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Market News Gold continues to rebound, the U.S. index turns down; the FED is expected to withdraw the widening this year, but there are other difficulties
Gold continues to rebound, the U.S. index turns down; the FED is expected to withdraw the widening this year, but there are other difficulties
On September 21, spot gold continued its overnight rebound as the U.S. dollar index suspended its upward trend. The market is waiting for the Fed's two-day policy meeting, which will end on Wednesday, to signal that it may begin to cut stimulus measures. The Fed has been trying to distinguish the timetable for cutting debt purchases from when it will start the first interest rate hike in 2019, but this may not be as easy as some people think.
2021-09-21
9305
On Tuesday (September 21), spot gold continued to rebound overnight, as the US dollar index suspended its upward trend. The market is waiting for the Fed's two-day policy meeting, which will end on Wednesday, to signal that it may begin to cut stimulus measures.
At 19:44 GMT+8, spot gold rose 0.22% to US$1768.03 per ounce; the main COMEX gold contract rose 0.28% to US$1768.8 per ounce; the US dollar index fell 0.18% to 93.074.
On the last trading day (September 20), the U.S. dollar index gave up all gains after rising to a new high of 93.455 since August 23; the price of gold rebounded from the low point of $1,742.38 per ounce recorded in the day since August 12. Investors choose to remain cautious before the Federal Reserve announces the New Deal.
Investors are paying attention to the Fed's policy meeting this week, because it is approaching the last quarter of this year, and it is expected that the Fed will begin to reduce the scale of bond purchases and take the first step towards the normalization of monetary policy. Although investors have high expectations for the Fed to start reducing bond purchases in 2021, there is still a lot of uncertainty about when the Fed will announce and when it will act afterwards.
Most Fed officials stated at the beginning of this year that as long as the job market continues to improve, they will support the reduction of debt purchases. The market predicts that the Fed may act as early as November. However, the recently announced economic data is weak: the August non-agricultural employment report in the United States was far worse than expected; the inflation level that was once boosted by the resumption of business after the anti-epidemic-related suspension of work in the United States, now the upward momentum shows signs of slowing down. These all reduce the possibility of the Fed's actions during the year.
Investors are concerned about any new signals about when the Federal Reserve will begin to reduce debt purchases, and whether this move will be linked to specific improvements in employment and other data. The Fed’s meeting in early November will precede the release of employment data in October, which may make policymakers hesitant to make decisions before December.
Reducing the speed of debt purchases is also the key to how long the Fed will take to end quantitative easing. Quantitative easing is expected to end before the Fed raises interest rates. Fed Chairman Powell will hold a press conference after the announcement of the post-meeting statement. At that time, he may also hint that if the economic situation deteriorates, the Fed may accelerate, slow down and stop reducing debt purchases.
The Fed has been trying to distinguish the timetable for cutting debt purchases from when it will start the first interest rate hike in 2019, but this may not be as easy as some people think. In June this year, the Fed’s policymakers stated that they expected to raise interest rates twice in 2023, which made investors panic.
Fed officials predict that the "dot chart" of the federal funds rate will be updated this month to reflect these expectations and will also show for the first time Fed officials' expectations for 2024. The price of federal funds rate futures reflects that the first rate hike is expected in March 2023.
If employment continues to improve and inflation remains above the target level, the conditions for reducing debt purchases may also be regarded as conditions for raising interest rates. Investors will get away from gold and other assets that fight inflation and currency devaluation.
The economic forecasts released by the Fed this week will let people know whether policymakers are worried that economic growth and employment may lag behind inflation, which puts the Fed in a dilemma on how to normalize policy. Some investors worry that the US economy may enter a period of stagflation, even if economic growth is slow, price pressures will rise.
A JPMorgan Chase model predicts that September employment data will remain weak, as consumers seem to have cut travel and leisure spending since Labor Day. In predicting a sharp slowdown in U.S. job growth last month, JPMorgan Chase’s model is more accurate than almost all other forecasts.
The employment tracking model created by the JP Morgan flux research team, combined with a series of alternative data such as the use of Chase credit cards and the number of airport security checks, is expected to increase employment by 333,000 in September. Employment growth in August was disappointing, at only 235,000, which was the lowest level since January of this year and a far cry from the kind of rebound that the Fed and other policymakers hoped for.
The latest estimate of this model of the quantitative research team is down by nearly 250,000 from two weeks ago, and tracking of the use of Chase credit card data has found that consumer spending on air travel and restaurants has declined.
If the US September non-agricultural employment report continues to provide negative information to the market, the Fed may delay the reduction of its bond purchase plan, but it is unlikely that it will completely deviate from the right track. Unless there is an extremely bad and unpredictable situation, the downward trend of gold is difficult to change.
The key argument in support of when the Fed will raise interest rates is whether the Fed can wait until the economy improves as expected before tightening its policy, or whether the spiraling price pressures will force it to take action.
The recent weakening of prices will support Powell's view that high inflation will be temporary. But when the supply chain disruption that helped push up overall prices will be alleviated, it's unclear. In addition, it is still unknown whether the new restrictions to prevent the spread of the new crown virus will push up inflation.
The economic forecast released on Wednesday may show that policymakers’ inflation expectations are very divergent. They may have differences on whether the inflation risk is up or down. The US dollar index may face a see-saw near 93.50.
On the hourly chart, the price of gold started a downward c wave trend from US$1809 and fell below the 100% target of US$1757. The market outlook is expected to drop to the target of US$1737 by 138.2%. Wave c is a sub-wave of the downward (ii) wave that started at $1834. (ii) The wave is a sub-wave that started the upward ((i)) wave from $1680.
At 19:44 GMT+8, spot gold rose 0.22% to US$1768.03 per ounce; the main COMEX gold contract rose 0.28% to US$1768.8 per ounce; the US dollar index fell 0.18% to 93.074.
On the last trading day (September 20), the U.S. dollar index gave up all gains after rising to a new high of 93.455 since August 23; the price of gold rebounded from the low point of $1,742.38 per ounce recorded in the day since August 12. Investors choose to remain cautious before the Federal Reserve announces the New Deal.
When will the Fed start the withdrawal?
Investors are paying attention to the Fed's policy meeting this week, because it is approaching the last quarter of this year, and it is expected that the Fed will begin to reduce the scale of bond purchases and take the first step towards the normalization of monetary policy. Although investors have high expectations for the Fed to start reducing bond purchases in 2021, there is still a lot of uncertainty about when the Fed will announce and when it will act afterwards.
Most Fed officials stated at the beginning of this year that as long as the job market continues to improve, they will support the reduction of debt purchases. The market predicts that the Fed may act as early as November. However, the recently announced economic data is weak: the August non-agricultural employment report in the United States was far worse than expected; the inflation level that was once boosted by the resumption of business after the anti-epidemic-related suspension of work in the United States, now the upward momentum shows signs of slowing down. These all reduce the possibility of the Fed's actions during the year.
Investors are concerned about any new signals about when the Federal Reserve will begin to reduce debt purchases, and whether this move will be linked to specific improvements in employment and other data. The Fed’s meeting in early November will precede the release of employment data in October, which may make policymakers hesitant to make decisions before December.
Reducing the speed of debt purchases is also the key to how long the Fed will take to end quantitative easing. Quantitative easing is expected to end before the Fed raises interest rates. Fed Chairman Powell will hold a press conference after the announcement of the post-meeting statement. At that time, he may also hint that if the economic situation deteriorates, the Fed may accelerate, slow down and stop reducing debt purchases.
Interest rate hike is even more unknown
The Fed has been trying to distinguish the timetable for cutting debt purchases from when it will start the first interest rate hike in 2019, but this may not be as easy as some people think. In June this year, the Fed’s policymakers stated that they expected to raise interest rates twice in 2023, which made investors panic.
Fed officials predict that the "dot chart" of the federal funds rate will be updated this month to reflect these expectations and will also show for the first time Fed officials' expectations for 2024. The price of federal funds rate futures reflects that the first rate hike is expected in March 2023.
If employment continues to improve and inflation remains above the target level, the conditions for reducing debt purchases may also be regarded as conditions for raising interest rates. Investors will get away from gold and other assets that fight inflation and currency devaluation.
Employment may continue to be weak
The economic forecasts released by the Fed this week will let people know whether policymakers are worried that economic growth and employment may lag behind inflation, which puts the Fed in a dilemma on how to normalize policy. Some investors worry that the US economy may enter a period of stagflation, even if economic growth is slow, price pressures will rise.
A JPMorgan Chase model predicts that September employment data will remain weak, as consumers seem to have cut travel and leisure spending since Labor Day. In predicting a sharp slowdown in U.S. job growth last month, JPMorgan Chase’s model is more accurate than almost all other forecasts.
The employment tracking model created by the JP Morgan flux research team, combined with a series of alternative data such as the use of Chase credit cards and the number of airport security checks, is expected to increase employment by 333,000 in September. Employment growth in August was disappointing, at only 235,000, which was the lowest level since January of this year and a far cry from the kind of rebound that the Fed and other policymakers hoped for.
The latest estimate of this model of the quantitative research team is down by nearly 250,000 from two weeks ago, and tracking of the use of Chase credit card data has found that consumer spending on air travel and restaurants has declined.
If the US September non-agricultural employment report continues to provide negative information to the market, the Fed may delay the reduction of its bond purchase plan, but it is unlikely that it will completely deviate from the right track. Unless there is an extremely bad and unpredictable situation, the downward trend of gold is difficult to change.
Will high inflation be temporary?
The key argument in support of when the Fed will raise interest rates is whether the Fed can wait until the economy improves as expected before tightening its policy, or whether the spiraling price pressures will force it to take action.
The recent weakening of prices will support Powell's view that high inflation will be temporary. But when the supply chain disruption that helped push up overall prices will be alleviated, it's unclear. In addition, it is still unknown whether the new restrictions to prevent the spread of the new crown virus will push up inflation.
The economic forecast released on Wednesday may show that policymakers’ inflation expectations are very divergent. They may have differences on whether the inflation risk is up or down. The US dollar index may face a see-saw near 93.50.
Spot gold is still looking at $1,737
On the hourly chart, the price of gold started a downward c wave trend from US$1809 and fell below the 100% target of US$1757. The market outlook is expected to drop to the target of US$1737 by 138.2%. Wave c is a sub-wave of the downward (ii) wave that started at $1834. (ii) The wave is a sub-wave that started the upward ((i)) wave from $1680.
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