform policymakers Think about how far they might need to go.

Federal Reserve Chairman Jerome Powell said last week that while future rate hikes may be smaller, policy rates could end up being higher than previously expected as the central bank pushes policy toward “sufficiently restrictive” to reduce inflation. And San Francisco Fed President Daly advocated slowing the pace of interest rate hikes to avoid excessive policy tightening that unnecessarily damages the labor market.

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Researchers at the San Francisco Fed found that while the Fed’s actual policy rate is lower than the appropriate rate suggested by some widely cited monetary policy rules, such as the Taylor Rule, their proxy rate suggests that monetary policy is more aggressive than most rules dictate. for strict.

Kenneth Broux, senior foreign exchange strategist at Societe Generale said:“The question is has the dollar’s ​​cycle turned? The main conclusion of the FOMC last week was that the dollar has not been able to return to highs despite the re-pricing of terminal rates, so the dollar may have reached the point of exhaustion. Give us time to tell us.”

midterm elections

Traders also awaited the upcoming U.S. midterm elections later in the day. The final result could take days, but markets are predicting that Republicans will at least regain control of the House of Representatives and Congress could be deadlocked.Some analysts said the outcome could lead to less fiscal stimulus, which is bad for the dollar.

Many Americans are unhappy with Biden’s leadership despite delivering on industries such as infrastructure and clean energy that campaign promises were made. A poll released Monday showed only 39 percent approve of his job performance. Republicans blamed soaring prices and crime on Biden, two of the top concerns for voters.

A Republican victory in at least one chamber could ease concerns over Democrats’ push for tougher restrictions on prescription drug prices and raise expectations for increased defense spending and more favorable fossil fuel industry legislation; It may benefit industries such as clean energy.

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While investors are leaning toward a political gridlock in the U.S., one consequence of a split government could be a bitter fight over raising the U.S. debt ceiling, which could fuel fears of a U.S. debt default and spur market volatility.

Damien Boey, chief macro strategist at Barrenjoey in Sydney, said:“If the U.S. Congress is deadlocked or the Republican Party wins a sweep, fiscal stimulus will not be so easy next year, which means (Fed Chair) Powell is likely to abandon aggressive rate hikes.”

Morgan Stanley strategists including Mike Wilson wrote on Monday that a continued hold by Democrats in both chambers could push Treasury yields higher and strengthen the dollar, reflecting a view of potential higher fiscal spending That could fuel inflation and force the Fed to raise interest rates higher than expected.

Spot gold steps back to support $1666

On the hourly chart, the price of gold has stepped back on the support of $1,666, which is the 23.6% Fibonacci retracement level of the upward range of $1,616-$1,682. If this support is broken, gold could fall further to $1,657, which is the 38.2% Fibonacci retracement level of the aforementioned range.

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