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Market News Gold trading reminder: The US dollar strengthens again but the gains are limited, the weak gold price is expected to continue, pay attention to the European Bank's resolution

Gold trading reminder: The US dollar strengthens again but the gains are limited, the weak gold price is expected to continue, pay attention to the European Bank's resolution

In the Asian session on September 9, spot gold held steady at around 1789. Gold prices ushered in a three-day losing streak on Wednesday. As the U.S. dollar strengthened again, the price of gold is expected to continue its weak trend in the market outlook. We will pay attention to the European Bank's decision in the day.

LEO
2021-09-09
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On Thursday (September 9) Asian session, spot gold price held steady at around 1789. The price of gold fell slightly on Wednesday (September 8) as the US dollar rose to a one-week high and job vacancies continued to rise slightly in July. However, Williams’ dovish speech and the collective decline in the stock market supported gold prices.

In the day, we will focus on the European Central Bank's interest rate decision and the data on initial unemployment claims in the United States.


Fundamentals are bad


[Kaplan downgrades this year's US GDP forecast, and still supports the reduction of debt purchases starting in October]

Dallas Fed President Kaplan said on Wednesday that due to the recurring COVID-19 pandemic, he lowered his forecast for US gross domestic product (GDP) growth this year, but he reiterated that as long as there is no fundamental change in the outlook, he supports starting to reduce the Fed’s assets in October. Purchase plan.

Kaplan said at the Dallas Fed meeting: "Worries about the epidemic are having an impact." He predicted that recruitment in September will slow down and demand in the third quarter will be suppressed, but there will be no "long-term" impact. He said that the US economy may grow by 6% this year, which is lower than his earlier forecast of 6.5%, but there has been no fundamental change so far.

[The number of vacancies in the United States rose to 10.9 million in July]

The number of job vacancies in the United States rose to a record high in July, indicating that labor shortages continue to exist, posing a challenge for companies to meet customer needs.

The Job Vacancies and Labor Turnover Survey (JOLTS) released by the US Department of Labor on Wednesday showed that the number of job vacancies rose to 10.9 million in July and was revised up to 10.2 million in June. Economists surveyed expected a median value of 10 million.

Since the number of non-agricultural jobs dropped by millions last year, the rapid recovery in economic activity has led to a serious shortage of employees in many companies. You can see "recruitment" messages posted on the windows of merchants across the United States, and many restaurants have to restrict business hours.

Looking to the future, as worries about the new crown epidemic weaken and schools reopen, the problem of recruitment difficulties will also be eased accordingly. However, the surge in cases related to the delta strain, and its impact on school and workplace safety, may make improvements in job vacancy data come later.

The number of job vacancies in July was 4.3 million more than the number of recruits, the highest level on record since 2000. The number of voluntary turnovers increased to 4 million that month, and the turnover rate was flat at 2.7%, close to a record high.

[The U.S. dollar appreciates but the gains are limited]

The U.S. dollar rose to a one-week high on Wednesday, as concerns about the prospects of global economic growth led investors to turn to the U.S. dollar to seek safe-haven, but the gains were suppressed by Fed officials’ dovish views on the economic prospects . Investors also waited and watched the European Central Bank meeting on Thursday. .

(Daily chart of the US dollar index)

New York Fed Chairman Williams said that the labor market needs more progress to allow the Fed’s full employment goal to make further substantial progress.

Edward Moya, senior market analyst at OANDA, said: “The Fed will obviously be on the sidelines in the next few months to observe how the economy is going. The idea of debt scale."

Fundamentals are bullish


[Chairman of the New York Fed: It may be appropriate to reduce the scale of debt purchases this year]

New York Fed Chairman Williams said that it may be appropriate for the Fed to start reducing bond purchases before the end of the year.

In a speech prepared for the online event on Wednesday, Williams said: “Assuming that the economy continues to improve as I expected, it may be appropriate to start reducing the asset purchase speed this year. I will carefully evaluate the labor market data to be released and its The significance of the economic outlook, considering the impact of the delta strain and other risk factors."

The Fed reduced its benchmark interest rate to a level close to zero and purchased bonds when the epidemic began last year. The Fed said it will continue to buy at the current rate of $120 billion per month until the economy has made “substantial further progress” in achieving full employment and price stability goals. Many officials have stated that they believe they will achieve this goal this year.

Williams said: " I think it is very clear that we have made substantial further progress in achieving the inflation target, and we have also made considerable progress in achieving full employment, but before we announce substantial further progress, I hope See more improvements ."

According to the monthly employment report released by the U.S. Department of Labor on Friday, the number of new jobs created in August was only 235,000, which was far lower than the survey's economists expected. The new jobs in June and July were both close to 1 million.

Williams said in a question-and-answer session after the speech on Wednesday that “one of the reasons for the weak employment may be that the delta strain has caused a certain impact, but it is difficult to know the exact answer.”

He also said that judging whether to make "substantial further progress" ultimately requires evaluating the cumulative number of new jobs since December 2020.

He pointed out that "employment was strong in some months, but not in some months, depending on the accumulated value."

[Fed said the economic growth rate of July-August declined slightly]

The Fed stated that economic growth slowed slightly to a moderate level from early July to August.

The Fed stated in its Beige Book released on Wednesday: "The slowdown in economic activity is mainly due to the reduction in dining out, travel, and tourism and leisure activities in most regions."

The report is based on the information collected by the 12 regional banks of the Federal Reserve as of August 30 and compiled by the Federal Reserve Bank of New York.

The Fed said: “Looking forward, companies in most regions are still optimistic about the near-term prospects, but widespread concerns about supply disruptions and resource shortages continue.”

However, most of the regional Federal Reserve Banks stated that the spread of the epidemic caused by the delta strain has led to a decline in economic activity in the region.

[The three major stock indexes closed lower, and the technology giants caused a drag]

The U.S. stock market closed lower on Wednesday. The Dow fell 0.20%, the S&P 500 fell 0.13%, and the Nasdaq fell 0.57%. They were affected by concerns that the Delta variant virus might weaken the economic recovery and when the Fed might withdraw its easing policy. Uncertainty.

(Dow daily chart)

Investors have become more cautious after the weak August non-agricultural employment data was released last Friday. At the same time, despite the economic slowdown, the pressure from rising costs has intensified concerns that the Fed may take action earlier than expected to reduce support. . To alleviate the economic impact of the pandemic, the Fed implemented large-scale monetary support measures last year.

The Federal Reserve stated in its latest Beige Book on Wednesday that the U.S. economy "slightly slowed down" in August, and people are increasingly worried about the impact of a surge in the number of new cases on the economic recovery. The Beige Book summarizes the communications between Fed officials and contacts in 12 regions regarding economic conditions.

Sam Stovall, chief investment strategist at CFRA, said: “Investors said while pulling their petals,'The economy will grow, but the economy will not grow.'

St. Louis Fed President Brad told the Financial Times that despite the slowdown in employment growth, the Fed should advance plans to reduce pandemic stimulus measures.

Data Preview


In the day, we will focus on the European Central Bank's interest rate decision and the data on initial unemployment claims in the United States.

Bond traders bet that European Central Bank President Lagarde will try not to "frighten" the market on Thursday.

In the past three months, the yield premium of 10-year Italian government bonds relative to German government bonds of the same maturity has basically remained at a level of slightly more than 100 basis points.

But despite this, more and more market participants are speculating that the European Central Bank will begin to curtail the stimulus measures introduced during the epidemic.

The market position deployment shows that investors believe that the central bank will try its best to adopt a balanced approach when implying any change in the scale of bond purchases, and be alert to sudden or larger-than-expected risk adjustments that may cause the market to fall into chaos.

Imogen Bachra, a strategist at Natwest Markets, believes that the central bank will strive to adhere to this principle when adjusting its emergency debt purchase program, and it is impossible to reduce the amount of debt purchases to zero at once.

Bachra said that although the market may test the European Central Bank, the central bank’s recent strategic assessments show that maintaining financial stability (heavily dependent on the main power gap) has been regarded as a key priority by the central bank.

“The central bank may tolerate higher yields, but may not allow the spreads to widen,” she added. Bachra is betting that the yield gap between Italian and German government bonds will continue to tighten to around 75 basis points.

In terms of initial data, the market continues to expect a decline in the number of people, which is expected to be 335,000, with a previous value of 340,000, which is negative for gold prices.

In general, the price of gold continues to stay away from the 1800 mark, which is quite detrimental to the subsequent trend of gold prices. It may continue to be weak in the future. The trend in the day depends mainly on the dynamics of the European Central Bank.

(Spot gold daily chart)

GMT+8 8:53, spot gold was quoted at $1789.30 per ounce.

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