Spot gold bulls are subject to a strong dollar, which is backed by two forces

On Monday (September 13), spot gold price stopped falling and stabilized, but the US dollar remained strong, limiting the room for rebound. Even with the surge in coronavirus cases, investors are still cautious about the Fed's exit from the ultra-loose monetary policy.


At GMT+8 19:54, spot gold rose by 0.11% to US$1,789.57 per ounce; the main COMEX gold contract fell by 0.06% to US$1791.1 per ounce; the US dollar index rose by 0.25% to 92.872, hitting an intraday high since August 27 To 92.887.

Continued surge in cases is good for the U.S. dollar

U.S. President Biden announced a new mission last week to encourage Americans who have not been vaccinated against the new crown to get vaccinated. These measures apply to more than 100 million workers. Federal workers who refuse to be vaccinated will be consulted first, and if they persist in the refusal, they will eventually face dismissal. Companies that do not follow the rules may be fined nearly $14,000 for each violation.

In an interview with the Nikkei Shimbun on Monday, Philadelphia Fed President Hacker said: "We have seen people reduce air travel, hotels and leisure activities because of the virus fear — even before the government imposed restrictions, families and individuals started doing it. These decisions are in their opinion the most in their own interests."

Huck emphasized that we need to vaccinate Americans and the whole world so that we can learn to coexist with this virus, move on, learn to control it, so that our economy can be completely reopened.

Australia has expanded its COVID-19 vaccination campaign to include approximately 1 million children aged 12-15 to ensure that the pace of vaccination is accelerated in the event of a surge in infections. The steady increase in the number of infections in Australia has increased the pressure on the authorities to purchase emergency vaccine supplies. One million doses of Moderna vaccine were purchased from the European Union last Sunday, and vaccine swap agreements were reached with the United Kingdom and Singapore in the past two weeks.

New Zealand on Monday extended its strict lockdown on its largest city, requiring at least another week of extension of the ban on the 1.7 million people living in Auckland to curb a small outbreak of the highly infectious coronavirus strain Delta. The source of the outbreak in New Zealand was imported from Australia in August.

Rodrigo Catril, senior foreign exchange strategist at National Australia Bank in Sydney, said: “There are some dynamics in favor of the U.S. dollar, especially risk aversion, because even in countries with high vaccination rates, the number of COVID-19 cases is increasing. The economic reopening still remains. Faced with challenges from consumers, the economy is also facing bottlenecks that restrict its rebound. The increase in the number of infections indicates that we may still need to re-implement certain travel restrictions."

The Fed must start as soon as possible to reduce debt purchases

At the same time, another major focus is that the Fed continues to signal that it is about to cut its debt purchases. All eyes are now on the August Consumer Price Index (CPI) to be announced on Tuesday (September 14), which may show that the core inflation rate has slowed slightly to 4.2%. If the result is higher than expected, it may cause "stagflation" concerns and stimulate the Fed's expectations to turn hawks.

Greg Bassuk, CEO of AXS Investments, said, “Investors are looking for some major news or information that is beyond the expected range, and some major unexpected news or information, whether positive or negative, to better understand the situation for the rest of the year. How will it develop."

Hacker told the Nikkei News: “In my opinion, it is meaningless to discuss the lack of labor demand. The latest data shows that the number of vacant jobs in the United States is a record high. The labor market problem is on the supply side. People are worried that there are no elderly or children in the family. People take care of them, and are afraid of the risk of getting infected by returning to work or taking public transportation."

Hack pointed out that now that the market is functioning well, the reasons for continuing to purchase debt on a large scale are no longer tenable. I support early measures to reduce debt purchases, and hope that it will take 8 to 12 months to complete the task sometime this year.

Hacker said: "My baseline forecast is that the inflation rate will remain around 4% by the end of this year, and then gradually fall back to 2% in 2022 and 2023. But I do believe that the risk that the inflation rate may continue to rise is increasing. , Because the supply chain disruption that causes most of the inflation problems may last longer than we initially expected, the pressure of wage increases will not disappear in the short term."

Huck hopes that the Fed will start the process of reducing debt purchases as soon as possible. Hacker also predicted that the Fed may start raising interest rates in late 2022 or early 2023, "If we need to raise policy rates, we also have more time and space. I think we need to make this choice."

Philadelphia Fed President Hacker joined the ranks of decision makers keen to start reducing the scale of asset purchases as soon as possible. Traders seem to believe that the economic slowdown is not enough to postpone the Fed's reduction in debt purchases to a large extent, and it may be difficult for gold to return to above $1,800.

The Democrats are ready to raise taxes

The Wall Street Journal quoted an assistant to a congressman as saying that Democrats in the US House of Representatives are expected to increase the proposed corporate tax rate from 21% to 26.5% as part of a comprehensive plan. The plan includes tax increases for the wealthy, businesses and investors. The Democrats are also expected to propose a 3% surcharge on personal income in excess of $5 million as part of a broad $3.5 trillion budget bill. They are also considering raising the minimum tax rate for U.S. companies' overseas income from 10.5% to 16.5%, and increasing the maximum capital gains tax rate from 23.8% to 28.8%.

White House spokesperson Andrew Bates said in a statement that House Democrats are making sure that we make significant progress in economic incentives. This is not just to increase wealth through tax cuts for middle-class families. Reforming the tax law can prevent The United States outsources work and ensures that the wealthiest Americans and large companies fulfill their obligations.

Last Sunday (September 12), a four-page document circulated among lobbyists and congressional aides summarized the entire tax reform plan, which is estimated to raise $2.9 trillion in additional income, mainly to pay President Biden 3.5 The cost of a trillion-dollar domestic investment plan. The proposal will also increase the maximum personal tax rate from 37% to 39.6%, as part of a series of reforms aimed at high-income individuals, and it is estimated that this will raise approximately $1 trillion.

Increasing taxes and expanding investment in infrastructure construction are conducive to further increasing US jobs, but at the same time, potential inflationary pressures face the risk of further rising. Once such a policy is implemented, the bullish sentiment in the gold market is expected to be restored.

Spot gold material drops to $1,772

On the hourly chart, the price of gold has started a downward c wave trend from 1804, hitting a 38.2% target of $1,784, and the market outlook is expected to drop to a 61.8% target of $1772. Wave c is a sub-wave of the downward (ii) wave that started at $1834. The market outlook for the gold price is expected to further explore the 50% retracement level of the (i) wave (1680-1834 US dollars) at 1757 US dollars. The (i) wave and (ii) wave are sub-waves of the upward wave ((i)) that started at $1680.