On Wednesday (June 8), spot gold rebounded from lows, as the U.S. dollar index rose and fell, both of which fell into shock mode. Investors await the upcoming U.S. inflation data for further insights into the prospect of a rate hike by the Federal Reserve. U.S. Treasury Secretary Janet Yellen said inflation was unacceptably high. The World Bank is calling on policymakers to work to boost food and energy production and avoid import and export restrictions that could lead to further price spikes.

At GMT+8 20:01, spot gold sank 0.01% to $1851.92 per ounce; the main COMEX gold futures contract rose 0.13% to $1854.6 per ounce; the US dollar index rose 0.02% to 102.3573. Gold prices fell the largest intraday 0.35%, the largest intraday gain of 0.43% in the US index.

Yellen: High inflation unacceptable

Investors now await the release of the core consumer price index (CPI) due on Friday (June 10). The market expects that the overall and core CPI of the United States are expected to rise by 8.3% and 5.9% year-on-year respectively in May, and the prospect of aggressive interest rate hikes by the Fed is difficult to shake.

U.S. Treasury Secretary Yellen told senators on Tuesday (June 7) that the current level of U.S. inflation is "unacceptable" and that she expects inflation to remain high and that the Biden administration may raise its inflation forecast for this year in its budget proposal.

Yellen has repeatedly denied Republican allegations that President Biden's $1.9 trillion anti-epidemic spending last year fueled inflation. "We're seeing high inflation in almost every developed world in the world, and fiscal policies vary widely across countries, so much of the inflation experienced in the U.S. cannot be blamed on COVID-19 spending."

Yellen reiterated her view that hyperinflation was fueled by soaring energy and food prices triggered by Russia’s invasion of Ukraine, consumers concentrating on purchasing goods during the pandemic and emerging variants of Covid-19 delaying supply chain disruptions ease.

In recent months, U.S. consumer price index inflation has been above 8%, the highest level in more than 40 years and well above the Biden administration's forecast for the preparation of the fiscal 2023 budget. But the core U.S. personal consumption expenditures price index has begun to cool, with a reading of 4.9% in April, the second straight month of declines.

Gold has been trading sideways for the past few weeks. The market expects that the Fed will raise interest rates 4 to 5 times this year, and investors are paying attention to the Fed's next move. If inflation is nearing a peak and leveling off, that's not good for gold.

America's Recession Debate

While many still expect consumer spending to remain resilient, combined with job gains will bring the U.S. out of recession. But concerns are growing that the U.S. economy could slip into a recession as soaring inflation dampens the outlook for corporate profits.

In an update released on Tuesday, the Atlanta Fed's GDPNow pointed to the U.S. economy growing at an annualized rate of just 0.9% in the second quarter. The U.S. economy isn't making much progress out of recession after an unexpected contraction in the first quarter. Two consecutive quarters of negative growth in an economy are often seen as a recession.

Amanda Agati, chief information officer at PNC Asset Management, said the Fed raising interest rates or shrinking its balance sheet could have little impact on dampening macroeconomic headwinds. “Given that the global economy is facing a perfect storm of macro headwinds, we have to be realistic about what the Fed’s policy tools can actually do. The Fed is very accustomed to tightening policy in response to overheating. But I think what’s interesting this time around is that we Already in the midst of a slowdown in the expansion cycle.”

Agati said the Russian invasion of Ukraine put upward pressure on global commodities and was partly responsible for the surge in inflation. "...I don't think the Fed can solve this problem alone," she added.

Neil Meader, head of precious metals at Metals Focus, said: “With the U.S. economy slowing and inflation stubbornly high, the risk of stagflation is increasing, while other systemic risks abound. This should continue to encourage many investors to allocate to gold, especially It's when gold prices correct and encourage bargain hunting."

World Bank makes gloomy forecast

The World Bank on Tuesday lowered its 2022 global growth forecast to 2.9 percent from 4.1 percent in January. Governor David Malpass said the risks of stagflation and the Russia-Ukraine war have been hitting growth and a recession will be unavoidable for many countries. Meanwhile, while global inflation is expected to moderate next year, inflation is likely to remain above target in many economies.

Malpass wrote in the foreword to the report: “The danger of stagflation is considerable, with subdued growth likely to persist throughout the decade due to weak investment in much of the world. high, and supply is expected to grow slowly, so inflation is likely to remain elevated for longer."

Malpass also said that to reduce risks, policymakers should work to coordinate aid to Ukraine, boost food and energy production, and avoid import and export restrictions that could lead to further spikes in oil and food prices. Negative spillovers from the Ukraine war will be enough to offset any boost commodity exporters get from higher prices.

Commerzbank economists report that the world may face several years of below-average economic growth and above-average price gains, which is bullish for gold in the long run, because in such an environment, gold is likely to become a means of preservation.

Spot gold remains volatile

From the daily chart, the price of gold may start a downward iii wave trend from $1,874, and the lower support looks at the 23.6% target of $1,824. Wave iii is a sub-wave of the descending (c) wave that started at $1998. Wave (c) belongs to wave ((c)) that started at $2070.

But gold prices may still be in the uptrend ii wave that started from $1786. Among them, the upward ((C)) wave started from $1836 is a sub-wave of the ii wave, and the upper resistance looks at the 38.2% target of the ((C)) wave at $1868.

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