Gold trading reminder: The Fed strengthens its expectations for a reduction in the year, and the rise in gold prices may be unsustainable!
In the Asian session on September 28, spot gold held steady at around 1750. As Fed officials strengthened their expectations for a reduction in this year on Monday, the yields of the U.S. dollar and U.S. Treasury both rose, and the price of gold rose and fell and remained stable, and the gold price may be further under pressure in the future.

On Tuesday (September 28) Asian session, spot gold price held steady at around 1750. On Monday (September 27), the price of gold rose and fell and remained stable. The rising dollar and US bond yields brought pressure, but the stock market closed down and the European Central Bank continued to maintain dovishness to provide momentum for gold prices.
Pay attention to the US September Chamber of Commerce Consumer Confidence Index and Fed Chairman Powell's speech. The data is currently expected to be slightly better than the previous value, which is negative for the price of gold.
Fundamentals are bullish
[S&P 500 Index and Nasdaq closed lower as U.S. Treasury yields hit technology stocks]
The U.S. stock market S&P 500 index and the Nasdaq index closed lower on Monday, and investors turned to value stocks, as technology stocks were hit by rising U.S. Treasury yields, which caused a drag on the stock market in the last week of the quarter.
(S&P 500 daily chart)
Chuck Carlson, CEO of Horizon Investment Services, said, "Economically sensitive stocks have risen, technology stocks have been hit hard, and economic restart trading is very active.
Carlson added that the Fed is also hinting that it will begin to reduce the pace of asset purchases sooner rather than later, which may help interest rates rise. "Rising interest rates usually reflect an increase in investor confidence that the economy is not stagnating.
Rising bond yields have hit some market leaders who have benefited from low interest rates.
In Washington, at the beginning of this week, negotiations on funding the government and raising the debt ceiling have heated up. This week Congress may also vote on the $1 trillion infrastructure bill proposed by President Biden.
The S&P 500 index is about to suspend its seven consecutive months of gains , affected by the prospect of raising corporate tax rates and the Fed's hint that it may begin to tighten loose monetary policy in the next few months.
[European Central Bank President Lagarde said the increase in inflation is largely temporary]
European Central Bank President Lagarde stated in the European Parliament that the inflation rate this fall is expected to rise further from the 3% reached in August, but "we continue to believe that this rise is largely temporary."
The impact of measures including rising oil prices and ending the reduction of the VAT rate in Germany "should disappear in the next year."
Raw material shortages may be more persistent than expected, and rising inflation may also lead to higher than expected wage needs.
"But so far, we have seen limited signs of this risk, which means that our baseline scenario assumptions continue to predict that inflation will fall below the target in the medium term."
"Favorable financing conditions are essential for the continued economic recovery and the sustained closeness of inflation to our goals."
Fundamentals are bad
[Fed officials reinforce the message that they will reduce the weight and be patient with interest rate hikes in the near future]
Fed officials strengthened the message released by the policy meeting last week: may soon begin to shrink the scale of bond purchases, but the economy still has a way to go before it is suitable to raise interest rates.
Fed Governor Brainard said in a speech to the National Association of Business Economics on Monday that labor market conditions may "soon" constitute a reason for underweight.
Brainard added: “Any decision to slow down asset purchases should not be seen as a signal about the timing of the first interest rate hike.”
New York Fed Chairman Williams and Chicago Fed Chairman Evans made similar remarks on Monday, echoing the Fed’s policy guidance issued last week.
Williams said at a video event at the Economic Club of New York: "There is still a long way to go before full employment."
Evans answered questions from reporters at the same meeting with Brainard, saying that his first rate hike is 2023, and thereafter it will "rise very gently."
Minneapolis Federal Reserve Chairman Kashkari also predicted that inflation will ease. "We don't want to overreact to short-term price movements. We want to ensure that the economy returns to full growth," he said in an online question and answer posted on the Federal Reserve's website. "I wouldn't be surprised if it will take six months or most of next year to get people back to work fully."
[August strong growth in US corporate equipment spending is expected to support third-quarter GDP growth]
The steady increase in new orders and shipments for key capital goods in the United States in August, boosted by strong demand for computers and electronic products, is expected to drive corporate equipment spending once again to record strong quarterly growth.
It is expected that continued strong corporate investment will limit the expected slowdown in consumer spending to hit economic growth in the third quarter . As fiscal stimulus measures weaken and new cases surge, consumer spending is expected to slow down. Companies are eager to replenish inventory to boost commodity demand, but supply chain pressure remains a challenge.
Michael Pearce, senior U.S. analyst at Capital Investment Corporation, said: “The outlook for corporate equipment investment remains bright. The latest corporate survey shows that the growth rate will remain close to the level of recent quarters. One of the reasons why the growth rate of GDP will only slow down slightly, although the slowdown in consumption growth will be even greater."
The US Department of Commerce said on Monday that orders for non-defense capital goods deducting aircraft in August increased by 0.5% from the previous month, which is a closely watched indicator of corporate spending plans.
Including orders for durable goods, ranging from toasters to airplanes, which are expected to last for three years or more , they rose by 1.8% in August after climbing 0.5% in July. A 5.5% jump in orders for transportation equipment provided a boost, and such orders fell 0.4% in July.
[The U.S. dollar climbed for the second day in a row, following the rise in U.S. bond yields]
The U.S. dollar rose for the second consecutive trading day on Monday. Boosted by the rise in U.S. Treasury yields , a series of Fed officials’ speeches this week may confirm the expectation of starting to reduce asset purchase plans before the end of the year.
(Daily chart of the US dollar index)
Federal Reserve officials, including an influential governor, on Monday linked the reduction in monthly debt purchases to continued employment growth. The September employment report is now a potential trigger for the Fed’s “scaling” action.
Fed Chairman Powell and U.S. Treasury Secretary Yellen will speak in Congress on Tuesday.
Previously released data showed that US new orders and shipments for key capital goods increased steadily in August, and core capital goods orders increased by 0.5% from the previous month, boosted by strong demand for computers and electronic products. The dollar subsequently continued its gains.
U.S. Treasury yields climbed to the highest since late June. The market expected the Fed to tighten monetary policy. The Fed announced last week that it may start to reduce the scale of stimulus as early as November, and hinted that interest rate hikes may come sooner than expected.
Mazen Issa, a senior foreign exchange strategist at TD Securities, wrote in a research report, "Although the reduction in asset purchases is not surprising in itself, the downside risk of the early termination of the plan that will strengthen the US dollar has been reduced."
TD Securities predicts that the Fed will end its quantitative easing program by June 2022. "If there is any reference value in the last round of reduction cycle, it is that about half of the dollar's cyclical upward movement occurred three months after the reduction."
[The yield on the 10-year U.S. Treasury bond breaks through 1.5%]
Boosted by the economic outlook and the optimism of the Fed’s tightening policy, the U.S. 10-year Treasury bond yield exceeded 1.5% for the first time since June , continuing the shift that began after the Fed meeting last week, when Fed members said that it might be as early as November. Start to reduce debt and raise interest rates next year.
Analysts said that other factors have also helped to stimulate the recent increase in yields. The reopening of businesses, strong consumer demand and the decline in new crown cases have boosted investor optimism about the U.S. economy.
The stock market has also rebounded from the September plunge. In addition, investors are liquidating recent hot deals that have bet on lower or stable US Treasury yields, which has increased the rate of increase in Treasury yields.
[September 27 gold ETF holdings: SPDR gold holdings decreased by 3.2 tons]
According to the data of gold ETFs on September 28, the world's largest gold ETF-SPDR Gold Trust held 990.32 tons of gold as of September 27, a decrease of 3.2 tons from the previous trading day.
In general, the trend of gold prices is still weak, and the upside space is very limited. The gold price still has greater downward pressure in the market outlook.
(Spot gold daily chart)
GMT+8 8:46, spot gold was quoted at US$1,749.87 per ounce.
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