Spot gold rose to 1670, the US index hit a new low in more than five weeks, and the FED alarming moment was approaching
On Wednesday (October 26), spot gold rose to a new high of $1,674.77 per ounce since October 13, as poor U.S. economic data intensified speculation that the Federal Reserve would slow down interest rate hikes, and the U.S. dollar index refreshed on September 20 Since the low to 109.932.
At 19:29 Beijing time, spot gold rose 1.07% to US$1,670.76 per ounce; the main COMEX gold futures contract rose 1.28% to US$1,675.2 per ounce; the US dollar index fell 0.65% to 110.171.
U.S. home prices fell in August as soaring mortgage rates dampened demand, data released overnight showed, the latest sign that interest rate hikes by the Federal Reserve have dented momentum in the world’s largest economy.
Craig Lazzara, managing director of S&P DJI, said in a statement: “As the Federal Reserve raises interest rates, mortgages have become more expensive and housing has become increasingly unaffordable. Given the continued outlook for a challenging macroeconomic environment, home prices are very expensive. It may continue to fall.”
U.S. retailers, which dispose of billions of dollars’ worth of unsold inventory, have taken a more cautious outlook on spending this holiday season as consumers weighed down by high inflation cut discretionary spending.
Post-it note maker 3M Co said on Tuesday (Oct 25) that it expects weak consumer spending to continue into the upcoming holiday season. The company also lowered its full-year forecast, echoing widespread concerns regarding the uncertain economic environment.
Earlier reports said that Fed officials have begun to express their desire to slow the pace of rate hikes as soon as possible. Traders and economists expect the Fed to raise interest rates by 75 basis points for the fourth straight time next week, but the rate hike in December will be trimmed to 50 basis points.
Lee Hardman, an analyst at MUFG Financial, said:“The (dollar) sell-off since last weekend has continued and the market is pricing in a likely slowdown in the pace of Fed rate hikes. We don’t think this will happen at the next policy meeting in November, but by December, the rate hikes have slowed to 50%. The odds of a basis point will increase.”
U.S. Congressman: Ensuring full employment is the responsibility of the Fed that cannot be ignored
U.S. Senate Banking Committee Chairman Sherrod Brown on Tuesday urged Federal Reserve Chairman Jerome Powell to prudently tighten monetary policy to prevent millions of Americans already suffering from high inflation from losing their jobs.
“It’s your job to fight inflation,” Brown said in the letter. “But at the same time, you must not lose sight of your responsibility to ensure full employment, and we must avoid short-term progress and a strong labor market being overturned by the consequences of aggressive monetary policy action. Especially if Fed actions do not address the main drivers of inflation.”
Brown’s early letter did not explicitly call for the Powell-led Fed to slow or stop raising interest rates, but given that factors such as synchronised central bank tightening around the world and Russia’s war in Ukraine pose a “real possibility of a deterioration in the global economy,” Brown urged the Fed to “deteriorate the global economy.” continue to be cautious”,
Commerzbank strategists pointed out,There have been some recent signs that the pace of Fed rate hikes may be slowing following an expected 75 basis point hike next week. This can be interpreted as a signal that there is huge upside potential for gold once the end of the sharp rate hike is determined.
Fed PK investors?
Powell echoed those risks and the possibility that higher borrowing costs would lead to higher unemployment, but he also argued that keeping inflation down is the only way to ensure a long-term strong labor market. Unemployment is currently at an all-time low of 3.5%. Brown’s letter is unlikely to change the Fed’s approach.
Economic data is bleak, and chief executives, economists and global organizations are sounding the alarm for an impending recession. But Fed officials have made it clear they have no plans to abandon their aggressive rate hikes to combat persistent inflation.
Fed policymakers say research shows inflation is driven by a combination of excess demand and supply constraints, and they’re committed to doing what they can to bring it down regardless of the cause. When the Fed began raising interest rates earlier this year, officials publicly explained the importance of their credibility in successfully reducing inflation. If the Fed is to succeed, they say, Americans need to trust the central bank to be steadfast in the fight to keep prices down.
Economists at Wells Fargo expect,The U.S. dollar has not yet reached its cyclical peak and will move higher, with a peak expected in the first quarter of 2023. The relative resilience of the U.S. economy and continued interest rate hikes by the Federal Reserve, combined with instability in global markets, should push the U.S. dollar up a further 4 percent on a trade-weighted basis over the next three to six months.
Spot gold at $1683
On the hourly chart, the price of gold has started an upward iii-wave trend from $1,637, with the upper resistance looking at the 76.4% target at $1,678 and the 85.4% target at $1,683. Wave iii is a sub-wave of the up (i) wave that started at $1617.
