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Market News [Market Morning] Gold Falls Below $1,720 as Fed's Hawkish Rate Hike Is Imminent

[Market Morning] Gold Falls Below $1,720 as Fed's Hawkish Rate Hike Is Imminent

In early Asian market trading on July 26, the U.S. dollar was trading around 106.46, and expectations for the Fed to raise interest rates by 75 basis points this week rose to 75%. Awaiting U.S. second-quarter GDP data, gold prices fell slightly on Monday; oil prices rose more than 1.5%, helped by supply concerns.

TOPONE Markets Analyst
2022-07-26
498

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On Monday, spot gold rose first and then fell, erasing all gains within the day, failing to hold the 1720 mark, and finally closed down 0.3% at US$1,719.53 per ounce; spot silver fluctuated widely and finally closed down 0.54% at US$18.43 per ounce . Analysts believe that the Fed is expected to raise interest rates by 75 basis points this week.


Comment: Gold pared earlier gains and fell on Monday, and U.S. Treasury yields rose as investors prepared for an expected 75 basis point rate hike by the Federal Reserve later this week.


Suggestion: short spot gold at 1719.10, the target point is 1705.30.


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The U.S. dollar index fluctuated within the 106-107 mark, and finally closed down 0.084% at 106.5; the 10-year U.S. bond yield fluctuated upwards and finally closed at 2.807%.


Comment: The dollar traded lower against a basket of major currencies on Monday as investors weighed the impact of the Federal Reserve's interest rate hikes as the economy may be teetering on the edge of recession. The Fed is widely expected to raise interest rates by 75 basis points after this week's policy meeting, a rate hike that would end the central bank's support for the economy during the pandemic.


Suggestion: short EUR/USD at 1.022220, target point 1.01540.


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In terms of crude oil, the two crude oils fell first and then rose. WTI crude oil rebounded sharply to below US$97 after hitting US$93, and finally closed up 1.41% at US$98.42/barrel; Brent crude oil closed up 1.21% at US$104.89/barrel .


Comment: Oil prices rose about $2 on Monday, helped by supply concerns, a weaker dollar and a stronger stock market in early trade, but saw a tug-of-war during the session, with some worrying that fuel demand could weaken if the Federal Reserve raises U.S. interest rates too aggressively. The dollar was slightly weaker and stocks were improving, which was supportive for oil.


Suggestion: go short at 95.540 of US crude oil, target point at 92.480.


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US stocks closed, the Dow closed up about 90 points, and the Nasdaq closed down 0.43%. Monkeypox concept stocks and oil and gas sectors performed strongly, while gold and silver sectors generally fell.


Comment: The U.S. stock market S&P 500 was volatile on Monday, closing near flat as investors braced for an expected rate hike at this week's Federal Reserve meeting and earnings reports from several growth-stock giants.


Suggestion: go short at 12277.500 of the Nasdaq index, target point at 12015.000


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The European Central Bank's Governing Council has released a hawkish signal, and the sharp interest rate hike may not be over


European Central Bank Governing Council member Visco said that the European Central Bank will make decisions in each meeting, but it does not mean that it will raise interest rates slowly. Another ECB governor, Kazaks, said the big rate hikes may not be over, and that a September rate hike "needs quite a bit" because a weak euro would be a problem. In addition, on the issue of new tools, ECB Governing Councilor Visco said that TPI will help the ECB avoid excessive and disorderly market volatility, and the ECB will independently decide when and how to use TPI to intervene. ECB Governing Council member Kazaks said the new bond instrument "fills" the gap in the current instrument.


Dallas Fed business activity index hits two-year low in July


The U.S. Dallas Fed Business Activity Index recorded -22.6 in July, the lowest level since May 2020. The agency believes that it is only a matter of time before overall business activity has to slow due to persistent supply chain issues, high raw material costs, and sharply higher interest rates.


Moody's cuts forecast for U.S. GDP growth, raises unemployment rate forecast


Moody's said that considering the impact of the Fed's tightening policy to curb inflation, it lowered its economic growth forecast for the United States in 2022-23; it currently expects real GDP growth in the United States to be 2.1% in 2022 and 1.3% in 2023. In addition, the U.S. unemployment rate is projected to rise from its current low level of 3.6% to just over 4.0% by 2023.

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