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Market News Spot gold fell to a new low in the past eight weeks, the FED started to withdraw the widening standard "seems to have been reached"
Spot gold fell to a new low in the past eight weeks, the FED started to withdraw the widening standard "seems to have been reached"
On September 28, spot gold fell again and refreshed the low since August 11 to $1,731.86 per ounce. Therefore, some former Fed officials hinted that they had reached the standard for starting the process of reducing debt purchases. The U.S. dollar index hit a new high of 93.665 since August 20, and the 10-year U.S. Treasury yield hit a record high of 1.549% since June 17. It has continued to strengthen in the last four trading days, with a cumulative increase of nearly 250 basis points. However, the partial shutdown of the US government and the risk of default still make the market vigilant.
2021-09-28
11093
On Tuesday (September 28), spot gold fell again and set a new low since August 11 to $1,731.86 per ounce. The U.S. Treasury yield rose sharply, driving the U.S. dollar index to strengthen for the third consecutive trading day, setting a record in August. The new high since the 20th was 93.665. Some Federal Reserves have hinted that they have reached the criteria for starting the process of reducing debt purchases.
At 19:32 GMT+8, spot gold fell 0.93% to US$1733.84 per ounce; the main COMEX gold contract fell 1.05% to US$1733.6 per ounce; the US dollar index rose 0.20% to 93.609.
As the Fed’s policy outlook turned into an eagle, the 10-year U.S. Treasury yield hit a record high of 1.549% since June 17, and continued to strengthen in the last four trading days, with a cumulative increase of nearly 250 basis points. The Fed announced last week that it may start reducing stimulus measures as early as November, and hinted that interest rates may be raised earlier than expected. Analysts predict that the dollar will continue to rise gradually.
Later in the day, Fed Chairman Powell will participate in congressional hearings with Treasury Secretary Yellen. Some Fed officials on Monday (September 27) will reduce the scale of monthly bond purchases and link the continued growth of employment. The September employment report may trigger the Fed to reduce bond purchases.
The Fed has stated that if the economy continues to develop according to current trends, it will begin to reduce the scale of bond purchases as early as November. Some officials will pay attention to the September employment report released on October 8 to find the last piece of evidence that the recovery of the labor market has made "further substantial progress." Other officials believe that the standards have been met and are ready to start the process.
Fed Governor Brainard (with permanent voting rights) stated on September 27: "As far as I think further substantive progress is concerned, employment is still somewhat insufficient. But if progress continues as I hope, it may be reached soon. standard."
New York Fed President Williams (with permanent voting rights) stated on September 27: “I think it’s clear that we have made further substantial progress in achieving our inflation target. We have also made extraordinary progress in achieving maximum employment. Good progress. Assuming that the economy continues to improve as I expected, there may soon be reason to slow down the pace of asset purchases."
Chicago Fed President Evans (with voting rights in 2021) stated on September 27: "I think the economy is close to reaching the standard of'further substantive progress' we set in December last year. This is the threshold for starting to reduce asset purchases. If the employment improvement trend continues, it seems likely that these conditions will be met soon, and reductions can begin."
Mazen Issa, senior currency strategist at TD Securities, wrote in the research report: "Just as the reduction in debt purchases is not a surprise, the early termination of the quantitative easing program will further illustrate that the downside risk of the US dollar has weakened. If the debt cycle is used as a guide, about half of the dollar’s cyclical rise will occur after three months of reducing debt purchases.” The agency expects that the Fed will end its quantitative easing program by the end of June 2022.
The deeply divided U.S. Senate failed to advance a bill on Monday to suspend the federal debt ceiling and avoid partial government shutdowns. Democrats who control both houses of Congress with a narrow advantage now have only three days left to find another way to get the government in the week. Continue to operate after four.
This bill mainly deals with two imminent deadlines that may impact the US economy, but Republican lawmakers refused to give the number of votes needed to advance the bill. Republicans have stated that they want Democrats to lift the debt ceiling on their own, saying that they do not support the Democrats' spending plans. The Democrats pointed out that most of the new debt was generated during Trump's administration.
The U.S. Congress must resolve the issue of government funding before the deadline of September 30, or the U.S. government will shut down and cease services. Lawmakers must consider how to raise the debt ceiling to avoid the risk of default. The shutdown of the government—or worse defaults—would be a huge blow to Biden's Democratic Party.
New York Fed President Williams warned on Monday that if the United States fails to resolve the debt ceiling issue, it may trigger a negative reaction in the market, but he also said that current market participants seem to believe that the debt ceiling issue will be resolved.
Michael Purves, CEO of Tallbacken Capital Advisors, pointed out in a research report released on Monday that some tensions related to the debt ceiling have appeared in the U.S. Treasury bill market, which is reflected in the price of three-month Treasury bills, which were originally thought to be less expensive. Like one-month treasury bills, it is affected by the risk of default, but he also said that the situation of three-month treasury bills has not yet reached the level of sharp rise in yields like in 2011, 2013 and 2015.
Williams said that there has been some market price digestion of U.S. Treasury bills that mature near the date when some people expect the U.S. to reach the debt ceiling. But he said that based on the information he received, market participants expected that the debt ceiling issue would be resolved.
After falling below $1,740, gold seems to have a clear outlook. The price of gold will be in a downturn for a long period of time, and it will be impossible to get rid of it anyway. The strength of the 10-year U.S. Treasury yield and the strength of the U.S. dollar are both unfavorable factors.
There are also disagreements within the Democrats on how to view the two pillars of the Biden administration's agenda-the $1 trillion infrastructure bill and the $3.5 trillion social spending plan. This rift may not be conducive to Biden’s administration and may derail the Democratic Party’s hopes of maintaining a majority in Congress in next year’s midterm elections.
House Speaker Pelosi postponed the vote on infrastructure legislation to Thursday (September 30) instead of the previously agreed Monday, in order to provide more time to reach agreement on Biden's more comprehensive social spending plan.
The infrastructure bill was passed in the Senate last month and received strong support from the Republican Party. Moderate Democrats pointed out that the $3.5 trillion social spending plan is too high, and Democrats including Pelosi believe that the plan needs to be scaled down before it can be passed. But progressive Democrats threatened that unless moderates in the Senate and House of Representatives agree to a larger social spending plan, they will oppose the infrastructure bill.
As the U.S. dollar restarts a new round of gains and is approaching the important neckline of 93.734 in the previous period, the downward movement of gold can accelerate again, and the overall outlook for the gold price is pessimistic. However, if the two parties in the United States cannot reach an agreement on the federal debt ceiling as soon as possible, and eventually lead to a default by the government, gold may rebound sharply in the short-term at any time.
On the daily chart, the price of gold fell below the 38.2% target of the downward (3) wave that started from $1834 at $1744. The market outlook is expected to further drop to the 61.8% target at $1688. (3) Wave is a sub-wave of the downward ((Y)) wave that started from 1917 USD, and ((Y)) belongs to the corrective IV wave that started from 2075 USD.
At 19:32 GMT+8, spot gold fell 0.93% to US$1733.84 per ounce; the main COMEX gold contract fell 1.05% to US$1733.6 per ounce; the US dollar index rose 0.20% to 93.609.
As the Fed’s policy outlook turned into an eagle, the 10-year U.S. Treasury yield hit a record high of 1.549% since June 17, and continued to strengthen in the last four trading days, with a cumulative increase of nearly 250 basis points. The Fed announced last week that it may start reducing stimulus measures as early as November, and hinted that interest rates may be raised earlier than expected. Analysts predict that the dollar will continue to rise gradually.
Fed waits for September employment report
Later in the day, Fed Chairman Powell will participate in congressional hearings with Treasury Secretary Yellen. Some Fed officials on Monday (September 27) will reduce the scale of monthly bond purchases and link the continued growth of employment. The September employment report may trigger the Fed to reduce bond purchases.
The Fed has stated that if the economy continues to develop according to current trends, it will begin to reduce the scale of bond purchases as early as November. Some officials will pay attention to the September employment report released on October 8 to find the last piece of evidence that the recovery of the labor market has made "further substantial progress." Other officials believe that the standards have been met and are ready to start the process.
Fed Governor Brainard (with permanent voting rights) stated on September 27: "As far as I think further substantive progress is concerned, employment is still somewhat insufficient. But if progress continues as I hope, it may be reached soon. standard."
New York Fed President Williams (with permanent voting rights) stated on September 27: “I think it’s clear that we have made further substantial progress in achieving our inflation target. We have also made extraordinary progress in achieving maximum employment. Good progress. Assuming that the economy continues to improve as I expected, there may soon be reason to slow down the pace of asset purchases."
Chicago Fed President Evans (with voting rights in 2021) stated on September 27: "I think the economy is close to reaching the standard of'further substantive progress' we set in December last year. This is the threshold for starting to reduce asset purchases. If the employment improvement trend continues, it seems likely that these conditions will be met soon, and reductions can begin."
Mazen Issa, senior currency strategist at TD Securities, wrote in the research report: "Just as the reduction in debt purchases is not a surprise, the early termination of the quantitative easing program will further illustrate that the downside risk of the US dollar has weakened. If the debt cycle is used as a guide, about half of the dollar’s cyclical rise will occur after three months of reducing debt purchases.” The agency expects that the Fed will end its quantitative easing program by the end of June 2022.
The debt ceiling divergence must be bridged as soon as possible
The deeply divided U.S. Senate failed to advance a bill on Monday to suspend the federal debt ceiling and avoid partial government shutdowns. Democrats who control both houses of Congress with a narrow advantage now have only three days left to find another way to get the government in the week. Continue to operate after four.
This bill mainly deals with two imminent deadlines that may impact the US economy, but Republican lawmakers refused to give the number of votes needed to advance the bill. Republicans have stated that they want Democrats to lift the debt ceiling on their own, saying that they do not support the Democrats' spending plans. The Democrats pointed out that most of the new debt was generated during Trump's administration.
The U.S. Congress must resolve the issue of government funding before the deadline of September 30, or the U.S. government will shut down and cease services. Lawmakers must consider how to raise the debt ceiling to avoid the risk of default. The shutdown of the government—or worse defaults—would be a huge blow to Biden's Democratic Party.
New York Fed President Williams warned on Monday that if the United States fails to resolve the debt ceiling issue, it may trigger a negative reaction in the market, but he also said that current market participants seem to believe that the debt ceiling issue will be resolved.
Michael Purves, CEO of Tallbacken Capital Advisors, pointed out in a research report released on Monday that some tensions related to the debt ceiling have appeared in the U.S. Treasury bill market, which is reflected in the price of three-month Treasury bills, which were originally thought to be less expensive. Like one-month treasury bills, it is affected by the risk of default, but he also said that the situation of three-month treasury bills has not yet reached the level of sharp rise in yields like in 2011, 2013 and 2015.
Williams said that there has been some market price digestion of U.S. Treasury bills that mature near the date when some people expect the U.S. to reach the debt ceiling. But he said that based on the information he received, market participants expected that the debt ceiling issue would be resolved.
After falling below $1,740, gold seems to have a clear outlook. The price of gold will be in a downturn for a long period of time, and it will be impossible to get rid of it anyway. The strength of the 10-year U.S. Treasury yield and the strength of the U.S. dollar are both unfavorable factors.
The Democratic Party's views on the infrastructure bill still disagree
There are also disagreements within the Democrats on how to view the two pillars of the Biden administration's agenda-the $1 trillion infrastructure bill and the $3.5 trillion social spending plan. This rift may not be conducive to Biden’s administration and may derail the Democratic Party’s hopes of maintaining a majority in Congress in next year’s midterm elections.
House Speaker Pelosi postponed the vote on infrastructure legislation to Thursday (September 30) instead of the previously agreed Monday, in order to provide more time to reach agreement on Biden's more comprehensive social spending plan.
The infrastructure bill was passed in the Senate last month and received strong support from the Republican Party. Moderate Democrats pointed out that the $3.5 trillion social spending plan is too high, and Democrats including Pelosi believe that the plan needs to be scaled down before it can be passed. But progressive Democrats threatened that unless moderates in the Senate and House of Representatives agree to a larger social spending plan, they will oppose the infrastructure bill.
As the U.S. dollar restarts a new round of gains and is approaching the important neckline of 93.734 in the previous period, the downward movement of gold can accelerate again, and the overall outlook for the gold price is pessimistic. However, if the two parties in the United States cannot reach an agreement on the federal debt ceiling as soon as possible, and eventually lead to a default by the government, gold may rebound sharply in the short-term at any time.
Spot gold expected to fall to $1688
On the daily chart, the price of gold fell below the 38.2% target of the downward (3) wave that started from $1834 at $1744. The market outlook is expected to further drop to the 61.8% target at $1688. (3) Wave is a sub-wave of the downward ((Y)) wave that started from 1917 USD, and ((Y)) belongs to the corrective IV wave that started from 2075 USD.
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