The Fed's fight against inflation has not been successful, but markets have begun to bet that the Fed will slow its aggressive rate hikes in December, and the strong dollar seems to have come to an end, but gold, which is moving in the opposite direction of the dollar, has begun to "soar" to $1800 an ounce.

As of December 5, the dollar index fell more than 5% in November, while the Bloomberg spot dollar index fell to 7% from 16%.Has erased more than half of this year's increase.。

On the other hand, the trend of gold was contrary to that of the US dollar. after receiving the signal that the market was betting on a dovish turn from the Federal Reserve, the price of gold began to rise. On December 5th, the price of spot gold once stood above 1808 US dollars per ounce.Climb to the highest level since July。

The boosted price of gold

Media analysts pointed out that since the beginning of this year, the price of gold has been hit by continued aggressive interest rate increases by the Federal Reserve, so gold prices began to rebound as the market began to raise interest rates more and more slowly in December. Last week, it stood at $1800 an ounce.

There is also an obvious negative correlation between the price of gold and the trend of dollar index.. After the collapse of the Bretton Woods system, gold no longer enjoyed the status of fixed peg with the US dollar, but mainly settled in US dollars, which led to the price of gold will be naturally affected by the US dollar.

At the same time, due to the risk aversion and anti-inflation nature of gold itself,There is an obvious negative correlation between the price trend of gold and the yield of 10-year Treasury bonds.

As a result, after the more-than-expected decline in the US CP1 index in October, market expectations for future Fed interest rate increases have weakened, and superimposed investors generally believe that the risks in the future market have been alleviated, resulting in a sharp decline in the dollar index in line with US bond yields, which is a big boon for gold prices and boosts gold prices.

There was another piece of good news for gold in November, when Wall Street's financial giants began to sell digital currencies following the collapse of the cryptocurrency market triggered by the bankruptcy of FTX. Where should these withdrawn assets go? Gold seems to be a good choice!

Therefore, some analysts believe that after the currency circle tsunami, the market risk preference will be affected to a certain extent, and then play a positive role in the risk aversion of gold.

According to the media, Nicholas Frappell12, global head of market at ABC Refinery institutions in Sydney, said on March 4 that strong employment data and wage pressure should have put pressure on gold prices, but gold prices "rose immediately after falling slightly, and there is a feeling of 'buying on bargains'".

A depressed dollar

The dollar index has fallen sharply since November, with Wind data showing that the dollar index has fallen from 111.56 on November 1 to 104.7 on December 1, down more than 5 per cent in November. The Bloomberg dollar index has also shrunk to 7% from 16% this year, wiping out half of its gains.

Soochow Securities analysts believe that the fundamentals of the US dollar can be derived fromFrom the two dimensions of the United States and non-American economiesIn the United States, the two topics that cannot be bypassed in 2023 areThe US recession and the Federal Reserve stops raising interest ratesOn the non-American side, the focus is onThe economic recovery of Europe and China, and the marginal improvement of the European and Chinese economies together will be an important driver of the depreciation of the US dollar.。

The trend of the dollar index is not only closely related to the direction of the Fed's monetary policy, but also closely related to the performance of the US economy and the euro zone economy.The euro accounts for an important part of the dollar index.。

Media analysts believe that historical experience shows that in the face of US economic recession, it is very difficult for the Fed to be indifferent, and the most likely scenario is that the US economy may have a recession in the first half of 2023, while US fiscal policy will face greater constraints on expanding spending next year, and the Fed may suspend interest rate increases or even turn to interest rate cuts in the third quarter of 2023.

In contrast, the euro zone economy is likely to improve significantly in the third quarter of next year. After the triple impact of the conflict between Russia and Ukraine in 2022, high inflation and rapid tightening of monetary policy, the euro zone economy is likely to enter recession at the end of this year and early next year. The analysis points out that both high inflation and monetary policy will have a further turning point in 2023, which will create conditions for the recovery of the European economy in the second half of the year. A stronger euro zone economy will be an important driving force for the decline of the dollar index.

At the same time, as China continues to optimize its epidemic prevention policy, it has greatly boosted market confidence. The boiling global market and the influx of overseas capital into Chinese assets have also led to an increase in demand for the renminbi. The RMB has risen rapidly. On December 5, the offshore RMB regained the 6.94 mark, while the onshore RMB broke through the 6.95 mark, rising more than 1,000 points in the day, which will undoubtedly further push the strong dollar down.

More and more Wall Street investment banks and securities analysts are optimistic about China's economic prospects, optimistic about the Chinese stock market, and foreign investors have poured into a series of China-focused ETF funds.

According to the media, Christopher Wong, foreign exchange strategist at overseas Chinese Bank of Singapore, said that he is more optimistic about the future of China's economy and the Fed's policy adjustment will make the dollar fall further, and last Friday's strong non-farm payrolls report only made the dollar rebound briefly.