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Market News Spot gold is stable, FED hawks are aggressive, but there is still time to suppress inflation
Spot gold is stable, FED hawks are aggressive, but there is still time to suppress inflation
On Tuesday (April 19), spot gold was basically steady, although the US dollar index was supported by the prospect of accelerated interest rate hikes by the Federal Reserve, which was bearish for gold prices. Hawkish Fed officials reiterated that each subsequent meeting should raise interest rates by 50 basis points. But fears of the war in Ukraine and soaring inflation continued to boost risk aversion, limiting the downside for gold prices.
2022-04-19
6842
On Tuesday (April 19), spot gold was basically stable. Although the U.S. dollar index was supported by the prospect of accelerated interest rate hikes by the Federal Reserve, which was bearish for gold prices, concerns about the war in Ukraine and soaring inflation continued to boost risk aversion, limiting the downside of gold prices.
At 19:40 GMT+8, spot gold rose 0.03% to US$1,978.97 per ounce; the main COMEX gold futures contract fell 0.22% to US$1,982.0 per ounce; the US dollar index rose 0.11% to 100.903.
Spot gold recorded its highest since March 11 at $1,998.39 an ounce overnight, but ended up only 0.21% higher at $1,978.50 an ounce. The U.S. dollar index hit a new high of 101.026 on the day since late March 2020, as market expectations for the U.S. Federal Reserve to accelerate monetary policy tightening continued to provide support for the U.S. dollar.
Investors braced for more than one 50-basis-point rate hike from the Federal Reserve at its remaining policy meeting this year in an effort to rein in soaring inflation. The Fed's tougher monetary policy relative to other major central banks continued to support the dollar's strength.
The annual rate of U.S. inflation rose to a more than 40-year high of 8.5% in March. St. Louis Fed President Bullard said Monday (April 18) that U.S. inflation is "too high." He reiterated his case for raising rates to 3.5% by the end of the year.
What we need to do now is move quickly and aggressively, Bullard said at an online event at the Council on Foreign Relations. He added that the unemployment rate could fall below 3% this year from the current 3.6% as the economy is expected to maintain its underlying growth capacity and not fall into recession.
The Fed last month raised its target policy rate by 0.25 percentage points. Fed forecasts released at the time showed policymakers expected rates to rise to 1.9% by the end of the year. But Bullard's own preferred rate path calls for the Fed to raise rates by 0.5 percentage points each at each of the remaining six meetings this year, bringing the federal funds rate ceiling to 3.5%.
Bullard said he also hopes to begin shrinking the balance sheet at the upcoming Fed policy meeting. Still, he said he didn't see a need to start selling bonds unless inflation didn't subside as the Fed expected.
Commerzbank analyst Daniel Briesemann said: "We were surprised that gold was able to remain relatively strong given the strengthening dollar, high yields and the Fed's hawkish rhetoric about raising rates."
Stephen Innes, managing partner at SPI Asset Management: “Now that we’ve tested close to $2,000, it will be an eye-opener for more traditional gold buyers and more momentum players, and fears of a U.S. recession will also keep gold in the red. Higher in the medium term."
Russian troops launched the "Battle of Donbass" on Tuesday in an attempt to break through Ukrainian defenses along almost the entire front in eastern Ukraine. Russia's invasion of Ukraine (a special military operation claimed by Russia) has entered its second phase.
In March, an offensive by Russian troops in northern Kyiv was repelled by Ukrainian troops. Russia re-deployed troops to eastern Ukraine, regrouping to launch a ground offensive in the Donbas region. It has also been launching long-range strikes against other targets, including the capital, Kyiv.
Western countries and Ukraine have accused Russian President Vladimir Putin of unprovoked aggression. French President Emmanuel Macron said his talks with Putin had stalled after Ukraine uncovered mass killings of civilians. President Joe Biden will hold a conference call with allies on Tuesday to discuss the crisis, including how to hold Russia accountable, the White House said.
The war in Ukraine has further exacerbated global inflation that was already fueled by supply chain disruptions and soaring energy prices before the war. Ukraine is a major exporter of agricultural by-products such as wheat and sunflower oil, while Russia is a major producer of oil, gas, wheat and fertilizers.
Gold still lives up to its reputation as a safe haven due to the war in Ukraine, and is also in demand as a store of value given high inflation in many parts of the world, Briesemann added.
Matt Simpson, senior market analyst at City Index, said: “This ($2,000 an ounce) is a pretty critical level, and gold’s reversal of most of its gains overnight suggests that bulls appear to be a little hesitant to push prices higher immediately, but gold has The ability to overcome the headwinds of a stronger dollar could break $2,000 in the next week or so.”
From the daily chart, the price of gold may start an upward ((iii)) wave trend from $1,889, with the upper resistance looking at the 38.2% target at $2,001. Wave ((iii)) is a sub-wave of the up 5 wave that starts at $1779.
On the hourly chart, the price of gold has started a downward iv wave trend since $1998, and is expected to fall below the 38.2% Fibonacci retracement level of the iii wave at $1967. Both waves iii and iv are sub-waves of the ascending (i) wave that started at $1915, and the (i) wave belongs to the ((iii)) wave.
At 19:40 GMT+8, spot gold rose 0.03% to US$1,978.97 per ounce; the main COMEX gold futures contract fell 0.22% to US$1,982.0 per ounce; the US dollar index rose 0.11% to 100.903.
Spot gold recorded its highest since March 11 at $1,998.39 an ounce overnight, but ended up only 0.21% higher at $1,978.50 an ounce. The U.S. dollar index hit a new high of 101.026 on the day since late March 2020, as market expectations for the U.S. Federal Reserve to accelerate monetary policy tightening continued to provide support for the U.S. dollar.
Bullard reiterates: 50bps rate hike at each next meeting
Investors braced for more than one 50-basis-point rate hike from the Federal Reserve at its remaining policy meeting this year in an effort to rein in soaring inflation. The Fed's tougher monetary policy relative to other major central banks continued to support the dollar's strength.
The annual rate of U.S. inflation rose to a more than 40-year high of 8.5% in March. St. Louis Fed President Bullard said Monday (April 18) that U.S. inflation is "too high." He reiterated his case for raising rates to 3.5% by the end of the year.
What we need to do now is move quickly and aggressively, Bullard said at an online event at the Council on Foreign Relations. He added that the unemployment rate could fall below 3% this year from the current 3.6% as the economy is expected to maintain its underlying growth capacity and not fall into recession.
The Fed last month raised its target policy rate by 0.25 percentage points. Fed forecasts released at the time showed policymakers expected rates to rise to 1.9% by the end of the year. But Bullard's own preferred rate path calls for the Fed to raise rates by 0.5 percentage points each at each of the remaining six meetings this year, bringing the federal funds rate ceiling to 3.5%.
Bullard said he also hopes to begin shrinking the balance sheet at the upcoming Fed policy meeting. Still, he said he didn't see a need to start selling bonds unless inflation didn't subside as the Fed expected.
Commerzbank analyst Daniel Briesemann said: "We were surprised that gold was able to remain relatively strong given the strengthening dollar, high yields and the Fed's hawkish rhetoric about raising rates."
Stephen Innes, managing partner at SPI Asset Management: “Now that we’ve tested close to $2,000, it will be an eye-opener for more traditional gold buyers and more momentum players, and fears of a U.S. recession will also keep gold in the red. Higher in the medium term."
Russians begin battle of Donbass
Russian troops launched the "Battle of Donbass" on Tuesday in an attempt to break through Ukrainian defenses along almost the entire front in eastern Ukraine. Russia's invasion of Ukraine (a special military operation claimed by Russia) has entered its second phase.
In March, an offensive by Russian troops in northern Kyiv was repelled by Ukrainian troops. Russia re-deployed troops to eastern Ukraine, regrouping to launch a ground offensive in the Donbas region. It has also been launching long-range strikes against other targets, including the capital, Kyiv.
Western countries and Ukraine have accused Russian President Vladimir Putin of unprovoked aggression. French President Emmanuel Macron said his talks with Putin had stalled after Ukraine uncovered mass killings of civilians. President Joe Biden will hold a conference call with allies on Tuesday to discuss the crisis, including how to hold Russia accountable, the White House said.
The war in Ukraine has further exacerbated global inflation that was already fueled by supply chain disruptions and soaring energy prices before the war. Ukraine is a major exporter of agricultural by-products such as wheat and sunflower oil, while Russia is a major producer of oil, gas, wheat and fertilizers.
Gold still lives up to its reputation as a safe haven due to the war in Ukraine, and is also in demand as a store of value given high inflation in many parts of the world, Briesemann added.
Matt Simpson, senior market analyst at City Index, said: “This ($2,000 an ounce) is a pretty critical level, and gold’s reversal of most of its gains overnight suggests that bulls appear to be a little hesitant to push prices higher immediately, but gold has The ability to overcome the headwinds of a stronger dollar could break $2,000 in the next week or so.”
Spot gold sees $1,967 in the short-term
From the daily chart, the price of gold may start an upward ((iii)) wave trend from $1,889, with the upper resistance looking at the 38.2% target at $2,001. Wave ((iii)) is a sub-wave of the up 5 wave that starts at $1779.
On the hourly chart, the price of gold has started a downward iv wave trend since $1998, and is expected to fall below the 38.2% Fibonacci retracement level of the iii wave at $1967. Both waves iii and iv are sub-waves of the ascending (i) wave that started at $1915, and the (i) wave belongs to the ((iii)) wave.
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