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Market News Gold Trading Reminder: The U.S. dollar has returned to the low price of carbine gold, and U.S. stocks have fallen sharply. Gold bulls or choose to dispatch? Pay attention to the initial application data
Gold Trading Reminder: The U.S. dollar has returned to the low price of carbine gold, and U.S. stocks have fallen sharply. Gold bulls or choose to dispatch? Pay attention to the initial application data
Federal Reserve officials continued to deliver hawkish speeches and strengthened expectations of aggressive interest rate hikes, helping the dollar to rise on Wednesday, temporarily interrupting the dollar's high correction and putting pressure on gold prices; however, U.S. building permits fell to a five-month low in April, and the S&P 500 index And the Dow hit the biggest decline in nearly two years; Wells Fargo lowered its target for the S&P 500 twice in three weeks; JPMorgan Chase lowered its forecast for US GDP growth, and the United Nations lowered its forecast for global economic growth in 2022; these still provide safe-haven support for gold prices.
2022-05-19
8699
During the Asian session on Thursday (May 19), spot gold hovered at a low level and was currently trading around $1,815. Federal Reserve officials continued to deliver hawkish speeches and strengthened expectations for aggressive interest rate hikes, helping the dollar to rise on Wednesday, temporarily interrupting the high-level correction of the dollar. , putting pressure on gold prices; however, U.S. building permits fell to a five-month low in April, and the S&P 500 and the Dow fell the most in nearly two years; Wells Fargo lowered its target for the S&P 500 twice in three weeks; JPMorgan Chase lowered its target The U.S. GDP growth forecast and the United Nations lowered its 2022 global economic growth forecast; these still provide safe-haven support for gold prices.
This trading day focuses on the changes in the number of initial jobless claims in the United States and the annualized total sales of existing homes in the United States in April, as well as the situation in Russia and Ukraine, the new crown epidemic and the speech of the Federal Reserve officials.
[Fed's Harker sees 50 basis points of interest rate hikes in both June and July, before raising rates more "moderately"]
Philadelphia Fed President Harker said on Wednesday he expects the central bank to make two more 50-basis-point rate hikes, before shifting to a single 25-basis-point hike until the "bane" of inflation is defeated.
"Looking ahead, if there is no major change in data in the coming weeks, I would expect two more 50 basis point rate hikes in June and July," Harker said in a speech prepared for the Alliance of Mid-Cap U.S. Banks. " After that, I expect a series of modest increases in the funds rate until we are confident that inflation is falling back toward the Committee's target."
Harker also said he expects the U.S. economy to grow 3 percent this year, enough to keep the labor market tight until the end of the year, despite higher interest rates.
He said he believes the Fed can lower inflation without tipping the economy into recession, in part because the labor market is strong right now.
"There may be a few quarters of negative growth, but that's not my estimate and it's not my current forecast," he said, adding that the economy could withstand a "moderate" and "methodical" tightening of financial conditions, which would Pushing demand down, "We don't want to overdo it, but we have to act."
[Chicago Fed Evans: Interest rates above neutral can curb high inflation]
Chicago Fed President Charles Evans said that if the Fed raises its benchmark rate above the neutral rate and keeps it there, inflation should ease from where it is now.
"If we raise rates by 50 basis points or 75 basis points on top of that, then this kind of economic-suppressing monetary policy should help keep inflation down," Evans said in an interview on Wednesday.
"We don't have to keep raising the federal funds rate to a level that depresses the economy. We can watch for a while after that," he said.
Evans said, "As Chairman Powell said, we will quickly move the federal funds rate toward a more 'neutral' direction. I think the 'neutral rate' range is 2.25-2.5%".
"I expect that by the end of the year, we are likely to be at a neutral level and should be well prepared for inflationary pressures in 2023," he said. "Inflation is expected to ease somewhat from its current very high levels, but it will take some time."
Fed officials are rapidly raising interest rates to combat inflation, which has risen to a 40-year high in recent months. According to data released by the Labor Department on May 11, the U.S. CPI rose 8.3% year-on-year in April.
Federal Reserve Chairman Jerome Powell on Tuesday reiterated expectations that the Federal Open Market Committee (FOMC) could raise interest rates by 50 basis points each at its June and July meetings.
“Continued increases in U.S. real interest rates will drive out speculators and put all prices under pressure,” analysts at Liberum Capital Ltd. wrote in a note. “We believe the Fed’s hawkish rate policy is key to weighing on the near-term outlook for metals prices. factor."
[The dollar ends a three-day losing streak]
The dollar rose 0.6% to 103.90 on Wednesday after a three-session losing streak was interrupted as concerns over the outlook for global growth and rising inflation hit sentiment, a day after Federal Reserve Chairman Jerome Powell made hawkish remarks.
Neutral interest rates are interest rates that neither stimulate nor restrict economic activity. The neutral rate is widely expected to be around 3.5% by mid-2023.
The dollar benefited from demand for safe-haven assets on Wednesday as stocks sold off and U.S. Treasury yields fell.
"Unsurprisingly, Tuesday's rally in risk assets appeared to be short-lived, disappearing almost entirely in Wednesday morning's session," said Michael Brown, head of market intelligence at Caxton.
"As a result, there has been a re-emergence of safe-haven demand for the U.S. dollar, and there has been a sort of 'fleeing to cash' phenomenon, with Treasuries failing to get much buying despite shaky market sentiment," Brown added.
“Technically, this will keep the bulls happy, the dollar index has managed to hold above previous support at 103.20, which, combined with a persistently subdued economic backdrop, should keep the dollar firm for the time being,” said Caxton’s Brown.
[U.S. building permits fell to a five-month low in April, the real estate market is slowing]
U.S. home building permits fell to their lowest level in five months in April, suggesting the housing market is slowing, with rising mortgage rates reducing affordability for entry-level and first-time homebuyers.
However, a report from the Commerce Department on Wednesday also showed a record number of homes still under construction, suggesting only a slight slowdown in construction activity.
Housing construction has been constrained by soaring prices and shortages of materials. The housing market is the most interest-rate sensitive sector of the economy, and building permits are a leading indicator for this sector.
Conrad DeQuadros, senior economic advisor at Brean Capital, said: “Housing construction appears to be going through a transition, with surging mortgage rates and declining affordability on the one hand, and supply chain constraints continuing to increase project backlogs on the other.”
Building permits fell 3.2% in April to a seasonally adjusted annual rate of 1.819 million units, the lowest level since November last year, and economists forecast a drop to 1.812 million units. Building permits rose 3.1% year-on-year in April.
The decline was concentrated in the single-family sector, where building permits for single-family homes fell 4.6% to 1.111 million units, the lowest since October last year. Multifamily permits of five or more units fell just 0.6% to 656,000.
In a further sign of cooling housing demand, a report from the Mortgage Bankers Association (MBA) on Wednesday showed that applications for home purchase loans fell 12% last week from the previous week. Compared with the same period last year, the number of applications dropped by 15%.
Housing starts fell 0.2% to 1.724 million units in April. Single-family housing starts, which account for the largest share, tumbled 7.3% to 1.1 million units, the lowest level since October last year.
Multifamily housing starts jumped 16.8% to 612,000 units, the highest since April 1986. There is a huge demand for rental apartments.
Housing completions fell 5.1% to 1.295 million, with single-family completions down 4.9%. Multifamily completions fell 6.6%.
The stock of single-family homes under construction rose 1.0% to 815,000 units in April, the most since November 2006. Multifamily housing under construction rose 2.3 percent to 811,000, the most since February 1974.
U.S. stocks fell on Wall Street, the dollar rose against a basket of currencies and U.S. Treasury yields fell after the data.
[The S&P 500 and the Dow have their biggest losses in nearly two years]
U.S. Wall Street stocks tumbled on Wednesday, with Target plunging about 25%, the retailer becoming the latest victim of a surge in prices that underscores deep concerns about the U.S. economy. Both the S&P 500 and the Dow Jones Industrial Average had their biggest one-day losses since June 2020.
Target, which reported a halving in first-quarter profit, warned that margins would be more affected given higher fuel and freight costs. Shares of the company tumbled about 25 percent, wiping about $25 billion off its market value, in its worst one-day performance since the October 19, 1987 Black Monday crash.
A day earlier, rival Walmart also cut its profit forecast. SPDR S&P Retail tumbled 8.3%.
“We believe that inflation has been outpacing wage gains for even longer than people expected, which is having an ongoing impact on retail spending, which was a major factor in today’s sell-off,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. , "Retailers are starting to expose the impact of the decline in consumers' purchasing power."
Rate-sensitive giant growth stocks exacerbated recent losses and dragged the S&P 500 and Nasdaq lower. Amazon, Nvidia (Nvidia/Nvidia) and Tesla tumbled nearly 7%, while Apple tumbled 5.6%.
“At this particular time, the tailwinds outweigh the tailwinds for growth stocks and the market is trying to decide how bad things can get,” said Liz Young, director of investment strategy at SoFi. “The market is nervous about the next six months. We may find that there is no need to be as nervous as it is now, the market does tend to overreact to the downside.”
All 11 sectors of the S&P 500 were wiped out, led by consumer discretionary and consumer staples stocks, both down more than 6%.
Rising inflation, the conflict in Ukraine, prolonged supply chain disruptions, coronavirus lockdowns in Asia and monetary tightening by major central banks have all weighed on financial markets recently, raising fears of a global economic slowdown.
As of the close, the S&P 500 fell 4.04% to close at 3923.68 points. The Nasdaq fell 4.73% to 11,418.15; the Dow Jones Industrial Average fell 3.57% to 31,490.07.
"Another big sell-off in equities, coupled with lower yields and safe-haven buying, is driving gold higher," said David Meger, head of metals trading at High Ridge Futures.
David Meger believes, "The real question and the sticking point is whether the Fed is doing enough given the level of inflation. If that is not enough to calm inflationary pressures, gold will find support in this environment.
[Recession becomes the base forecast scenario, Wells Fargo cuts the S&P 500 target twice in three weeks]
Wells Fargo lowered its forecast for the S&P 500 for the second time in three weeks, saying a mild recession is now its base case.
Wells Fargo's consulting arm cut its year-end target for the S&P 500 by 300 points on Wednesday, after a 200-point cut in late April. The index is now expected to be in the 4200-4400 range before Christmas, implying a decline of as much as 7.7% for the year, but a gain of as much as 12% from current levels.
"Since the beginning of the year, we have noted rising recession risks," strategists at Wells Fargo Consulting wrote in a note to clients. "We weighed the latest monthly and weekly data and the economy has crossed a probability level that makes a mild and short recession our base case."
[JP Morgan Chase downgrades U.S. GDP growth forecast as U.S. stocks decline has impact on financial wealth]
JPMorgan economists cut their U.S. economic forecasts for this year and next, arguing that falling stock prices, rising mortgage rates and a stronger dollar relative to trading partner currencies will weigh on the outlook.
In a note to clients on Wednesday, economists including Michael Feroli cut their economic growth forecasts for the second half of 2022 to 2.4 percent from 3 percent, and for the first half of 2023 to 1.5 percent from 2.1 percent, and down 2023. The half-year growth forecast was revised down to 1% from 1.4%. That would result in a U.S. unemployment rate of 3.5% in the second half of 2023, compared with a previous forecast of 3.2%, the company said.
Economists cited hawkish comments from Federal Reserve Chairman Jerome Powell, who said on Tuesday that the central bank will raise interest rates until there is "clear and convincing" evidence that inflation is falling back. He welcomed the slowdown in economic growth, which would bring inflation down from a near four-decade high.
"The Fed is well on its way to achieving the desired tightening of financial conditions," JPMorgan economists wrote. Other economists include Daniel Silver and Peter McCrory. “Financial conditions have tightened because, as Powell said recently, the Fed has had to let growth slow. The Fed will do whatever is necessary to ensure that its goals are met. That gives us some confidence that GDP growth will be in the next few quarters. below potential growth rate."
Economists at the Federal Reserve and many private companies estimate the long-term growth potential or capacity of the U.S. economy to be around 1.8-2%.
U.S. stocks posted their biggest daily drop in nearly two years on Wednesday as investors assessed the impact of higher prices on earnings and the impact of tighter monetary policy on the outlook for economic growth. Economists write that every dollar lost in financial wealth translates into a drop in spending of about 2 to 3 cents a year. The recent hit to wealth will reduce consumer spending by about $100 billion at an annualized rate over the next few quarters, or nearly 0.5 percent of gross domestic product, they wrote.
The various drags on growth "should be sufficient to slow growth and ultimately lead to a gradual rise in unemployment later next year," the economists wrote. They also expect a "soft landing" for the economy, in which growth will slow and inflation will fall, which is the Fed's goal, although such an outcome is rare.
JPMorgan is the latest to cut its forecast or raise its risk outlook. Deutsche Bank economists predicted in late April that the U.S. would fall into a deep recession next year, while Goldman Sachs Group Inc. estimated the probability of a recession in the next two years at about 35 percent.
[Goldman Sachs CEO says U.S. is at risk of recession, Solomon says inflation is "extremely punitive"]
Goldman Sachs Group Chief Executive David Solomon said the bank's clients were bracing for slower growth and lower asset prices, all as "extremely punitive" inflation weighed on the economy.
“There is a possibility that the economy will slip into a recession,” he said in a telephone interview, though he was not overly concerned about the risk, citing estimates by economists including his firm Jan Hatzius that the risk of a recession in the next 12 to 24 months is at least at 30%. He is watching closely to see if credit spreads start to widen more significantly.
Months before his remarks, Goldman Sachs President John Waldron told a large investment client that the Fed was not moving fast enough to fight inflation. This week, former Goldman Sachs CEO Lloyd Blankfein expressed similar unease about soaring prices.
"We have to get rid of inflation," Solomon said by phone Tuesday. "Inflation is extremely punitive, especially for those who live on weekly, dead wages. It's a huge Taxes. I think it's very, very important to control that."
He added that Goldman's clients are recognizing that economic conditions are tightening, and the process remains fairly orderly for now. While the drop in share prices is predictable, it would be "worrisome" if the turmoil spilled over to credit spreads.
"We're seeing a tightening of monetary conditions," he said. "It's not surprising what's happening to asset prices, given that we're moving into a more restrictive monetary policy environment."
[The United Nations lowered its forecast for global economic growth in 2022]
On the 18th local time, the United Nations released the "World Economic Situation and Prospects in 2022".
The report predicts that as the global economic recovery is disrupted by the conflict between Russia and Ukraine, which has triggered a huge humanitarian crisis, raised food and commodity prices, and exacerbated inflationary pressures on a global scale.
The report shows that the global economic growth rate in 2022 is lowered to 3.1%, which is lower than the 4% growth rate forecast released in January 2022.
The report expects global inflation to increase to 6.7 percent in 2022, double the 2.9 percent average for the 2010-20 period, and food and energy prices to rise sharply. Among them, the EU's economic growth prospects have weakened significantly, and EU GDP is expected to grow by only 2.7% in 2022, instead of the 3.9% predicted in early January.
On the whole, the short-term gold price still has the risk of fluctuating and dropping, but factors such as economic recession expectations and the sharp drop in U.S. stocks are expected to attract bargain-hunting buying to provide support for the gold price, which will limit the downside of the gold price; the short-term gold price has low fluctuations bottom possibility.
Both gold and silver are relatively cheap, as investors ignore the risk that a Fed rate hike will push the U.S. economy into recession, Degussa chief economist Thorsten Polleit said in his latest market commentary. “As long as financial markets have reason to believe that central banks can strike an acceptable balance between raising interest rates to curb inflation and preventing the financial and economic system from falling off a cliff, gold and silver prices may not rise significantly for now. However, central banks’ plans The risk of failure, leading to a major crisis, is real and cannot be ignored."
Even if the Fed can avoid pushing the economy into a recession, Gold and silver could still rise once investors realize that inflation will remain elevated for longer than expected, Polleit said.
At 10:30 GMT+8, spot gold is now at $1,815.02 per ounce.
This trading day focuses on the changes in the number of initial jobless claims in the United States and the annualized total sales of existing homes in the United States in April, as well as the situation in Russia and Ukraine, the new crown epidemic and the speech of the Federal Reserve officials.
The fundamentals are mainly bearish
[Fed's Harker sees 50 basis points of interest rate hikes in both June and July, before raising rates more "moderately"]
Philadelphia Fed President Harker said on Wednesday he expects the central bank to make two more 50-basis-point rate hikes, before shifting to a single 25-basis-point hike until the "bane" of inflation is defeated.
"Looking ahead, if there is no major change in data in the coming weeks, I would expect two more 50 basis point rate hikes in June and July," Harker said in a speech prepared for the Alliance of Mid-Cap U.S. Banks. " After that, I expect a series of modest increases in the funds rate until we are confident that inflation is falling back toward the Committee's target."
Harker also said he expects the U.S. economy to grow 3 percent this year, enough to keep the labor market tight until the end of the year, despite higher interest rates.
He said he believes the Fed can lower inflation without tipping the economy into recession, in part because the labor market is strong right now.
"There may be a few quarters of negative growth, but that's not my estimate and it's not my current forecast," he said, adding that the economy could withstand a "moderate" and "methodical" tightening of financial conditions, which would Pushing demand down, "We don't want to overdo it, but we have to act."
[Chicago Fed Evans: Interest rates above neutral can curb high inflation]
Chicago Fed President Charles Evans said that if the Fed raises its benchmark rate above the neutral rate and keeps it there, inflation should ease from where it is now.
"If we raise rates by 50 basis points or 75 basis points on top of that, then this kind of economic-suppressing monetary policy should help keep inflation down," Evans said in an interview on Wednesday.
"We don't have to keep raising the federal funds rate to a level that depresses the economy. We can watch for a while after that," he said.
Evans said, "As Chairman Powell said, we will quickly move the federal funds rate toward a more 'neutral' direction. I think the 'neutral rate' range is 2.25-2.5%".
"I expect that by the end of the year, we are likely to be at a neutral level and should be well prepared for inflationary pressures in 2023," he said. "Inflation is expected to ease somewhat from its current very high levels, but it will take some time."
Fed officials are rapidly raising interest rates to combat inflation, which has risen to a 40-year high in recent months. According to data released by the Labor Department on May 11, the U.S. CPI rose 8.3% year-on-year in April.
Federal Reserve Chairman Jerome Powell on Tuesday reiterated expectations that the Federal Open Market Committee (FOMC) could raise interest rates by 50 basis points each at its June and July meetings.
“Continued increases in U.S. real interest rates will drive out speculators and put all prices under pressure,” analysts at Liberum Capital Ltd. wrote in a note. “We believe the Fed’s hawkish rate policy is key to weighing on the near-term outlook for metals prices. factor."
[The dollar ends a three-day losing streak]
The dollar rose 0.6% to 103.90 on Wednesday after a three-session losing streak was interrupted as concerns over the outlook for global growth and rising inflation hit sentiment, a day after Federal Reserve Chairman Jerome Powell made hawkish remarks.
Neutral interest rates are interest rates that neither stimulate nor restrict economic activity. The neutral rate is widely expected to be around 3.5% by mid-2023.
The dollar benefited from demand for safe-haven assets on Wednesday as stocks sold off and U.S. Treasury yields fell.
"Unsurprisingly, Tuesday's rally in risk assets appeared to be short-lived, disappearing almost entirely in Wednesday morning's session," said Michael Brown, head of market intelligence at Caxton.
"As a result, there has been a re-emergence of safe-haven demand for the U.S. dollar, and there has been a sort of 'fleeing to cash' phenomenon, with Treasuries failing to get much buying despite shaky market sentiment," Brown added.
“Technically, this will keep the bulls happy, the dollar index has managed to hold above previous support at 103.20, which, combined with a persistently subdued economic backdrop, should keep the dollar firm for the time being,” said Caxton’s Brown.
Fundamentals are mostly bullish
[U.S. building permits fell to a five-month low in April, the real estate market is slowing]
U.S. home building permits fell to their lowest level in five months in April, suggesting the housing market is slowing, with rising mortgage rates reducing affordability for entry-level and first-time homebuyers.
However, a report from the Commerce Department on Wednesday also showed a record number of homes still under construction, suggesting only a slight slowdown in construction activity.
Housing construction has been constrained by soaring prices and shortages of materials. The housing market is the most interest-rate sensitive sector of the economy, and building permits are a leading indicator for this sector.
Conrad DeQuadros, senior economic advisor at Brean Capital, said: “Housing construction appears to be going through a transition, with surging mortgage rates and declining affordability on the one hand, and supply chain constraints continuing to increase project backlogs on the other.”
Building permits fell 3.2% in April to a seasonally adjusted annual rate of 1.819 million units, the lowest level since November last year, and economists forecast a drop to 1.812 million units. Building permits rose 3.1% year-on-year in April.
The decline was concentrated in the single-family sector, where building permits for single-family homes fell 4.6% to 1.111 million units, the lowest since October last year. Multifamily permits of five or more units fell just 0.6% to 656,000.
In a further sign of cooling housing demand, a report from the Mortgage Bankers Association (MBA) on Wednesday showed that applications for home purchase loans fell 12% last week from the previous week. Compared with the same period last year, the number of applications dropped by 15%.
Housing starts fell 0.2% to 1.724 million units in April. Single-family housing starts, which account for the largest share, tumbled 7.3% to 1.1 million units, the lowest level since October last year.
Multifamily housing starts jumped 16.8% to 612,000 units, the highest since April 1986. There is a huge demand for rental apartments.
Housing completions fell 5.1% to 1.295 million, with single-family completions down 4.9%. Multifamily completions fell 6.6%.
The stock of single-family homes under construction rose 1.0% to 815,000 units in April, the most since November 2006. Multifamily housing under construction rose 2.3 percent to 811,000, the most since February 1974.
U.S. stocks fell on Wall Street, the dollar rose against a basket of currencies and U.S. Treasury yields fell after the data.
[The S&P 500 and the Dow have their biggest losses in nearly two years]
U.S. Wall Street stocks tumbled on Wednesday, with Target plunging about 25%, the retailer becoming the latest victim of a surge in prices that underscores deep concerns about the U.S. economy. Both the S&P 500 and the Dow Jones Industrial Average had their biggest one-day losses since June 2020.
Target, which reported a halving in first-quarter profit, warned that margins would be more affected given higher fuel and freight costs. Shares of the company tumbled about 25 percent, wiping about $25 billion off its market value, in its worst one-day performance since the October 19, 1987 Black Monday crash.
A day earlier, rival Walmart also cut its profit forecast. SPDR S&P Retail tumbled 8.3%.
“We believe that inflation has been outpacing wage gains for even longer than people expected, which is having an ongoing impact on retail spending, which was a major factor in today’s sell-off,” said Paul Christopher, head of global market strategy at Wells Fargo Investment Institute. , "Retailers are starting to expose the impact of the decline in consumers' purchasing power."
Rate-sensitive giant growth stocks exacerbated recent losses and dragged the S&P 500 and Nasdaq lower. Amazon, Nvidia (Nvidia/Nvidia) and Tesla tumbled nearly 7%, while Apple tumbled 5.6%.
“At this particular time, the tailwinds outweigh the tailwinds for growth stocks and the market is trying to decide how bad things can get,” said Liz Young, director of investment strategy at SoFi. “The market is nervous about the next six months. We may find that there is no need to be as nervous as it is now, the market does tend to overreact to the downside.”
All 11 sectors of the S&P 500 were wiped out, led by consumer discretionary and consumer staples stocks, both down more than 6%.
Rising inflation, the conflict in Ukraine, prolonged supply chain disruptions, coronavirus lockdowns in Asia and monetary tightening by major central banks have all weighed on financial markets recently, raising fears of a global economic slowdown.
As of the close, the S&P 500 fell 4.04% to close at 3923.68 points. The Nasdaq fell 4.73% to 11,418.15; the Dow Jones Industrial Average fell 3.57% to 31,490.07.
"Another big sell-off in equities, coupled with lower yields and safe-haven buying, is driving gold higher," said David Meger, head of metals trading at High Ridge Futures.
David Meger believes, "The real question and the sticking point is whether the Fed is doing enough given the level of inflation. If that is not enough to calm inflationary pressures, gold will find support in this environment.
[Recession becomes the base forecast scenario, Wells Fargo cuts the S&P 500 target twice in three weeks]
Wells Fargo lowered its forecast for the S&P 500 for the second time in three weeks, saying a mild recession is now its base case.
Wells Fargo's consulting arm cut its year-end target for the S&P 500 by 300 points on Wednesday, after a 200-point cut in late April. The index is now expected to be in the 4200-4400 range before Christmas, implying a decline of as much as 7.7% for the year, but a gain of as much as 12% from current levels.
"Since the beginning of the year, we have noted rising recession risks," strategists at Wells Fargo Consulting wrote in a note to clients. "We weighed the latest monthly and weekly data and the economy has crossed a probability level that makes a mild and short recession our base case."
[JP Morgan Chase downgrades U.S. GDP growth forecast as U.S. stocks decline has impact on financial wealth]
JPMorgan economists cut their U.S. economic forecasts for this year and next, arguing that falling stock prices, rising mortgage rates and a stronger dollar relative to trading partner currencies will weigh on the outlook.
In a note to clients on Wednesday, economists including Michael Feroli cut their economic growth forecasts for the second half of 2022 to 2.4 percent from 3 percent, and for the first half of 2023 to 1.5 percent from 2.1 percent, and down 2023. The half-year growth forecast was revised down to 1% from 1.4%. That would result in a U.S. unemployment rate of 3.5% in the second half of 2023, compared with a previous forecast of 3.2%, the company said.
Economists cited hawkish comments from Federal Reserve Chairman Jerome Powell, who said on Tuesday that the central bank will raise interest rates until there is "clear and convincing" evidence that inflation is falling back. He welcomed the slowdown in economic growth, which would bring inflation down from a near four-decade high.
"The Fed is well on its way to achieving the desired tightening of financial conditions," JPMorgan economists wrote. Other economists include Daniel Silver and Peter McCrory. “Financial conditions have tightened because, as Powell said recently, the Fed has had to let growth slow. The Fed will do whatever is necessary to ensure that its goals are met. That gives us some confidence that GDP growth will be in the next few quarters. below potential growth rate."
Economists at the Federal Reserve and many private companies estimate the long-term growth potential or capacity of the U.S. economy to be around 1.8-2%.
U.S. stocks posted their biggest daily drop in nearly two years on Wednesday as investors assessed the impact of higher prices on earnings and the impact of tighter monetary policy on the outlook for economic growth. Economists write that every dollar lost in financial wealth translates into a drop in spending of about 2 to 3 cents a year. The recent hit to wealth will reduce consumer spending by about $100 billion at an annualized rate over the next few quarters, or nearly 0.5 percent of gross domestic product, they wrote.
The various drags on growth "should be sufficient to slow growth and ultimately lead to a gradual rise in unemployment later next year," the economists wrote. They also expect a "soft landing" for the economy, in which growth will slow and inflation will fall, which is the Fed's goal, although such an outcome is rare.
JPMorgan is the latest to cut its forecast or raise its risk outlook. Deutsche Bank economists predicted in late April that the U.S. would fall into a deep recession next year, while Goldman Sachs Group Inc. estimated the probability of a recession in the next two years at about 35 percent.
[Goldman Sachs CEO says U.S. is at risk of recession, Solomon says inflation is "extremely punitive"]
Goldman Sachs Group Chief Executive David Solomon said the bank's clients were bracing for slower growth and lower asset prices, all as "extremely punitive" inflation weighed on the economy.
“There is a possibility that the economy will slip into a recession,” he said in a telephone interview, though he was not overly concerned about the risk, citing estimates by economists including his firm Jan Hatzius that the risk of a recession in the next 12 to 24 months is at least at 30%. He is watching closely to see if credit spreads start to widen more significantly.
Months before his remarks, Goldman Sachs President John Waldron told a large investment client that the Fed was not moving fast enough to fight inflation. This week, former Goldman Sachs CEO Lloyd Blankfein expressed similar unease about soaring prices.
"We have to get rid of inflation," Solomon said by phone Tuesday. "Inflation is extremely punitive, especially for those who live on weekly, dead wages. It's a huge Taxes. I think it's very, very important to control that."
He added that Goldman's clients are recognizing that economic conditions are tightening, and the process remains fairly orderly for now. While the drop in share prices is predictable, it would be "worrisome" if the turmoil spilled over to credit spreads.
"We're seeing a tightening of monetary conditions," he said. "It's not surprising what's happening to asset prices, given that we're moving into a more restrictive monetary policy environment."
[The United Nations lowered its forecast for global economic growth in 2022]
On the 18th local time, the United Nations released the "World Economic Situation and Prospects in 2022".
The report predicts that as the global economic recovery is disrupted by the conflict between Russia and Ukraine, which has triggered a huge humanitarian crisis, raised food and commodity prices, and exacerbated inflationary pressures on a global scale.
The report shows that the global economic growth rate in 2022 is lowered to 3.1%, which is lower than the 4% growth rate forecast released in January 2022.
The report expects global inflation to increase to 6.7 percent in 2022, double the 2.9 percent average for the 2010-20 period, and food and energy prices to rise sharply. Among them, the EU's economic growth prospects have weakened significantly, and EU GDP is expected to grow by only 2.7% in 2022, instead of the 3.9% predicted in early January.
Outlook
On the whole, the short-term gold price still has the risk of fluctuating and dropping, but factors such as economic recession expectations and the sharp drop in U.S. stocks are expected to attract bargain-hunting buying to provide support for the gold price, which will limit the downside of the gold price; the short-term gold price has low fluctuations bottom possibility.
Both gold and silver are relatively cheap, as investors ignore the risk that a Fed rate hike will push the U.S. economy into recession, Degussa chief economist Thorsten Polleit said in his latest market commentary. “As long as financial markets have reason to believe that central banks can strike an acceptable balance between raising interest rates to curb inflation and preventing the financial and economic system from falling off a cliff, gold and silver prices may not rise significantly for now. However, central banks’ plans The risk of failure, leading to a major crisis, is real and cannot be ignored."
Even if the Fed can avoid pushing the economy into a recession, Gold and silver could still rise once investors realize that inflation will remain elevated for longer than expected, Polleit said.
At 10:30 GMT+8, spot gold is now at $1,815.02 per ounce.
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