Original title: spot gold benefits from a weak dollar, and the pace of Fed policy tightening is expected to slow down relatively.
On Tuesday (October 19), spot gold prices rebounded due to the dollar index.It fell to 93.505, the lowest since Sept. 28, as overnight industrial production data from the United States were weak and markets were betting that monetary policy in other countries would normalize faster.
20:28 Beijing time, spot gold rose 0.76 per cent to $1778.19 per ounce; COMEX gold futures rose 0.74 per cent to $1778.9 per ounce; and the dollar index fell 0.33 per cent to 93.661.
Beautiful fingerFurther away from the nearly one-year high of 94.563 recorded a week ago. Expectations that the Fed will scale back its stimulus measures as early as next month and raise interest rates for the first time next year have been priced in by markets, which are raising their bets on the normalisation of monetary policy in other countries.
Other economies may accelerate policy tightening
Britain's inflation rate is at its highest level in nearly a decade, driven by supply bottlenecks, shortages and rising energy prices. Bailey, governor of the Bank of England, sent a new signal to raise interest rates early on Sunday, saying the central bank would "have to take action" to deal with the rising risk of inflation.
Some of Mr Bailey's colleagues on the monetary policy committee, such as Mr Sanders, have also recently warned of raising interest rates, and several big banks have changed their appeal to the Bank of England. JPMorgan Chase & Co's British economists are the latest to do so. They now expect interest rates to rise by 15 basis points in November and then by 25 basis points in February.
In New Zealand, data released on Monday showed that New Zealand's consumer price index (CPI) soared in the third quarter at its fastest pace in more than a decade, adding to bets on accelerating policy normalisation in the country. Earlier this month, the central bank of new Zealand raised interest rates to 0.5% for the first time in seven years and hinted at further tightening.
Sean Keane, strategist at consultancy Triple T, said: "the New Zealand interest rate market now suggests that the official cash rate (OCR) will reach at least 1 per cent by February 2022 and is likely to rise to 1.25 per cent. So far, in terms of inflation data, the Fed of New Zealand will not find it difficult to justify accelerated tightening. "
At present, the euroRegional inflation has soared above the 2 per cent target set by the ECB, raising fears that price increases may not be temporary. Bostjan Vasle, ECB policy maker, said the eurozone was at risk of higher-than-expected inflation, so the ECB needed to monitor price growth carefully and should end its emergency stimulus programme in March.
"there are early signs that the risks in the labour market may become more significant in some economies and in some regions, and in some parts of the economy, labour is in short supply," Wassler said in an interview. If this trend continues or spreads to other sectors, it could pose a risk to inflation, then it would be appropriate to end PEPP in March next year. "
The perception that "temporary" inflation will last longer than previously expected has become the main catalyst as markets have readjusted expectations for interest rate increases in most non-US economies. As a result, gold is showing renewed charm as a tool to fight inflation.
Will America pay the price one day?
Factory production in the United States fell the steepest in seven months in September, as persistent shortages in global semiconductor supply weighed on car production, further evidence that supply constraints are hampering economic growth. Manufacturing production was also affected in September by the aftermath of Hurricane Ida. The Fed said the aftermath of Hurricane Ida contributed 0.3 percentage points to the decline in manufacturing output.
Manufacturing, which accounts for 12 per cent of the US economy, is still supported by companies that desperately need to replenish their inventories, which fell in the first half of this year due to strong demand for goods. The Atlanta Fed estimates that US gross domestic product (GDP) grew at an annualised rate of 1.2 per cent in the third quarter. The growth rate was 6.7% in the second quarter.
Michael Pearce, senior US analyst at Capital Economics, said: "while the damage and weather effects of the hurricane will subside, labour and product shortages are still worsening, which will continue to weigh on manufacturing output in the coming months and quarters."
Activist investor Carl Icahn said on Monday that the US market could face major challenges in the long run in the face of excess money supply and rising inflation. "in the long run, we will definitely hit a brick wall. I really think that the way we move forward, the way we print money, the way we fall into inflation all determine that we can't avoid a crisis. If you look around, you will see inflation everywhere. I don't know how to deal with it in the long run. " Icahn insists on not making market timing, but he believes that in the long run, the market will one day pay the price for these policies.
Kim Mundy, an analyst at the Commonwealth Bank of Australia (CBA), wrote in a client report:
"We still believe that the dollar can regain its upward trend and that inflationary pressures are rising in the US in the medium term, so we expect US federal funds rate futures to begin to reflect a more positive cycle of interest rate increases."
Energy bottlenecks have little impact on the United States.
Record electricity and natural gas prices have increased energy costs for industry and consumers, prompting some EU countries to formulate emergency measures. Europe needs to use existing unused storage space to set up a regulated natural gas bank to help solve its gas problems, the head of Europe's largest natural gas transport network said on Tuesday.
However, the United States may not be as constrained by energy market bottlenecks as other major economies. The United States is expected to generate more coal-fired electricity this year than in 2020, the U.S. Energy Information Administration said on Monday. This should allow short-term yield spreads to continue to move in favor of the dollar.
Joseph Capurso, a strategist at the Commonwealth Bank of Australia (CBA), wrote in a note to clients:
The strong dollar forecast we released in early July reflects the outperformance of the US economy, but the factors driving the dollar may be changing. In a cycle of tightening global monetary policy, if expectations of short-term interest rates are strong enough to force stocks to revise downwards, then global inflation and surging interest rates could support the safe haven status of the dollar. "
Spot gold is expected to encounter resistance of US $1785
According to the hour chart, gold prices rebounded ((ii)) from US $1759, breaking the ((I)) 50% Fibonacci retracement level of US $1780 and approaching the 61.8% Fibonacci retracement level of US $1785. On the daily chart, gold prices began a downward trend of three waves from $1801. ((I)) waves and ((ii)) waves are both sub-waves of three waves.
