On Friday (October 14), spot gold hit bottom and rebounded. Currently trading around $1,668. Overnight data shows that the US core inflation still hits a record high in nearly 40 years, strengthening the expectation of Fed to further aggressively raise . The gold price fell to around $1,642 at one point; however, the news that the British government may reverse the tax cut policy in the future, helping the pound rise sharply, and thus causing the US dollar to fall, providing opportunities for the gold price to rebound, and the gold price rebounded above 1,660; in addition, the US dollar index ushered in long profit settlement after rising. The technical side of the US dollar faces the risk of peaking and further correction, which is expected to provide support for the gold price.
Although the Fed and global central banks' aggressive rate hike expectations still makes gold bulls concerned, and the sharp rebound of the stock market also suppresses gold's safe-haven buying demand. After surged and fell back on Thursday, the short-term bearish signal of gold prices increased, but the short-term trend of gold prices was more affected by the US dollar trend. If the US dollar index further pulls back, it is expected to provide momentum for the rebound of gold prices.
On the other hand, the geopolitical situation in Russia and Ukraine is still tense. The differences between the United States and Saudi Arabia on production cuts have increased, and it is necessary to pay attention to the support of safe-haven buying and dips.
This trading day will also usher in US retail sales data known as "terrifying data". Investment needs to be paid attention to, and the current market expectations are relatively neutral; in addition, we need to pay attention to the initial value of the US University of Michigan consumer confidence index in October; pay attention to the speeches of Kansas Fed Chairman George and Federal Reserve Director Lisa Cook .
fundamentals are mainly favorable to
[Saudi and the United States are tit for tat about the reasons for OPEC+ production cuts, and relations between the two countries are frozen]
Saudi Arabia refuted criticism of OPEC+'s decision to cut production last week despite US opposition, believing that it "has no factual basis" and said on Thursday that Washington's request to postpone the production cuts by one month will have negative economic consequences.
White House fired back on this on Thursday, saying it submitted an analysis report to Saudi Arabia, showing that production cuts could damage the world economy, and alleged that Saudi Arabia put pressure on other OPEC members during the vote. Officials from both countries are expected to discuss the issue soon.
This back and forth quarrel has made the relationship between these two countries that have maintained the "energy for security" alliance for decades even colder.
The oil-producing group OPEC+, which consists of OPEC and allies including Russia, announced last week that it would cut its production target by 2 million barrels per day, after U.S. officials lobbying for weeks against the move.
Although the fuel market remains tight, the inventory of in major economies is lower than the level at which OPEC had previously cuts, OPEC+ still made a decision to cut production. OPEC+ production cuts have worried Washington that gasoline prices may rise to higher before the US midterm elections in November. Democrats are trying to keep their control over the Senate and House.
U.S. President BidenEarly this week, OPEC+ production cuts will affect U.S.-Saudi relations.
The Saudi Foreign Ministry said in a statement Thursday that the OPEC+ decision was adopted unanimously, taking into account the balance of supply and demand, aimed at curbing market volatility. The statement mentioned consultations with the United States ahead of the OPEC+ meeting on October 5, when the United States demanded a delay in production cuts by one month.
The Saudi Foreign Ministry’s statement stated, “Through continuous consultations with the US government, all economic analysis shows that if the OPEC+ production cut decision is postponed by one month as recommended, there will be negative economic consequences,”
The United States accused Saudi Arabia of bowing to Moscow. "We submitted an analysis report to Saudi Arabia, showing that the target of cutting production has no market basis, and they can wait until the next OPEC meeting to see how the situation develops," White House spokesman Kirby said in a statement. The statement also said that other OPEC countries told the United States that they felt "forced" to support Saudi Arabia's decision.
Saudi Arabia stated that Saudi Arabia regards its relationship with the United States as a "strategic relationship" and emphasizes the importance of mutual respect. The Gulf Arab Cooperation Commission (GCC) issued a statement supporting Saudi remarks, praising Saudi Arabia's efforts to protect markets from volatility.
[Russia begins evacuating civilians from Ukraine Khlsong , NATO will strengthen European air defense forces]
The Russian-appointed governor of Khlsong Prefecture in southern Ukraine suggested that local residents take their children to safe areas, which is by far one of the most obvious signs that Moscow is losing control of the areas it claims to have annexed.
Chief Executive of Khlsson Vladimir Saldo, appointed by Russia, said in a video message: "Cities in the Khlsson region are attacked by missile every day. Therefore, the leadership of the Khlsson administration decided to give Khlsson families the option to go to other parts of the Russian Federation to rest and study."
Khlsson is one of the four occupied Ukrainian provinces that Russia claims to have annexed, and is arguably the most strategically important province. Khlsson controls both the only land route to , the Crimean Peninsula, which Russia seized in 2014, and also the estuary of Dnieper River.
Since early October, Ukrainian troops have broken through Russia's frontline there, the biggest victory in the southern region since the beginning of the war. Since then, they have been advancing rapidly along the West Bank, aiming to cut off supply lines and potential escape routes from thousands of Russian troops.
NATO Secretary-General Stottenberg said Thursday after a two-day meeting of defense ministers that NATO will not give up support for Ukraine because of Moscow's nuclear threat .
At a NATO meeting held in Brussels , allies unveiled plans to jointly strengthen European air defense with Patriots and other missile systems
"We live in an era full of threats and dangers," German Defense Minister Christine Lambrecht said at the signing ceremony. Germany and more than a dozen European NATO member states have promised to jointly purchase weapons for the construction of the "European Sky Shield".
[British Stan Tras is considering a big reversal in tax policies, and pound and British debt rebounded]
Some media reported on Thursday that British Prime Minister Tras is considering giving up more content in the government's controversial "mini budget", which has driven the previously hit pound and British Treasury rebound.
Sources said that Downing Street is discussing whether to cancel some of the contents of the plan, and the Chancellor of the Finance Minister Kuateng triggered a sharp fluctuation in the financial market after announcing the plan three weeks ago.
reported that Tras is considering raising corporate taxes in April next year. She promised to stop raising corporate taxes when she ran for prime minister, and she vowed to eliminate "orthodox practices" in economic policies during her campaign.
The Chancellor of the Finance Minister Kuateng was repeatedly asked in an interview if the report on changing the corporate tax policy was accurate, saying he focused on his growth plan.
He said on the sidelines of the International Monetary Fund (IMF) meeting, "Our position has not changed. I will propose a medium-term fiscal plan on October 31, as I said earlier this week, there will be more details at that time."
Quatten will announce his medium-term budget plan on October 31, along with independent fiscal forecasts.
Tras faces tremendous pressure within her Conservative Party to change her £43 billion unfunded tax cut as polls show her approval rating has plummeted and the possible impact of public finance has discouraged investors.
Some lawmakers are considering whether to oust the new prime minister who has just taken office for only one month. Tras is the fourth British Prime Minister in just six years after the Brexit referendum
Since Tras became the leader in the prime minister's election in August, the pound has fallen sharply. After the above report was issued, the pound jumped against the dollar, and the pound rose sharply against the dollar by nearly 2.5%.
UK government bond prices have also recovered some of the sharp drops since Kuaten announced the "mini budget" on September 23.When asked if Downing Street was discussing abandoning his plan, he said, "I have been talking to the Prime Minister and we are totally focused on implementing this growth plan."
He and Trass succumbed to pressure earlier this month to give up the mini-budget's removal of the highest income tax, which they had said would help stimulate the UK's downturn in economic growth. This will exacerbate inequality, the IMF said.
The government has repeatedly stated that it will stick to most of Tras' tax cuts while also maintaining public spending, but economists and critics say something must be given up.
IMF President Georgieva said she had discussed with Quatten the importance of "policy consistency and clear communication", which shows how much the UK's reputation in improving economic management and institutional stability has declined. The sharp rebound of
pounds caused the US dollar to fall from its highs in more than two weeks. The rebound of British bond prices also led to a decline in British bond yields. Both of these provide support for the gold price; before the release of the US CPI data, the gold price once rose to around 1682; after the release of the US CPI data, even though the gold price once fell to around 1642, as the US dollar fell, the gold price rebounded above 1660.
In addition, although the yield on the US 10-year Treasury bond once climbed to 4.08%, the highest since 2 October 2, the two-year Treasury bond yield reflecting interest rate expectations also hit a 15-year high. However, the decline in the yield on the UK bonds also dragged down the yield on US bonds . During the Asian session on Friday, US bonds volatility fell by about 1%, basically giving up all the gains on Thursday, and is currently trading around 3.913.
[The US dollar surged and fell on Thursday, and the risk of short-term pullback increased]
US dollar fell against most currencies on Thursday in a volatile trading. It had previously soared in the early trading after the US inflation report was hotter than expected, but some investors believed that the market was overreacting to the data at the initial level; and the sharp rise of the pound also put pressure on the US dollar, prompting more US dollar bulls to take profits; technically, the US dollar index followed the upper shadow line of with negative line at a relatively high level, implying that the US dollar peaked in the short term and there was a risk of further pullback.
The US dollar index fell 0.71% on Thursday to close at 112.46. Follow the support of Bollinger Band mid-track 112.42 below. Greg Anderson, head of global Forex strategy at
BMO Capital Markets, said the current Forex trend "is a manifestation of market pressure, panic about a slight deviation at a data point. The reversal of the US dollar movement is a shock. It's a super uneasy market, and a tiny flow can have an exaggerated impact." Brian Westbury, chief economist at
FTAdvisors, said: "Although those factors that allegedly make inflation rise improve, inflation remains -- think of energy prices and used cars, which fell 1.1% in September. It is because overall inflation is a monetary phenomenon. The problem is that the Fed believes it can manage inflation by targeting short-term interest rates. We believe that the Fed needs to pay less attention to rate hikes and pay more attention to keeping the growth of the money supply under continuous control. "
fundamental negatives
[Rent and food costs soar, core U.S. inflation hit a 40-year high]
U.S. consumer prices grew more than expected in September because rents hit the largest increase since 1990, and food costs also rose, which strengthened expectations that the Fed will raise interest rates for the fourth consecutive month by 75 basis points. The
report also shows that the metrics measuring core inflation have recorded the largest annual growth in 40 years as consumers pay more for healthcare. The data follows last week's strong employment report. "This is not what the Fed wants to see, and the Fed has entered one of the most radical tightening cycles in decades for six months," said Sal Guatieri, senior economist at
BMOCapitalMarkets in Toronto . "This is not what the Fed wants to see, and the Fed has entered one of the most radical tightening cycles in decades for six months."
Consumer Price Index (CPI) rose 0.4% month-on-month in September and 0.1% in August. Economists have previously predicted that CPI will climb 0.2%.
Food prices rose 0.8%, and owners' equivalent rent, which measures the rent that homeowners will pay or the income earned from renting out their properties, surged 0.8%, the biggest increase since June 1990. The huge increase in
offsets the 4.9% decline in gasoline prices. But gasoline prices may have bottomed out after OPEC+ decided to cut oil production last week. In the 12 months to September, CPI rose 8.2% after rising 8.3% in August, slowing down for the third straight month. CPI rose 9.1% year-on-year in June, the highest increase since November 1981.
excluding the volatile food and energy sectors, the core CPI in September climbed 0.6% month-on-month, which is comparable to the increase in August. The core CPI is mainly driven by rising rental costs.
pressure also comes from a jump of 0.8% in medical expenses, the highest increase since October 2019. Rents and healthcare are the most sticky components of the CPI, suggesting that inflation may remain high for some time even if commodity price increases ease.
core service prices rose 0.8%, the largest increase since 1982. In the 12 months to September, core CPI jumped 6.6%, the highest increase since August 1982, with an increase of 6.3% in August.
Chief U.S. economist Michael Gapen of Bank of America Securities in New York said: "The high inflation rate in the service industry reflects the resilience of the labor market, because the service industry is a labor-intensive industry and is produced at home. The Fed needs to cool down the labor market significantly to bring inflation back to its target."
Financial markets have almost completely digested the Fed's expectation that the Fed will raise interest rates by another 75 basis points at its policy meeting on November 1-2. interest rate futures once showed that the probability of raising interest rates by 100 basis points in November rose to 13%.
[The U.S. labor market is still tight]
But The second report released today by the Department of Labor showed that the number of initial unemployment claims increased last week, but this is likely due to the impact of Hurricane Ian, which hit Florida and Carolina at the end of September.
As of the week ending October 8, the number of initial unemployment claims increased by 9,000, to 228,000 after seasonal adjustments. The number of unadjusted applicants increased by 32,275 to 199,662 million. Florida's applicants surged by 10,368.
As of the week ending October 1, the number of people who received unemployment benefits increased by 3,000 to 1.368 million. On the last day of August, each unemployed person had 1.7 job openings.
Conrad DeQuadros, senior economic adviser at Brean Capital in New York, said: "The labor market is still very tight and the company is still unwilling to fire workers."
[U.S. stock market closed up more than 2% after a sharp reversal]
U.S. stock market rose sharply on Thursday, with the three major indexes rising by more than 2% at the close of the market, as technical support and short-selling investors short-selling rebounded , driving the market to rebound strongly after a sharp drop earlier.
In a sharp reversal on Thursday, the S&P 500 index jumped nearly 194 points from intraday lows to highs, the index's largest intraday point gain since January 24. The S&P 500 opened low at the beginning of the session, falling 1.6% at one point, hitting a new low in the past two years to 3491.58 points.
After data showed that the consumer price index (CPI) rose 8.2% year-on-year in September, the market fell due to an estimated increase of 8.1%. "People may have been net shorts before the CPI report was released, and they saw that the report was negative, so they started to cover the shorts." Some strategists also pointed out that the S&P 500 index has some technical support around 3500 points.
ended the closing, Dow Jones Industrial Average climbed 827.87 points, or 2.83%, to 30038.72 points; the S&P 500 jumped 92.88 points, or 2.60%, to 3669.91 points; the Nasdaq Index closed higher by 232.05 points, or 2.23%, to 10649.15 points.
[ECB Regulatory Commission Cassacks: Fiscal expansion may force the ECB to carry out more rate hikes]
Latvian Central Bank Governor and ECB Regulatory Commission Martins Kazaks said on Thursday that the ECB should continue to raise interest rates quickly, and Eurozone of 219 countries is raising the risk that the bank has to further tighten its policies.
Cassacks said the ECB should raise the deposit rate of 0.75% by 75 basis points on October 27 and should raise interest rates again sharply in December, joining a growing camp of policymakers, advocating for large-scale action this month. But the steps thereafter may become smaller, he added, along with other initiatives such as shrinking the ECB’s oversized private and public bond portfolio.
During the IMF meeting in Washington, Cassachs, who served as a member of the ECB's interest rate setting committee, said: "It is necessary to take big steps at the next meeting, and I think 75 basis points are appropriate. In December, we can have a clear big step, but whether it will be 50 basis points, 75 basis points or otherwise, it remains to be discussed."
[ECB Management Committee Nager supports a "strong" interest rate hike and starts reducing bonds next year]
German Central Bank Governor and ECB Management Committee Nager said on Thursday that the ECB should conduct a "strong" interest rate hike at the next meeting and start shrinking its large amount of bonds in 2023 to combat continued high inflation.
The ECB has raised bank deposit rates twice, pledging more rate hikes and has begun discussions to reduce the 3.3 trillion euro bonds it has purchased - a legacy of the ECB's fight against deflation over the past decade.
Nager said that the normalization of monetary policy is far from complete and should continue at the ECB meeting on October 27. "The data clearly states the need for a strong interest rate move," Nagar said on the sidelines of the International Monetary Fund (IMF) and the World Bank Annual Meeting. "His data clearly states the need for a strong interest rate move." He added that inflation in Germany could remain above 7% next year, and he said the ECB should start to cut back on its stacked bonds.
This is a way to clean up excess liquidity and drive up long-term borrowing costs.
[Source: ECB report envisions starting to shrink balance sheet in the second quarter of next year]
Sources told the media that ECB policymakers discussed a detailed timetable for cutting the 3.3 trillion euro bond portfolio earlier this month and envisioned a quantitative tightening sometime in the second quarter of 2023.
According to three sources, who spoke on condition of anonymity, the ECB may have fine-tuned the wording on reinvestment at its October meeting and then may provide a detailed plan in December, but more likely in February.
Since interest rate hikes have begun, reinvestment will also need to come to an end. A report discussed at a seminar at the ECB Cyprus meeting mentioned that all reinvestment ended in the second quarter of next year, some policy makers mentioned earlier dates, and others advocated in June.
The ECB will reduce its holdings by stopping reinvestment of all recovered funds from maturing bonds, rather than selling them directly.
Sources said policy hawks, who usually advocate tightening policies, also seem to agree with the plan because they prioritize rate hikes and regard balance sheet issues as a secondary matter.
has not yet made a decision on this timeline, and sources say there may be changes. The discussion is still in its early stages and the report is not a policy proposal.
Overall, the trend of the US dollar index has a great impact on gold prices. Non-US currencies have shown signs of rebounding in the short term. The US dollar index has a risk of further pullback in the short term, which is expected to provide opportunities for gold prices to rebound; pay attention to the resistance near Tuesday's highs of 1683.83 and 1700 integer marks; pay attention to the two support lines of 1658 and 1642 below.
This article is from Huitong.com
