Golden Weekly Review: Gold prices hit a record high in more than seven weeks for four consecutive years! August non-agricultural stumbling to FED

The spot golden weekly has four consecutive positives, hitting a new high of more than seven weeks since July 15 to $1,833.93 per ounce, and the final closing rose 0.58% to $1,27.37 per ounce. As US employment growth in August was much lower than expected, the Fed's expected pace of reducing quantitative easing has slowed again, dragging the U.S. dollar index down to a new low since August 4 to 91.941, and closing down 0.61% to 92.126.

Non-agricultural employment hits the smallest increase in nearly seven months

The non-agricultural employment population in the United States increased by 235,000 in August, the smallest increase since January 2021, and was far less than the expected increase of 725 million. The previous value was revised up to an increase of 1.053 million. This may make the Fed's discussion about reducing the size of debt purchases more interesting.

The slowdown in hiring may reflect growing concerns about the rapid spread of the new crown variant virus Delta and the difficulty of filling vacant positions. The surge in COVID-19 cases has led to restrictions on consumer activities and disrupted plans for personal education and return to the workplace. This may cause companies to become more cautious in recruiting and make some employees abandon the pursuit of employment that has more contact with the outside world. Chance.

The entertainment, catering and accommodation industry once again recorded zero employment growth in August, showing that the impact of the new round of the epidemic on consumption and employment activities is higher than expected. As the new wave of infection peaks caused by the Delta virus has not passed, even if there are no further restrictions Measures put pressure on people to reduce their outings spontaneously will also continue to impact the level of economic activity.

Saxo Bank analyst Ole Hansen said: “Spot gold prices have received a welcome boost from the much weaker than expected (employment) report. However, the failure of gold prices to break through the resistance level of US$1835 per ounce may indicate that some people are It means that growth is peaking and the postponement of curtailment of asset purchases is skeptical."

Ed Moya, senior market analyst at OANDA, said: “The knee-jerk reaction is positive for the price of gold, because the overall data is significantly lower than expected, which almost ruled out the possibility of a reduction in quantitative easing in September.” He believes that the price of gold is expected to rise to US$1,850.

The Fed's water collection slows down again

Powell did not disclose when the Fed plans to cut asset purchases at the annual meeting of global central banks last Friday (August 27), only saying that it might be "this year." He also hinted that the Fed will remain cautious when it finally decides to raise interest rates. His remarks were interpreted as doves by the market.

After Powell's speech last week, the market began to readjust its expectations for US interest rate hikes. The less-than-expected non-agricultural data in August increased the probability of the Fed’s official announcement at the meeting in December instead of November. The expected time for the Fed to raise interest rates for the first time has been postponed to the second quarter of 2023. Due to the uncertainty of the Fed's policy, the US dollar trend is sluggish.

The Fed’s decision still depends on economic data, making the recovery of the job market a prerequisite for scaling back its asset purchase plan during the epidemic. And although Powell remains open to the possibility of reducing stimulus measures in 2021, he said that time will be dominated by data. He separated the reduction schedule from the interest rate hike, alleviating concerns about tightening monetary policy earlier.

Jim O'Sullivan, chief U.S. macro strategist at TD Securities in New York, said: "Regardless of the performance of the non-agricultural data in August, we don't expect the Fed to announce reductions in debt purchases after the September policy meeting."

The decision-making level needs to reach a consensus

Loretta Mester, chairman of the Cleveland Federal Reserve Bank of the United States, said on Monday (August 30) that the US economy is recovering strongly, but she still does not believe that the recent inflation readings are sufficient to achieve the price stability target adjusted by the Fed a year ago. The U.S. economy has not yet maximized employment. The fact that there are more job openings than unemployed people suggests that there may be a mismatch between the jobs being created and the people who are looking for work.

Meester’s speech highlighted the growing tensions between the Fed’s policymakers, which are now approaching a policy turning point, but they have not reached a broad consensus on some of the key thresholds that define its goals. It turns out that defining these thresholds is tricky, and there is little evidence that there is broad consensus among policymakers.

Several officials, including Atlanta Fed Chairman Raphael Bostic, said that the sharply higher inflation in the past few months means that the Fed has achieved its average inflation target by some measures. But Chairman Powell said on Friday that he is not clear whether the current inflationary pressures have enough staying power to achieve the goal.

Meester said that before she draws any conclusions, she would like to see more data on inflation next year. She will study the performance of inflation in the past five years, but will also use the Cleveland Fed’s forecast and other indicators to see what level of inflation is expected to be in the future.

Meester emphasized that even after slowing down the pace of purchases, the Fed will still support the economy. “We will still maintain a very accommodative stance, but it will not be as accommodative as we said and felt needed during the worst of the epidemic.”

Standard Chartered Precious Metals analyst Suki Cooper said: "The market focus will shift to the Federal Open Market Committee (FOMC) meeting in September. In view of our expectations of a weaker U.S. dollar and deep negative real yields, we continue to believe that gold has Further upside risks."

Vandana Bharti, assistant vice president of commodity research at SMC Comtradem, said: "...we may see a sharp increase in gold prices." He added that the $1917-1940 range should be the main resistance area for gold prices for the rest of 2021.

Avtar Sandu, senior commodity manager at Phillip Futures, said in a report: "The price of gold will again need to overcome the strong resistance level of $1839 before there are more additional buying orders."

The U.S. will face more inflation

The Standard & Poor's/Kies-Schiller index, which measures housing prices in 20 major cities in the United States, rose by a staggering 19.1% year-on-year in June. This is the largest jump in the data since 1987. Before the subprime mortgage crisis detonated the 2008 financial tsunami, the biggest year-on-year increase in the above indicators occurred in September 2005, when it reached 14.4%.

At the same time, the Advisory Chamber of Commerce reported that consumer inflation expectations have risen again. Respondents now believe that this indicator will reach 6.8% in 12 months, which is a full percentage point increase from a year ago, an increase of 17.2%.

Quadratic's Davis said that he believes that the potential risk of stagflation should attract investors' attention. Both of the above indicators send important warning signals: housing costs account for a considerable weight in most inflation indicators, and inflation expectations are considered to be a key indicator of how long upward price pressures will last.

Economist Jim Dolmas wrote that rising house prices are usually a leading indicator of rising rents. In the CPI calculation, rent accounts for a considerable part of housing costs. They said that this correlation has a lag time of about 18 months, which means that the rising housing costs now indicate that the rent burden will be heavier in the next few years.

Joseph Kalish, chief global macro strategist at Ned Davis Research, wrote: "Energy, food and rents are the most obvious manifestations of inflation. The continued increase in these items will eventually lead to higher inflation expectations and the Fed will run into trouble. My biggest The fear is that the complacency of the decision-making makers gave way to worry. The market interest rate suddenly soared, and Fed officials were forced to fight."

Some published data indicate that the US economy is about to face more inflation problems. Some people worry that the Fed may be too complacent about the factors that may contribute to "hyper" inflation, thus maintaining the recent rebound in gold prices.

The Democratic Party is not united, and the infrastructure project is blocked again

Democrats in the Senate and House of Representatives are currently enacting legislation to fill in the details of the $3.5 trillion spending plan approved by both houses last month. Democratic leaders hope to pass the plan and a $1 trillion infrastructure plan in the next few weeks. The plan will promote the progressives of the Democratic Party to deal with climate change and expand the grand plan of childcare, medical care and other social projects.

But the moderate Senator Joe Manchin of West Virginia on Thursday urged his fellow Democrats to suspend the advancement of the 3.5 trillion dollar spending bill that includes most of President Biden's domestic agenda. Another Democratic senator, Kyrsten Sinema, also said that she would not support the $3.5 trillion spending plan. These cast a shadow over whether and when the Democratic Party will be able to advance the program.

Manchin wrote in an opinion piece in the Wall Street Journal, “Congress should suspend the budget coordination process strategically instead of rushing to spend trillions on new government projects and additional stimulus funds. Personally, there is no more To make it clear why Congress chose to ignore the serious impact of inflation and debt on existing government programs, I will not support the 3.5 trillion dollar bill, or any additional spending close to this level."

The dollar's short-term direction is unknown

The survey shows that as the financial market is waiting for the Fed to provide a clearer path, the current direction of the US dollar is unclear, and strategists have different expectations for the US dollar in the next three months, highlighting the general uncertainty. Although analysts expect the U.S. dollar to give up most of its gains in the coming year.

The recruitment of small businesses in the United States has accelerated, and consumers are still optimistic about the labor market. In the past few years, including 2020, the initial value of employment in August was lower than expected and lower than the average employment growth in the three months ending in July.

Conrad DeQuadros, senior economic adviser at Brean Capital in New York, said: “The new crown epidemic may make this comparison less useful, but in the past 12 years, there have been 11 years including 2020. After the publication of the two employment reports, they were revised up."

Mahir Rasheed, an economist at the Oxford Economics Institute, said: "We are not describing the current environment as a labor shortage, but as a temporary dislocation between labor supply and demand, which will improve in the coming months."


The latest monthly outlook of the exchange rate trading team of the Financial Markets Department of CCB believes that ample US dollar liquidity makes it difficult for the US dollar to start a long-term upward trend before the end of the year. It is expected that the US dollar index may test the 90 mark again.

However, Li Liuyang, chief foreign exchange analyst at China Merchants Bank’s Financial Markets Department, predicts that the decline of the US dollar is only temporary. On the one hand, the global economy has already seen signs of a marginal deceleration. Under the impact of the Delta epidemic, the recovery of consumer demand has not been so smooth.

Some Chinese traders pointed out that in the medium term, the Fed will still be moving towards reducing debt purchases and raising interest rates, and the US dollar adjustment space is expected to be limited; and the impact of the epidemic on the global economy will also provide support to the US dollar. Market participants also predict that the details of the Fed's reduction, including reducing the size and speed of debt purchases, will become the key to affecting the direction of the US dollar.