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The Fed opens the interest rate hike cycle to seize the opportunity to buy more precious metals on dips | Fed_Sina Finance_Sina Network

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The Fed opens the interest rate hike cycle to seize the opportunity to buy more precious metals on dips | Fed_Sina Finance_Sina Network


The Fed raised interest rates by 25BP as expected by the market at its March interest rate meeting, and hinted that it would raise interest rates six times this year. Emphasizing that the market is facing inflationary pressures, it will be appropriate to continue raising interest rates, and will begin to shrink the balance sheet at the next monetary policy meeting. Powell’s speech pointed out that the time has come to raise interest rates and shrink the balance sheet. Inflation is still well above its long-term target, but it is expected to decline month by month. If inflation requires faster rate hikes, the Fed will take all tools. In terms of the reduction of the balance sheet, Powell has given clearer guidelines, and the plan for the reduction of the balance sheet will be announced in May at the earliest.

This meeting on interest rates and Powellā€™s speech are basically in line with market expectations. The dot plot is slightly more hawkish than market expectations, that is, the interest rate path suggests that the Fed is more hawkish than market expectations, reflecting the Fedā€™s concerns about rising inflation, which also makes the Fedā€™s implementation of The emergency policy is at risk and may also bring about economic recession concerns. Powell’s speech is basically in line with market expectations, emphasizing the necessity of raising interest rates and shrinking the balance sheet, suggesting a path to shrinking the balance sheet.

Based on the slightly hawkish meeting statement and speeches in line with market expectations, the negative impact was significant. U.S. bond yields rose first and then narrowed their gains. The U.S. dollar index rose first and then fell and then closed down. Precious metals fell first and then recovered. After falling, it rose sharply and closed up sharply.

The geopolitical situation has an impact on the US economy, but it will not stop the Fed’s tightening plan. With the US 5-year and 10-year Treasury yield curve inverted for the first time since March 2020, suggesting recession risks Lower than expected for bitmaps. Regarding the Fed’s monetary policy, we believe that the interest rate will be raised by 25BP each from May to June. The possibility of 5-6 interest rate hikes in 2022 is high, and the 7 interest rate hikes are too aggressive, and the balance sheet will be reduced in May. The Fed’s policy adjustment has a negative impact on the precious metal market; precious metals have a short-term correction due to the improvement of the geopolitical situation, but it is still not recommended to short the trend, and pay attention to the opportunity to buy on dips after the correction.

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The Fed’s start of the rate hike cycle is slightly hawkish

At 2:00 a.m. on March 17, Beijing time, the Federal Reserve announced the statement of the March meeting on interest rates. On the whole, the Fed raised interest rates by 25BP as expected by the market in its March interest rate meeting, which was the first time the bank raised interest rates since December 2018, and indicated that it would raise interest rates six times during the year. The meeting statement emphasized that the market is facing a wider range of price pressures, and the Ukrainian crisis has caused inflationary pressures and economic slowdown in the United States; it will be appropriate to continue raising interest rates, and will begin to shrink the balance sheet at the next monetary policy meeting. The dot plot shows that the Fed will raise interest rates seven times in 2022, to 1.9% by the end of 2022 and 2.8% by the end of 2023. The GDP forecast for 2022 was significantly lowered to 2.8%, and the PCE and core PCE inflation expectations for the next three years were raised. Federal Reserve officials passed the rate decision by an 8-1 vote, and St. Louis Fed President Bullard proposed a 50BP hike, the first time someone voted against it since September 2020.

This meeting on interest rates achieved the first rate hike by the Federal Reserve since 2018, and started a new round of interest rate hike cycle. There are also major changes in the meeting statement and the previous meeting statement, mainly in the following points. First, this meeting decided to raise the target range of the federal funds rate to 0.25% to 0.5%, and it is expected that it would be appropriate to continue raising the target range; Range maintained at 0% to 0.25%; opportune time to raise the target range for the federal funds rate is expected to come soon.ā€ Second, with regard to the reduction of the balance sheet, this statement emphasized that “it is expected to start reducing holdings of US treasuries, agency bonds and agency mortgage-backed securities at one of the next meetings”, ending the current round of QE and releasing the signal of shrinking the balance sheet. Unlike the last “decision to continue reducing the size of the monthly net asset purchases, let the asset purchases end in early March. Beginning in February, the committee will increase its holdings of US Treasuries by at least $20 billion and agency mortgages by at least $10 billion per month. Loan-backed securitiesā€ and delete ā€œOngoing purchases and holdings of securities will continue to promote smooth market functioning and create accommodative financial conditions, thereby supporting the flow of credit to households and businesses.ā€ Third, this statement proposes a new target outlook “through a modest tightening of the stance of monetary policy, the Committee expects inflation to return to its 2 percent target and the labor market to remain strong,” which has not been seen before. Fourth, stressing the negative impact of geopolitics, adding ā€œGeopolitics is causing huge livelihood and economic hardship, and the impact on the U.S. economy is highly uncertain, but in the short term, related events may put additional upward pressure on inflation and prevent it. suppress economic activity.” Fifth, St. Louis Fed President Bullard objected to the resolution of this meeting and proposed a 50BP rate hike. This is the first time someone has voted against it since September 2020. And of course there are wording changes on the pandemic, employment and financial conditions. Overall, the Fed’s monetary policy has entered a tightening cycle, and the meeting statement has also undergone fundamental changes.

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In terms of dot plots, the March dot plot shows that officials expect seven rate hikes in 2022 to 1.9% by the end of 2022 and 2.8% by the end of 2023. Eleven of the 16 members expect the federal funds rate to be above the neutral rate of 2.4% by the end of 2023. The dot plot is slightly more hawkish than market expectations on the path of interest rates, that is, the path of interest rates suggests that policymakers are more hawkish than expected, reflecting the Fed’s concerns that inflation will rise faster and more persistently than expected, which also makes the Fed want to relax Hopes of escaping emergency policies to fight the pandemic are at risk.

In terms of economic forecasts, the Fed’s economic forecast in March significantly lowered its GDP forecast for this year, and raised its PCE and core PCE inflation expectations for the next three years. The Fed expects the median GDP growth rate from 2022 to 2024 to be 2.8%, 2.2%, 2%, and 1.8%, respectively; the previous expectations were 4%, 2.2%, 2%, and 1.8%. The Fed expects the median core PCE inflation expectations from 2022 to 2024 to be 4.1%, 2.6%, and 2.3%, respectively; the previous expectations were 2.7%, 2.3%, and 2.1%. The Fed expects the median unemployment rate to be 3.5% and 3.5% in 2022 and 2023, respectively; the previous expectations were 3.5% and 3.5%, respectively. The March rate meeting lowered the economic forecast. The geopolitical situation and the epidemic will have an impact on the U.S. economy, but it will not stop the Fed’s tightening plan.

Powell’s speech is generally in line with expectations

At 2:30 on March 17, Beijing time, Fed Chairman Powell held a press conference. Powell said that the time has come to raise interest rates and shrink the balance sheet. Inflation is still well above the long-term target of 2%, but it is expected to decline month by month. Inflation data calls for faster rate hikes, and the Fed will do whatever it takes to avoid a prolonged period of high inflation. Powell gave clearer guidance on the reduction of the balance sheet. This meeting has made good progress on the reduction of the balance sheet plan. The reduction plan will be announced in May at the earliest. once. While the geopolitical toll on the U.S. economy is highly uncertain, the chances of a recession are not particularly high. Regarding the epidemic, Powell said that the economic slowdown caused by the Omicron variant will be mild and short-lived, and that the job market will be more attractive as the epidemic fades. On the employment front, the job market is at an “unhealthy level of tightening” and will do everything possible to achieve the goals of price stability and maximum employment.

3Summary, Comments and Outlook of the Monthly Interest Rate Meeting

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The Fed raised interest rates by 25BP at its March interest rate meeting as expected by the market, the first rate hike since December 2018, and hinted that it will raise interest rates six times during the year. The meeting statement emphasized that inflation is high, the market is facing broader price pressures, and the U.S. inflationary pressure and economic growth slowdown caused by the Ukraine crisis; it will be appropriate to continue raising interest rates, and the balance sheet will be reduced at the next monetary policy meeting. The dot plot shows that Fed officials expect seven rate hikes in 2022 to 1.9% by the end of 2022 and 2.8% by the end of 2023. The FOMC’s economic forecast in March significantly lowered its GDP forecast for this year to 2.8%, and raised its PCE and core PCE inflation expectations for the next three years. Fed officials voted 8-1 to approve the rate decision. Only St. Louis Fed President Bullard dissented, proposing a 50BP hike, the first time someone voted against it since September 2020.

Powell’s speech pointed out that the time has come to raise interest rates and shrink the balance sheet. Inflation is still well above the long-term target of 2%, but it is expected to decline month by month. If the inflation data calls for a faster rate hike, the Fed will do so. tools to avoid prolonged high inflation. Powell gave clearer guidance on the reduction of the balance sheet. The meeting made good progress on the reduction of the balance sheet plan. The reduction plan will be announced as soon as May. . While the geopolitical toll on the U.S. economy is highly uncertain, the chances of a recession are not particularly high.

In this meeting on interest rates, Powellā€™s speech was generally in line with market expectations. The meeting statement and dot plot were slightly more hawkish than market expectations, that is, the interest rate path suggested that the Fed was more hawkish than market expectations, reflecting that the Fed was more hawkish than expected on inflation. Faster and more lasting concerns, which also put the emergency policy implemented by the Federal Reserve at risk, and may also bring economic recession fears; Powell’s speech was basically in line with market expectations, emphasizing the need to raise interest rates and shrink the balance sheet, suggesting that the time for shrinking the balance sheet will be different from that of the market. path. The geopolitical situation has hit the U.S. economy, but it wonā€™t stop the Fedā€™s tightening plans, with the U.S. 5-year and 10-year Treasury yield curve inverted for the first time since March 2020 suggesting recession risks will be lower than expected for the bitmap.

Based on the slightly hawkish meeting statement and the speech in line with market expectations, the negative impact was significant, and the financial and commodity markets fluctuated sharply. U.S. bond yields rose first and then narrowed their gains. The dollar index rose first and then fell and closed down 0.62% to 98.37 , the precious metal first fell and then rose to recover the decline, and closed at around $1,927 in late trading, up more than $30 from the daily low; US stocks fell first and then rose sharply to close up.

At present, although high inflation in the United States has pressured the Federal Reserve to accelerate its tightening of monetary policy, the impact of the geopolitical situation on the economy and finance, especially the risk of economic recession, prevents the Federal Reserve from raising interest rates too aggressively. Therefore, for the Fed’s monetary policy, we believe that interest rates will be raised by 25BP each from May to June. It is highly possible to raise interest rates 5-6 times in 2022, and 7 interest rate hikes are too aggressive. In May, the balance sheet will be reduced, and the scale and pace of reduction The difference will also affect the pace of interest rate hikes.

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Analysis of the correlation between the Fed rate hike cycle and the trend of precious metals

For precious metals, the geopolitical situationgold priceThe impact will be short-term. Once the geopolitical situation becomes clear or peace talks start or substantial progress occurs, the operation logic of precious metals will return to the macro factors centered on the adjustment of the Fed’s monetary policy. Judging from the Fed’s nearly 40-year interest rate hike cycle and the trend of silver, whether it is the 1988-1989 interest rate hike cycle, the 1994-1995 interest rate hike cycle, the 1999-2000 interest rate hike cycle, or the 2004-2006 interest rate hike cycle and 2015 -In the interest rate hike cycle in 2018, the price of gold showed a trend of first falling and then rising. When the Fedā€™s monetary policy is expected to be strengthened, such as when the expectations of reducing bond purchases and raising interest rates are heating up, gold remains weak. When the monetary policy adjustment is digested or implemented by the market, gold tends to rebound from bad news. In 2021, the Fed’s monetary policy adjustment expectations continue to strengthen, and gold also fluctuates and weakens; as the Fed’s monetary policy turns to be priced in the market, gold begins to strengthen, and this trend will continue.

Geopolitics and Federal Reserve Policy Continue to Dominate Precious Metals

The change of the Fed’s monetary policy will have a negative impact on precious metals. If the political situation is clear or eased, it will have a negative impact. If there is no further trend in geopolitics, the impact of precious metals will still be dominated by the Fed’s monetary policy. In the market outlook, it is difficult for geopolitics to materially ease in the short term. The Fed’s policy tightening has exhausted all the negative effects. Liquidity is still flooding. At present, it is still not recommended to short the trend of precious metals, and the core of operation is still to do more on dips.

In the short term, the Fed monetary policy and geopolitical situation continue to disturb precious metals. After the Fed’s monetary policy was implemented, there are obvious signs of easing the situation, and gold continues to adjust. The short-term support level is still in the 1900-1918 range, and the core support level is around $1,870 per ounce; if the situation does not improve substantially, gold still has room to rise, and the top continues. Focusing on the former high position of $2,075/oz, we do not rule out the possibility of refreshing a new all-time high. The support level below Shanghai Gold is 387-390 yuan/gram, and the top continues to focus on the 420 yuan/gram mark. Based on the strong exchange rate trend, Shanghai Gold will still be weaker than London Gold. Spot silver fell from a high level, and the bottom support was the annual line of $24.55/oz (4,900 yuan/kg); the top continued to focus on the $28.3/oz mark (5,600 yuan/kg). Pay close attention to the geopolitical situation, do not recommend shorting the trend, and continue to pay attention to opportunities to go long on dips.

2022In the second quarter of 2018, after the political situation became clear or significantly eased, if the Federal Reserve releases more hawkish signals or actions again, there is still a short-term possibility for precious metals to weaken again. US$1758/oz (365 yuan/gram) is an important support level, 1720- The core support level is the $1740/oz (360 yuan/gram) range. Silver may weaken again in the short term, and the low position before 21.4 (4600 yuan/kg) is a strong support level. Precious metals due to policy adjustment expectations and panic fall is a buying opportunity, it is recommended to continue to buy more on dips.

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