Market News Spot gold continues to rebound, the US index falls, and the Fed wants to complete the "impossible" thing
Spot gold continues to rebound, the US index falls, and the Fed wants to complete the "impossible" thing
On Thursday (June 2), spot gold continued to rebound, as the U.S. dollar index fell back after a lapse of two trading days. Some institutions believe that although the Fed can put out the fire of high inflation by raising interest rates strongly, it is "extremely difficult" to achieve a soft landing of the economy at the same time. The direct impact of inflation on consumer spending was witnessed, especially on fuel and food, and while overall consumer spending was strong, growth was slowing.
2022-06-02
10817
On Thursday (June 2), spot gold continued to rebound, as the U.S. dollar index fell back after a lapse of two trading days. Some institutions believe that although the Fed can put out the fire of high inflation by raising interest rates strongly, it is "extremely difficult" to achieve a soft landing of the economy at the same time.
At GMT+8 19:57, spot gold rose 0.51% to US$1,855.72 per ounce; the main COMEX gold futures contract rose 0.55% to US$1,858.9 per ounce; the US dollar index fell 0.37% to 102.182.
St. Louis Fed President Bullard said on Wednesday (June 1) that high inflation is jeopardizing the Fed's credibility, and again called on the Fed to honor its pledge to raise interest rates to reduce inflation and inflation expectations. The last time inflation was this high was in the late 1970s and early 1980s.
Federal Reserve Chairman Jerome Powell has vowed to keep tightening monetary policy until inflation falls in a clear and convincing manner, cementing market expectations for further rate hikes this year and next, including at the upcoming June and July meetings. Each rate hike by 0.5 percentage points.
U.S. inflation is more than triple the Fed's 2 percent target on an annualized basis, resonated by strong consumer demand, labor and parts shortages. In response, the Fed has raised rates by 75 basis points this year. But critics say the Fed is too timid to bring inflation under control quickly. Bullard has said he wants to raise rates to 3.5% by the end of the year. That means the Fed must raise rates by 50 basis points in a row at each policy meeting for the remainder of the year.
While data from the latest U.S. personal consumption expenditures (PCE) price index reinforced optimism that inflation may have peaked in April, analysts are increasingly concerned that prices will remain troublingly longer than expected This will also continue to support gold's anti-inflationary charm.
Wells Fargo Chief Executive Charlie Scharf has warned that the Fed will find it "extremely difficult" to guide the economy to a soft landing as it seeks to raise interest rates to put out the fires of inflation. He has witnessed the direct impact of inflation on consumer spending, especially on fuel and food, and while overall consumer spending is strong, growth is slowing.
Scharf said: "The soft landing scenario ... is extremely difficult to achieve in the environment we are in today. If there is a short recession, it is not very serious ... There is some pain when you go through it, but In general everyone is going to get out of it just fine. Businesses are still spending, they can build up their inventories... We do expect consumer and downstream demand to weaken, which is part of what the Fed is trying to design, but hopefully in a constructive way way to achieve it.”
GE Chief Executive Larry Culp said: “I don’t think the macro is necessarily better later this year, 2023 or even 2024. Obviously, we’re going to see the Fed’s actions affect different businesses differently. "
Dhwani Mehta, analyst at FXStreet pointed out: "Gold prices opened the day above the bearish 21-day MA at $1,845, which is currently acting as strong support. If the $1,850 resistance is broken, gold will extend its recovery momentum. The next key resistance is at $1,859. This is where the downtrend line lies. A strong break above this line would retest the previous week's high of $1,870."
JPMorgan Chase Chairman and Chief Executive Jamie Dimon described the challenges facing the U.S. economy as a "hurricane" ahead and urged the Federal Reserve to take strong steps to avoid plunging the world's largest economy into recession.
"The Fed has to deal with this now with rate hikes and quantitative tightening," Dimon said. "They have to tighten money, in my opinion, and they have no choice because the flood of liquidity has to be turned around."
Dimon's remarks came a day after President Biden met with Federal Reserve Chairman Jerome Powell to discuss severe inflation not seen in more than 40 years. The Fed faces enormous difficulties in decisively reducing inflationary pressures and preventing a surge in the cost of living for Americans without causing a recession. Against the backdrop of a relatively strong U.S. dollar, Fed hawkishness, higher real interest rates, and medium-term inflation expectations remain bullish, all of which put pressure on gold’s upside action.
From the daily chart, the price of gold is in an upward ((C)) wave that started from $1,828, and is expected to rise above the 38.2% target at $1,860, and further touch the 61.8% target at $1,879. Wave ((c)) is a sub-wave of the uptrend ii wave that started at $1786. Wave ii is a sub-wave of the downward (c) wave that started at $1998.
At GMT+8 19:57, spot gold rose 0.51% to US$1,855.72 per ounce; the main COMEX gold futures contract rose 0.55% to US$1,858.9 per ounce; the US dollar index fell 0.37% to 102.182.
Bullard: Fed should deliver on its promises
St. Louis Fed President Bullard said on Wednesday (June 1) that high inflation is jeopardizing the Fed's credibility, and again called on the Fed to honor its pledge to raise interest rates to reduce inflation and inflation expectations. The last time inflation was this high was in the late 1970s and early 1980s.
Federal Reserve Chairman Jerome Powell has vowed to keep tightening monetary policy until inflation falls in a clear and convincing manner, cementing market expectations for further rate hikes this year and next, including at the upcoming June and July meetings. Each rate hike by 0.5 percentage points.
U.S. inflation is more than triple the Fed's 2 percent target on an annualized basis, resonated by strong consumer demand, labor and parts shortages. In response, the Fed has raised rates by 75 basis points this year. But critics say the Fed is too timid to bring inflation under control quickly. Bullard has said he wants to raise rates to 3.5% by the end of the year. That means the Fed must raise rates by 50 basis points in a row at each policy meeting for the remainder of the year.
While data from the latest U.S. personal consumption expenditures (PCE) price index reinforced optimism that inflation may have peaked in April, analysts are increasingly concerned that prices will remain troublingly longer than expected This will also continue to support gold's anti-inflationary charm.
Soft landing? Extremely difficult!
Wells Fargo Chief Executive Charlie Scharf has warned that the Fed will find it "extremely difficult" to guide the economy to a soft landing as it seeks to raise interest rates to put out the fires of inflation. He has witnessed the direct impact of inflation on consumer spending, especially on fuel and food, and while overall consumer spending is strong, growth is slowing.
Scharf said: "The soft landing scenario ... is extremely difficult to achieve in the environment we are in today. If there is a short recession, it is not very serious ... There is some pain when you go through it, but In general everyone is going to get out of it just fine. Businesses are still spending, they can build up their inventories... We do expect consumer and downstream demand to weaken, which is part of what the Fed is trying to design, but hopefully in a constructive way way to achieve it.”
GE Chief Executive Larry Culp said: “I don’t think the macro is necessarily better later this year, 2023 or even 2024. Obviously, we’re going to see the Fed’s actions affect different businesses differently. "
Dhwani Mehta, analyst at FXStreet pointed out: "Gold prices opened the day above the bearish 21-day MA at $1,845, which is currently acting as strong support. If the $1,850 resistance is broken, gold will extend its recovery momentum. The next key resistance is at $1,859. This is where the downtrend line lies. A strong break above this line would retest the previous week's high of $1,870."
The flood of liquidity must be reversed
JPMorgan Chase Chairman and Chief Executive Jamie Dimon described the challenges facing the U.S. economy as a "hurricane" ahead and urged the Federal Reserve to take strong steps to avoid plunging the world's largest economy into recession.
"The Fed has to deal with this now with rate hikes and quantitative tightening," Dimon said. "They have to tighten money, in my opinion, and they have no choice because the flood of liquidity has to be turned around."
Dimon's remarks came a day after President Biden met with Federal Reserve Chairman Jerome Powell to discuss severe inflation not seen in more than 40 years. The Fed faces enormous difficulties in decisively reducing inflationary pressures and preventing a surge in the cost of living for Americans without causing a recession. Against the backdrop of a relatively strong U.S. dollar, Fed hawkishness, higher real interest rates, and medium-term inflation expectations remain bullish, all of which put pressure on gold’s upside action.
Spot gold at $1879
From the daily chart, the price of gold is in an upward ((C)) wave that started from $1,828, and is expected to rise above the 38.2% target at $1,860, and further touch the 61.8% target at $1,879. Wave ((c)) is a sub-wave of the uptrend ii wave that started at $1786. Wave ii is a sub-wave of the downward (c) wave that started at $1998.
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