A series of economic data recently released by the United States is relatively weak, and inflation may hit a peak, thus breaking the previous expectation that the Fed would raise interest rates wildly. The U.S. Treasury yield fell sharply by more than 13% from its highs for three weeks, while the U.S. dollar index fell by 3% from its highs. Affected by this, the spot gold price continued to rebound last week, hitting US$1,869.6/ounce, closing at US$1,853.27/ounce, a slight increase of US$7.05 or 0.38%, and the weekly K-line was positive for two consecutive times.
gold price weekly chart
article | Researcher at Beijing Gold Economic Development Research Center Li Yuefeng
This article is an original article from China Gold Network. The content is for reference only and does not constitute operational suggestions or investment guides.
1 US dollar weakens, gold price rebounds
this week's week-month line handover, with only 2 trading days remaining in May, and the monthly line is likely to be negative for two consecutive times, and there are important US non-farm data this week. Although the Fed hinted that it would not take more radical measures, its determination to raise interest rates by 50 basis points in June and July to combat inflation is unquestionable. In addition, the market believes that the most hawkish moment of the Federal Reserve may have passed. The three major U.S. stock indexes rebounded sharply, risk sentiment heated up, and the rebound of gold prices was blocked, fluctuating between $1,840/ounce to $1,870/ounce waiting for a breakthrough.
The latest economic data released by the United States in May showed that new home sales in the United States fell to the lowest since April 2020, with business activities slowing down, and home builders stocks also put pressure on the market. The US construction permit rate in April was revised to -3%, with a previous value of -3.2%; the total number of construction permitted households in April was revised to 1.823 million, with a previous value of 1.819 million; the US new home sales in April decreased by 16.6% month by month, with a previous value of 10.5% month by month; the US new home sales in April was revised to 591,000, with a previous value of 750,000; the US Chicago Fed National Activity Index in April was 0.47, with a previous value of 0.36.
data shows that the slowest expansion in several months, reflecting the impact of high inflation, continued supply shortages and partial weakening of customer demand. It is worth noting that due to concerns about economic growth, the latest U.S. durable goods orders slowed to 0.4% month-on-month growth, lower than market expectations, and lowered the previous reading by 0.6%. In addition, core durable goods orders increased by 0.3% month-on-month, and expected to increase by 0.6%, compared with previous revisions of 1.1%.
The annualized correction of the US personal consumption expenditure (PCE) in the first quarter (quarterly increase) 3.1%, expected 2.8%, the previous value was 2.7%. The annualized correction of the US real GDP in the first quarter (quarterly increase) -1.5%, expected -1.3%, and the previous value was -1.4%.
A series of weak data in the United States undoubtedly suppressed the US dollar. At the same time, the minutes of the Federal Reserve meeting hinted that more radical measures would not be taken, resulting in continuous declines in US bond yields. Both the US dollar and US bonds fell were important driving forces for the continuous rebound of gold prices.
2 The Fed downplays hawkish stance?
Fed's May meeting minutes show that Fed officials raised inflation expectations, just like in previous meetings. Many attendees expect wage pressure to remain high for some time. Some participants said that once the debt reduction goes well, it is appropriate to consider selling mortgage-backed securities. Several Fed officials pointed out that liquidity in the U.S. Treasury market is at risk.
Participants stressed a high focus on inflation risks and believed that these risks may continue to rise. All Fed participants believed that the U.S. economy was very strong, the labor market was extremely tense, and inflation was very high. All Fed officials support the need to start a balance sheet reduction plan.
Many participants believe that a quicker easing will put the Fed in a favorable position to assess whether further adjustments are needed later this year. Most Fed officials support a 50 basis point hike in the next few meetings. Minutes of the
meeting showed that Fed researchers raised inflation expectations, and they estimated that the personal consumption expenditure price index will rise 4.3% in 2022 and lower its forecast for next year to 2.5%. This suggests that inflation forecasts submitted by Fed officials for the updated quarterly economic outlook next month will be raised.
Data released by the US Department of Commerce on the 27th showed that the Fed preferred inflation indicator in April, excluding the volatile food and energy prices of food and energy prices, the core deflator index index of personal consumption expenditure rose by 4.9% year-on-year. Although the figures are still relatively high, the pace of price increases has slowed compared to the 5.2% increase in March.The core personal consumption expenditure deduction index in April increased by 0.3% month-on-month, the same as the March data.
In addition, including food and energy prices, the overall personal consumption expenditure deflator index index rose by 6.3% year-on-year. This also declined from the 6.6% growth rate in March. Monthly data showed that the index in April showed a more significant decline. Compared with the surge of 0.9% in March, the overall personal consumption expenditure deduction index in April increased by 0.2% month-on-month, which is the smallest increase in the indicator since last summer.
US personal consumption expenditure deflator index, the Fed's preferred inflation indicator, shows that US inflation may have peaked and fell. At the same time, the US personal income increased by 0.4% in April, slightly higher than the estimate, and personal consumption expenditure increased by 0.9% month by month, rising for four consecutive months, highlighting the continued growth momentum of the US economy. The U.S. personal consumption spending deflator data alleviated expectations of a sharp rate hike, while alleviating market concerns about a recession.
In addition, the final value of the University of Michigan Consumer Confidence Index in May released on Friday was 58.4, the lowest since August 2011, lower than the expected 59.1, and the initial value was 59.1. In terms of sub-index, the final value of the current index was 63.3, hitting a new low in 2013, with an expected 63.6 and an initial value of 63.6. The final value of the expected index is 55.2, the expected value is 56.3, and the initial value is 56.3. In terms of inflation expectations that have attracted much attention in the market, the end value of one-year inflation expectations is 5.3%, lower than the expected 5.4%, and the initial value is 5.4%. The 5.4% value is the highest since 1981. The five-year inflation expectation ends at 3%, the initial value is 3%, and the long-term inflation expectation is within the range of 2.9%-3.1% in the past 10 months.
The U.S. consumer confidence in Michigan in May was finally lower than expected and initial value, setting a new low in more than 10 years. The initial value data half a month ago had already fallen sharply. Consumers' short-term inflation expectations have slightly declined from their highest levels in more than 40 years.
Whether U.S. inflation peaked is not yet confirmed, but traders have lowered their expectations for the Fed's interest rate hike. Traders expect the possibility that the Fed will achieve a target range of 2.75%-3% interest rates by the end of the year to 27%, and it was 51% on May 19. The US dollar index hit a new month low and fell for the second consecutive week.
3 Short-term oscillation rebounds. Beware of falling again
, the world's largest gold ETF - SPDR GOLD TRUST, the holding report shows that since April 21, after 15 consecutive reductions of holdings have been reduced by 57.53 tons, the holdings have increased by 4 times in the past two weeks, indicating that market sentiment has improved slightly. However, as of May, the current holdings are 1069.81 tons, still lower than the 1094.55 tons at the end of April, with a reduction of 24.74 tons.
The May non-farm employment data for Friday is an important data for the week, and the employment data will hint at room for tightening policies after the third quarter. Before the Federal Reserve's June interest rate meeting, the U.S. CPI data was released on June 10. Should inflation remain high or peak and fall?
Fed officials are working to bring inflation back to the target level of 2% by hikes, with the Fed raising interest rates 50 basis points in early May, and officials said the same rate hikes may be made in June and July, but actions thereafter will depend on the economy and inflation. There is still great uncertainty as to whether the Fed can achieve a soft landing, so as to ease inflationary pressure and avoid putting the economy into recession, and the intensified market concerns about stagflation will continue to support gold prices in the future. From the technical perspective of
, the gold price has started a rebound mode since $1,786/ounce, and is currently oscillating at $1,840/ounce to $1,870/ounce waiting for a breakthrough. Judging from the related varieties of
, the US Treasury yield and the US dollar index fell below the 1-hour long-term line, and the rebound cannot break up and will continue to decline. The gold-silver ratio fell below the 30-minute long-term line, and is expected to continue to shrink. This is conducive to the short-term rebound trend of gold prices.
this week is the 13th week since the high of $2070/ounce and the 7-week high resonance window of $2070/ounce-1998/ounce, pay attention to the surge and fall. June is the six-month low cycle window since 2021, so you need to pay attention to bottoming out and rebounding. Overall, the rebound may continue, but the adjustment has not yet ended. In the short term, the area around the $1840/ounce-1870/ounce area is oscillating around the $1840/ounce area to $1870/ounce area, and the upward breakthrough is expected to impact the key resistance above in the $1890/ounce-1900/ounce area. The break below may test the $1800/ounce-1810/ounce area support again. The possibility of another downward trend is not ruled out in the future, but it may be the best opportunity to enter the market in the medium and long term.
(The above content does not constitute investment advice or operating guide. Entering the market accordingly is at your own risk)
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