Market News Gold trading reminder: Risk aversion and inflation worries barely support gold prices, focus on Yellen House testimony
Gold trading reminder: Risk aversion and inflation worries barely support gold prices, focus on Yellen House testimony
The World Bank lowered its global growth forecast for this year to 2.9%, and the ongoing war between Russia and Ukraine has provided some safe-haven support for gold prices. The US dollar index has risen and fallen, and it has also provided gold with a rebound opportunity. In addition, US Treasury Secretary Yellen said U.S. inflation levels are "unacceptable" and are likely to remain high, increasing investor interest in gold. However, as the U.S. trade deficit in April fell by the most in nearly nine-and-a-half years, the dollar is still relatively strong, and the U.S. stock market is approaching a one-month high, which may put some pressure on gold prices. The uncertainty of the short-term gold price trend is relatively large.
2022-06-08
8449
In Asian session on Wednesday (June 8), spot gold fluctuated slightly and was currently trading around US$1,849. The World Bank lowered its global growth forecast for this year to 2.9%, and the ongoing war between Russia and Ukraine provided some hedging for gold prices. Support, the US dollar index rose and fell, which also provided gold with a rebound opportunity. In addition, US Treasury Secretary Yellen called the US inflation level "unacceptable" and may remain at a high level, which also increased investors' interest in gold. However, the market generally pays attention to the U.S. May CPI data released this week. As the U.S. trade deficit in April fell by the most in nearly nine and a half years, the U.S. dollar is still relatively strong, and the U.S. stock market is approaching a near one-month high, which may have some impact on the price of gold. suppress. The uncertainty of the short-term gold price trend is relatively large.
There is no important economic data released this trading day, pay attention to the news of US Treasury Secretary Yellen, GMT+8 22:00, Yellen will testify before the US House Ways and Means Committee to discuss President Biden's 2023 budget.
[The World Bank lowered its global growth forecast for this year to 2.9%, warning of the risk of "stagflation"]
The World Bank on Tuesday cut its 2022 global growth forecast by 1.2 percentage points to 2.9 percent and warned that Russia's invasion of Ukraine has exacerbated the damage caused by the new crown epidemic, and many countries may face a recession.
The World Bank said in its Global Economic Outlook report that Russia's invasion of Ukraine has exacerbated a global slowdown that may be entering a "protracted period of weak growth and rising inflation".
World Bank President David Malpass said global growth was being hit by wars, China's coronavirus lockdown, supply chain disruptions and the risk of stagflation. The 1970s saw a period of stagflation with low economic growth and high inflation.
“The danger of stagflation is considerable today,” Malpass wrote in the report’s foreword. “With weak investment in much of the world, subdued economic growth is likely to persist for the entire decade. Highs, supply is expected to grow slowly and inflation is likely to remain elevated for longer.”
Global economic growth is expected to slow by 2.7 percentage points between 2021 and 2024, more than double the rate of deceleration between 1976 and 1979, Malpass said.
The World Bank warned that the rate hikes needed to control inflation in the late 1970s were so large that they sparked the 1982 global recession and a series of financial crises in emerging market and developing economies.
While there are similarities between the situation now and then, there are also important differences. To reduce risks, Malpass said, policymakers should work to coordinate aid to Ukraine, deal with soaring oil and food prices, strengthen debt relief, intensify efforts to contain the new crown epidemic, and accelerate the transition to a low-carbon economy.
The World Bank expects global growth to slip to 2.9% in 2022 from 5.7% in 2021, with growth hovering around that level in 2023 and 2024. The World Bank said global inflation should moderate next year, but inflation is likely to remain above target in many economies.
After reaching 5.1% in 2021, the economic growth rate of advanced economies is expected to slow sharply to 2.6% in 2022 and further slow to 2.2% in 2023.
Emerging market and developing economies are expected to grow by just 3.4% in 2022, down from 6.6% in 2021 and well below the 4.8% average annual growth rate from 2011-2019.
Negative spillovers from the Ukraine war will be more than enough to offset a short-term boost from higher energy prices for commodity exporters, with nearly 70% of emerging market and developing economies downgrading their 2022 growth forecasts.
After growing by 6.5% in 2021, the European and Central Asia region, excluding Western Europe, is expected to contract by 2.9% in 2022 before rebounding slightly to grow by 1.5% in 2023. Ukraine's economy is expected to shrink by 45.1% and Russia's by 8.9%.
Economic growth in Latin America and the Caribbean is expected to slow sharply, growing just 2.5% this year before slowing further to 1.9% in 2023, the World Bank said.
The Middle East and North Africa will benefit from higher oil prices, with growth expected to reach 5.3% in 2022 and slow to 3.6% in 2023. South Asia is expected to grow 6.8% this year and 5.8% in 2023.
Economic growth in sub-Saharan Africa is expected to slow by 3.7% in 2022 from 4.2% in 2021, the World Bank said.
[U.S. Treasury Secretary Yellen says U.S. inflation is "unacceptable" and may remain high]
U.S. Treasury Secretary Janet Yellen told senators on Tuesday that the U.S. faces "unacceptable levels of inflation" and that an appropriate budget stance is needed to help contain inflationary pressures without hurting the economy. Inflation is likely to remain high, she added, but she is hopeful that price increases will slow soon.
In a Senate Finance Committee hearing, Yellen pushed back against Republicans' claims that the highest inflation in 40 years was caused by the $1.9 trillion coronavirus spending bill enacted by Democratic President Joe Biden last year.
“We are seeing high inflation in almost all developed countries in the world. Fiscal policies in these countries are very different,” she said, “so it is unlikely that the inflation we are experiencing is largely reflecting the impact of ARP.”
Yellen said she believes inflation is largely the result of a mismatch between supply and demand, including excessive demand for goods relative to demand for services and severely disrupted supply chains during the pandemic. High energy and food prices caused by Russia's invasion of Ukraine also pushed up inflation, she said.
"I do expect inflation to remain high, although I would very much like it to come down," she said.
She insisted that tackling inflation is Biden's top priority, and said some parts of the president's proposed social and climate legislation, including prescription drugs and clean energy technology, could help Americans keep costs down.
Yellen came under fire from Republicans after she admitted last year that she "wrongly" predicted inflation to be temporary and to subside quickly. Yellen will also face tougher questions on the issue Wednesday before the House Ways and Means Committee.
Yellen added that she and Fed Chair Jerome Powell "probably should have used a better word than 'temporary'" when describing inflation that they believe will subside quickly.
"When I said inflation would be temporary, what I didn't foresee was that we would end up fighting multiple variants of Covid-19, disrupting our economy and global supply chains, I didn't foresee the Russian invasion of Ukraine affecting food and energy prices," Yellen said.
“To contain inflationary pressures without weakening the labor market, an appropriate budget stance is needed to complement the Fed’s monetary policy actions,” Yellen said in prepared remarks.
Yellen said the U.S., despite being a major energy producer and exporter, was "almost impossible" to be immune to price shocks in the oil market and needed to move forward with the transition to renewable energy.
Investors will pay close attention to the latest inflation data due to the release of the U.S. consumer price index (CPI) for May.
Han Tan, chief market analyst at Exinity, said, "High inflation threatens to further erode consumption while increasing the possibility of monetary policy mistakes, a risk that underpins safe-haven demand."
Tan added that if upcoming CPI data show inflation has peaked, the Fed's extreme hawkish stance may subside and encourage bulls to push gold closer to $1,890.
"Rising inflation concerns are supporting gold prices, which have historically been a bullish factor for metals markets," said Jim Wyckoff, senior analyst at Kitco Metals.
[The dollar is suppressed by the 21-day moving average]
The U.S. dollar index rose and fell on Tuesday. It once hit a new high of 102.84 in nearly two weeks during the session, just near the resistance of the 21-day moving average, but later gave up all the gains and closed at 102.34. Wall Street stocks regained earlier losses, and people are increasingly hopeful that inflation may have been topped out.
Yields on longer-dated U.S. Treasuries also eased as slowing inflation threatens to slow the Fed's rate-hike plans, hitting a 3-1/2-week high overnight on worries the central bank will continue to aggressively raise rates to fight inflation.
Thomas Martin, senior portfolio manager at Globalt Investments, said: “The market is pricing in the expectation that the Fed will deliver on almost everything it promises, but having said that, people are starting to realise that inflation may have peaked and may start to fall back.”
"Retailers are facing a build-up of inventory and will see some price declines, so U.S. yields have stalled, at least at current levels."
[The fierce street fighting in Northeastern Ukrainian city continues, Zelensky said that all the territory will be recovered]
Ukrainian President Volodymyr Zelenskiy said on Tuesday that Ukraine will fight to retake all territory occupied by Russian troops, which are struggling to defend positions in brutal street fighting in Severo Donetsk.
"We've lost too many people, let alone ceding our territory so easily," Zelensky said via video link at an event hosted by the Financial Times. "We must free all territories from occupation completely."
Zelensky's remarks were a forceful response to suggestions that Ukraine must cede territory to Russia to end the war, now in its fourth month.
French President Emmanuel Macron said in a recent interview that it was important not to "humiliate" Moscow, comments that were interpreted in Ukraine as suggesting the country must accept some of Russia's demands.
When asked about Macron's comments, Zelensky said, "We're not going to shame anyone, we're going to retaliate."
Defenders in the eastern industrial city of Severo Donetsk are finding it difficult to repel the Russian offensive, said Serhiy Gaidai, governor of the Luhansk region.
"The Russians are going all out to try to occupy Severo Donetsk and cut off the highway from Lisenshansk to Bakhmut," he posted online. "In the center of the district, it was difficult to resist the attack, but the occupiers did not control the town."
Moscow said the Russian army had been advancing.
In his post, Gaidai said that Lissenshansk was under constant bombardment.
Russia has been advancing from three main directions, east, north and south, trying to encircle the Ukrainians in the Donbas region.
Ukraine is one of the world's biggest grain exporters, and Western countries have accused Russia of risking global famine by closing Ukraine's Black Sea ports. Moscow has denied responsibility for the international food crisis, blaming Western sanctions instead.
Russian Defense Minister Sergei Shoigu said the Russian-occupied Ukrainian ports of Berdyansk and Mariupol are ready to resume grain exports. Ukraine said any such exports from territory seized by Russian forces amounted to illegal looting.
Zelensky said Kyiv was gradually receiving "specialized anti-ship systems" as the best way to break Russia's blockade of Ukrainian ports.
To resume exports from Ukrainian-controlled ports, Kyiv must first clear the port of mines, the Kremlin said. Russia can then inspect and escort the vessel to international waters, Kremlin spokesman Peskov said.
[The U.S. trade deficit fell the most in nearly 9-1/2 years in April, which may give a boost to growth in the second quarter]
The U.S. trade deficit fell by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on track to contribute to economic growth this quarter.
A sharp drop in the trade deficit reversed a surge in March, data from the Commerce Department showed on Tuesday, suggesting trade may be returning to a more normal pattern. As the U.S. economy takes the lead in recovering from the global recession of the new crown pandemic, the trade deficit continues to widen, hitting consecutive record highs.
The persistence of the Covid-19 pandemic and supply chain disruptions have resulted in extreme volatility in trade data.
“The deficit trend over the past two years has continued to widen as the U.S. economy has generally grown faster than most major trading partners during this period,” said Jay Bryson, chief economist at Wells Fargo. Modest positive contribution."
The U.S. trade deficit fell 19.1% to $87.1 billion in April, the largest drop since December 2012. Revised March data showed the trade deficit was revised down to a record high of $107.7 billion instead of the previously reported $109.8 billion.
Economists had expected the trade deficit to shrink to $89.5 billion. The government also revised several years of trade data, revising previously published forecasts through the first quarter, which could lead to an upward revision to first-quarter gross domestic product.
The record trade deficit slashed GDP by 3.23 percentage points in the first quarter, resulting in an annualized contraction of 1.5% in sequential growth, after a strong 6.9% growth in the fourth quarter.
After the revisions, economists expect first-quarter GDP to shrink by about 1.3% when the government releases its third forecast later this month. Trade has been a drag on GDP for seven straight quarters.
Economic growth is expected to be as high as 4.8% in the second quarter. The trade deficit in April was about $7.5 billion below the first-quarter average.
"If this level is maintained through June, it could contribute about two percentage points to second-quarter gross domestic product (GDP)," said Lou Crandall, chief economist at Wrightson ICAP.
U.S. exports of goods and services rose 3.5% in April to an all-time high of $252.6 billion. Shipments of industrial supplies and raw materials hit record highs, while exports of natural gas, precious metals and petroleum products increased.
Oil exports rose to a record high of $27.2 billion from $26.3 billion in March. Food exports also hit an all-time high, with U.S. soybean sales up $2.1 billion. Exports of capital goods rose $1.2 billion to $47.5 billion, the highest level since March 2019, while exports of civilian aircraft rose $1.3 billion.
Services exports rose $2.4 billion to $76.5 billion, driven by growth in tourism and transportation.
U.S. imports of goods and services fell 3.4% to $339.7 billion. Imports have been growing rapidly as companies replenish inventories to meet strong domestic demand.
But demand is slowing as the Fed raises interest rates to fight inflation. Inventories of some goods were also near normal levels, reducing import demand.
"While an increasingly hawkish Fed, a stronger dollar and a larger asset sell-off have weighed on gold prices, early June was close to where it was at the start of the year," Neil Meader, head of gold and silver at Metals Focus, wrote in a note. , outperformed stocks and bonds. Looking ahead to the second half of the year, despite rising risks and market uncertainty, they expect the Fed to drive a soft landing as inflation begins to cool and growth remains healthy.”
This environment will weigh on gold prices, Meader said. With policy rates rising and inflation falling, we expect real rates and yields to rise sharply in the second half of the year, which will weigh on gold prices.
[U.S. stocks closed higher, boosted by technology stocks and energy]
U.S. stocks rose late on Tuesday, closing higher for a second straight session, with technology and energy stocks gaining and the S&P 500 approaching a near one-month high.
Apple rose 1.8 percent despite earlier news that it has until 2024 to replace the port on iPhones sold in Europe after EU countries and lawmakers agreed to a single charging port for phones, tablets and cameras.
The S&P 500 technology index rose 1 percent, giving the benchmark the biggest boost. Microsoft climbed 1.4 percent. The S&P 500 energy index jumped 3.1 percent to close at its highest level since 2014 as oil prices rose sharply.
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said: "We've seen a nice rebound lately ... Overall, investors are feeling a lot better now. But the market is still in a tug of war, like we've seen so far this year."
"At some point, the market will bottom and then it will move higher, and it's hard for us to believe that's going to happen anytime soon because there are a lot of fundamental issues hanging over the market," he said. "Certainly, it's not good news out of Target today in terms of consumer goods stocks."
As of Tuesday's close, the Dow Jones Industrial Average rose 264.36 points, or 0.8%, to 33180.14; the S&P 500 rose 39.25 points, or 0.95%, to 4160.68; the Nasdaq rose 113.86 points, or 0.94%, to 12175.23 point.
Avatrade's Naeem Aslam said gold prices will look weak ahead of the U.S. CPI report. Gold prices have outperformed the S&P 500 this year, demonstrating its ability to resist a stock market pullback.
As the timing moves into the second half of the year, the team of Michael Arone, chief investment strategist at State Street Global Advisors, advises investors to focus on corporate fundamentals and consider inflation-sensitive assets such as gold. As the Federal Reserve is expected to continue to tighten financial conditions, it is foreseeable that gold prices will continue to fluctuate in the second half of the year.
In the short-term, the price of gold tends to maintain a volatile trend. Pay attention to the breakthrough in the 1828-1870 area. For a larger range, refer to the breakthrough in the 1800-1900 area.
At 10:15 GMT+8, spot gold is now at $1,849.35 per ounce.
There is no important economic data released this trading day, pay attention to the news of US Treasury Secretary Yellen, GMT+8 22:00, Yellen will testify before the US House Ways and Means Committee to discuss President Biden's 2023 budget.
Fundamentals are mostly bullish
[The World Bank lowered its global growth forecast for this year to 2.9%, warning of the risk of "stagflation"]
The World Bank on Tuesday cut its 2022 global growth forecast by 1.2 percentage points to 2.9 percent and warned that Russia's invasion of Ukraine has exacerbated the damage caused by the new crown epidemic, and many countries may face a recession.
The World Bank said in its Global Economic Outlook report that Russia's invasion of Ukraine has exacerbated a global slowdown that may be entering a "protracted period of weak growth and rising inflation".
World Bank President David Malpass said global growth was being hit by wars, China's coronavirus lockdown, supply chain disruptions and the risk of stagflation. The 1970s saw a period of stagflation with low economic growth and high inflation.
“The danger of stagflation is considerable today,” Malpass wrote in the report’s foreword. “With weak investment in much of the world, subdued economic growth is likely to persist for the entire decade. Highs, supply is expected to grow slowly and inflation is likely to remain elevated for longer.”
Global economic growth is expected to slow by 2.7 percentage points between 2021 and 2024, more than double the rate of deceleration between 1976 and 1979, Malpass said.
The World Bank warned that the rate hikes needed to control inflation in the late 1970s were so large that they sparked the 1982 global recession and a series of financial crises in emerging market and developing economies.
While there are similarities between the situation now and then, there are also important differences. To reduce risks, Malpass said, policymakers should work to coordinate aid to Ukraine, deal with soaring oil and food prices, strengthen debt relief, intensify efforts to contain the new crown epidemic, and accelerate the transition to a low-carbon economy.
The World Bank expects global growth to slip to 2.9% in 2022 from 5.7% in 2021, with growth hovering around that level in 2023 and 2024. The World Bank said global inflation should moderate next year, but inflation is likely to remain above target in many economies.
After reaching 5.1% in 2021, the economic growth rate of advanced economies is expected to slow sharply to 2.6% in 2022 and further slow to 2.2% in 2023.
Emerging market and developing economies are expected to grow by just 3.4% in 2022, down from 6.6% in 2021 and well below the 4.8% average annual growth rate from 2011-2019.
Negative spillovers from the Ukraine war will be more than enough to offset a short-term boost from higher energy prices for commodity exporters, with nearly 70% of emerging market and developing economies downgrading their 2022 growth forecasts.
After growing by 6.5% in 2021, the European and Central Asia region, excluding Western Europe, is expected to contract by 2.9% in 2022 before rebounding slightly to grow by 1.5% in 2023. Ukraine's economy is expected to shrink by 45.1% and Russia's by 8.9%.
Economic growth in Latin America and the Caribbean is expected to slow sharply, growing just 2.5% this year before slowing further to 1.9% in 2023, the World Bank said.
The Middle East and North Africa will benefit from higher oil prices, with growth expected to reach 5.3% in 2022 and slow to 3.6% in 2023. South Asia is expected to grow 6.8% this year and 5.8% in 2023.
Economic growth in sub-Saharan Africa is expected to slow by 3.7% in 2022 from 4.2% in 2021, the World Bank said.
[U.S. Treasury Secretary Yellen says U.S. inflation is "unacceptable" and may remain high]
U.S. Treasury Secretary Janet Yellen told senators on Tuesday that the U.S. faces "unacceptable levels of inflation" and that an appropriate budget stance is needed to help contain inflationary pressures without hurting the economy. Inflation is likely to remain high, she added, but she is hopeful that price increases will slow soon.
In a Senate Finance Committee hearing, Yellen pushed back against Republicans' claims that the highest inflation in 40 years was caused by the $1.9 trillion coronavirus spending bill enacted by Democratic President Joe Biden last year.
“We are seeing high inflation in almost all developed countries in the world. Fiscal policies in these countries are very different,” she said, “so it is unlikely that the inflation we are experiencing is largely reflecting the impact of ARP.”
Yellen said she believes inflation is largely the result of a mismatch between supply and demand, including excessive demand for goods relative to demand for services and severely disrupted supply chains during the pandemic. High energy and food prices caused by Russia's invasion of Ukraine also pushed up inflation, she said.
"I do expect inflation to remain high, although I would very much like it to come down," she said.
She insisted that tackling inflation is Biden's top priority, and said some parts of the president's proposed social and climate legislation, including prescription drugs and clean energy technology, could help Americans keep costs down.
Yellen came under fire from Republicans after she admitted last year that she "wrongly" predicted inflation to be temporary and to subside quickly. Yellen will also face tougher questions on the issue Wednesday before the House Ways and Means Committee.
Yellen added that she and Fed Chair Jerome Powell "probably should have used a better word than 'temporary'" when describing inflation that they believe will subside quickly.
"When I said inflation would be temporary, what I didn't foresee was that we would end up fighting multiple variants of Covid-19, disrupting our economy and global supply chains, I didn't foresee the Russian invasion of Ukraine affecting food and energy prices," Yellen said.
“To contain inflationary pressures without weakening the labor market, an appropriate budget stance is needed to complement the Fed’s monetary policy actions,” Yellen said in prepared remarks.
Yellen said the U.S., despite being a major energy producer and exporter, was "almost impossible" to be immune to price shocks in the oil market and needed to move forward with the transition to renewable energy.
Investors will pay close attention to the latest inflation data due to the release of the U.S. consumer price index (CPI) for May.
Han Tan, chief market analyst at Exinity, said, "High inflation threatens to further erode consumption while increasing the possibility of monetary policy mistakes, a risk that underpins safe-haven demand."
Tan added that if upcoming CPI data show inflation has peaked, the Fed's extreme hawkish stance may subside and encourage bulls to push gold closer to $1,890.
"Rising inflation concerns are supporting gold prices, which have historically been a bullish factor for metals markets," said Jim Wyckoff, senior analyst at Kitco Metals.
[The dollar is suppressed by the 21-day moving average]
The U.S. dollar index rose and fell on Tuesday. It once hit a new high of 102.84 in nearly two weeks during the session, just near the resistance of the 21-day moving average, but later gave up all the gains and closed at 102.34. Wall Street stocks regained earlier losses, and people are increasingly hopeful that inflation may have been topped out.
Yields on longer-dated U.S. Treasuries also eased as slowing inflation threatens to slow the Fed's rate-hike plans, hitting a 3-1/2-week high overnight on worries the central bank will continue to aggressively raise rates to fight inflation.
Thomas Martin, senior portfolio manager at Globalt Investments, said: “The market is pricing in the expectation that the Fed will deliver on almost everything it promises, but having said that, people are starting to realise that inflation may have peaked and may start to fall back.”
"Retailers are facing a build-up of inventory and will see some price declines, so U.S. yields have stalled, at least at current levels."
[The fierce street fighting in Northeastern Ukrainian city continues, Zelensky said that all the territory will be recovered]
Ukrainian President Volodymyr Zelenskiy said on Tuesday that Ukraine will fight to retake all territory occupied by Russian troops, which are struggling to defend positions in brutal street fighting in Severo Donetsk.
"We've lost too many people, let alone ceding our territory so easily," Zelensky said via video link at an event hosted by the Financial Times. "We must free all territories from occupation completely."
Zelensky's remarks were a forceful response to suggestions that Ukraine must cede territory to Russia to end the war, now in its fourth month.
French President Emmanuel Macron said in a recent interview that it was important not to "humiliate" Moscow, comments that were interpreted in Ukraine as suggesting the country must accept some of Russia's demands.
When asked about Macron's comments, Zelensky said, "We're not going to shame anyone, we're going to retaliate."
Defenders in the eastern industrial city of Severo Donetsk are finding it difficult to repel the Russian offensive, said Serhiy Gaidai, governor of the Luhansk region.
"The Russians are going all out to try to occupy Severo Donetsk and cut off the highway from Lisenshansk to Bakhmut," he posted online. "In the center of the district, it was difficult to resist the attack, but the occupiers did not control the town."
Moscow said the Russian army had been advancing.
In his post, Gaidai said that Lissenshansk was under constant bombardment.
Russia has been advancing from three main directions, east, north and south, trying to encircle the Ukrainians in the Donbas region.
Ukraine is one of the world's biggest grain exporters, and Western countries have accused Russia of risking global famine by closing Ukraine's Black Sea ports. Moscow has denied responsibility for the international food crisis, blaming Western sanctions instead.
Russian Defense Minister Sergei Shoigu said the Russian-occupied Ukrainian ports of Berdyansk and Mariupol are ready to resume grain exports. Ukraine said any such exports from territory seized by Russian forces amounted to illegal looting.
Zelensky said Kyiv was gradually receiving "specialized anti-ship systems" as the best way to break Russia's blockade of Ukrainian ports.
To resume exports from Ukrainian-controlled ports, Kyiv must first clear the port of mines, the Kremlin said. Russia can then inspect and escort the vessel to international waters, Kremlin spokesman Peskov said.
The fundamentals are mainly bearish
[The U.S. trade deficit fell the most in nearly 9-1/2 years in April, which may give a boost to growth in the second quarter]
The U.S. trade deficit fell by the most in nearly 9-1/2 years in April as exports jumped to a record high, putting trade on track to contribute to economic growth this quarter.
A sharp drop in the trade deficit reversed a surge in March, data from the Commerce Department showed on Tuesday, suggesting trade may be returning to a more normal pattern. As the U.S. economy takes the lead in recovering from the global recession of the new crown pandemic, the trade deficit continues to widen, hitting consecutive record highs.
The persistence of the Covid-19 pandemic and supply chain disruptions have resulted in extreme volatility in trade data.
“The deficit trend over the past two years has continued to widen as the U.S. economy has generally grown faster than most major trading partners during this period,” said Jay Bryson, chief economist at Wells Fargo. Modest positive contribution."
The U.S. trade deficit fell 19.1% to $87.1 billion in April, the largest drop since December 2012. Revised March data showed the trade deficit was revised down to a record high of $107.7 billion instead of the previously reported $109.8 billion.
Economists had expected the trade deficit to shrink to $89.5 billion. The government also revised several years of trade data, revising previously published forecasts through the first quarter, which could lead to an upward revision to first-quarter gross domestic product.
The record trade deficit slashed GDP by 3.23 percentage points in the first quarter, resulting in an annualized contraction of 1.5% in sequential growth, after a strong 6.9% growth in the fourth quarter.
After the revisions, economists expect first-quarter GDP to shrink by about 1.3% when the government releases its third forecast later this month. Trade has been a drag on GDP for seven straight quarters.
Economic growth is expected to be as high as 4.8% in the second quarter. The trade deficit in April was about $7.5 billion below the first-quarter average.
"If this level is maintained through June, it could contribute about two percentage points to second-quarter gross domestic product (GDP)," said Lou Crandall, chief economist at Wrightson ICAP.
U.S. exports of goods and services rose 3.5% in April to an all-time high of $252.6 billion. Shipments of industrial supplies and raw materials hit record highs, while exports of natural gas, precious metals and petroleum products increased.
Oil exports rose to a record high of $27.2 billion from $26.3 billion in March. Food exports also hit an all-time high, with U.S. soybean sales up $2.1 billion. Exports of capital goods rose $1.2 billion to $47.5 billion, the highest level since March 2019, while exports of civilian aircraft rose $1.3 billion.
Services exports rose $2.4 billion to $76.5 billion, driven by growth in tourism and transportation.
U.S. imports of goods and services fell 3.4% to $339.7 billion. Imports have been growing rapidly as companies replenish inventories to meet strong domestic demand.
But demand is slowing as the Fed raises interest rates to fight inflation. Inventories of some goods were also near normal levels, reducing import demand.
"While an increasingly hawkish Fed, a stronger dollar and a larger asset sell-off have weighed on gold prices, early June was close to where it was at the start of the year," Neil Meader, head of gold and silver at Metals Focus, wrote in a note. , outperformed stocks and bonds. Looking ahead to the second half of the year, despite rising risks and market uncertainty, they expect the Fed to drive a soft landing as inflation begins to cool and growth remains healthy.”
This environment will weigh on gold prices, Meader said. With policy rates rising and inflation falling, we expect real rates and yields to rise sharply in the second half of the year, which will weigh on gold prices.
[U.S. stocks closed higher, boosted by technology stocks and energy]
U.S. stocks rose late on Tuesday, closing higher for a second straight session, with technology and energy stocks gaining and the S&P 500 approaching a near one-month high.
Apple rose 1.8 percent despite earlier news that it has until 2024 to replace the port on iPhones sold in Europe after EU countries and lawmakers agreed to a single charging port for phones, tablets and cameras.
The S&P 500 technology index rose 1 percent, giving the benchmark the biggest boost. Microsoft climbed 1.4 percent. The S&P 500 energy index jumped 3.1 percent to close at its highest level since 2014 as oil prices rose sharply.
Tim Ghriskey, senior portfolio strategist at Ingalls & Snyder, said: "We've seen a nice rebound lately ... Overall, investors are feeling a lot better now. But the market is still in a tug of war, like we've seen so far this year."
"At some point, the market will bottom and then it will move higher, and it's hard for us to believe that's going to happen anytime soon because there are a lot of fundamental issues hanging over the market," he said. "Certainly, it's not good news out of Target today in terms of consumer goods stocks."
As of Tuesday's close, the Dow Jones Industrial Average rose 264.36 points, or 0.8%, to 33180.14; the S&P 500 rose 39.25 points, or 0.95%, to 4160.68; the Nasdaq rose 113.86 points, or 0.94%, to 12175.23 point.
Outlook
Avatrade's Naeem Aslam said gold prices will look weak ahead of the U.S. CPI report. Gold prices have outperformed the S&P 500 this year, demonstrating its ability to resist a stock market pullback.
As the timing moves into the second half of the year, the team of Michael Arone, chief investment strategist at State Street Global Advisors, advises investors to focus on corporate fundamentals and consider inflation-sensitive assets such as gold. As the Federal Reserve is expected to continue to tighten financial conditions, it is foreseeable that gold prices will continue to fluctuate in the second half of the year.
In the short-term, the price of gold tends to maintain a volatile trend. Pay attention to the breakthrough in the 1828-1870 area. For a larger range, refer to the breakthrough in the 1800-1900 area.
At 10:15 GMT+8, spot gold is now at $1,849.35 per ounce.
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