Market News The FED meeting is approaching, but the price of gold is still difficult to break out of this range.
The FED meeting is approaching, but the price of gold is still difficult to break out of this range.
On Monday (November 1), the price of gold did not change much. As the strong US dollar put pressure on the price of gold, investors cautiously waited for the important meeting of the Fed to be held. Previous data showed that inflation has risen again.
2021-11-01
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In the past year, gold has remained range-bound and lacks a clear direction, as investor interest has shifted to growth assets. As the market turns to the adjustment of monetary policy by central banks of various countries, especially the approach of the Federal Reserve's interest rate decision, gold is under further pressure. However, the high level of inflation and the need to hedge risks will still support gold prices. Analysts predict that although the short-term is expected to drop, the price of gold is still difficult to break through the range of 1650-1950 in a short period of time.
In the past year, global gold prices have basically fluctuated in the range of 1,650 to 1,950 US dollars per ounce. This volatile and directionless trading is largely due to lack of investor interest. With the beginning of the vaccination process and the relaxation of epidemic restrictions, market participants have shifted their focus to growth-related assets such as stocks and reduced their exposure to safe-haven assets. In terms of commodities, market participants have also shifted from gold and silver to growth-related commodities such as crude oil and industrial metals. The weakening of interest in gold is also evident from the continued outflow of funds from ETFs.
As the Fed and other central banks' debates about tightening monetary policy intensified, gold has lost some of its appeal. After the economic downturn triggered by the new crown epidemic, central banks have injected a lot of liquidity into stimulating economic growth.
Central banks in New Zealand and other countries have begun to raise interest rates to ease inflationary pressures, and the Fed also tends to tighten monetary policy. The comments of Fed officials show that the standard for beginning to tighten monetary policy has been basically met, and the Fed may announce this week that it has begun to reduce the scale of bond purchases. However, Fed officials did not say that they will raise interest rates after the end of bond purchases. However, the Fed’s forecasts and market expectations indicate that interest rate hikes may occur before the end of 2022.
First of all, the fear of the epidemic is far from over. Cases reappear and the vaccination process is uneven. Therefore, countries may be forced to continue to adopt some form of restrictive measures, which may affect economic growth.
Secondly, the stock market is still at a high level. We are seeing signs of exhaustion, inflationary pressures continue to rise, the possibility of currency tightening is increasing, supply chain problems, energy crises, labor shortages and other challenges are increasing. If there is a sustainable correction in the stock market, we may see investor interest shift to other asset classes such as gold.
The surge in global inflationary pressures has also increased the attractiveness of gold. Although central banks may consider normalizing monetary policy, they may take a prudent approach unless economic growth gains a foothold. In view of the different market factors, gold may continue to fluctuate in a wide range, but the increasing challenges facing the global economy may increase its hedging attractiveness and support gold prices. International prices may remain in the range of US$1650 to US$1950.
In the short term, Jeffrey Halley, senior market analyst for OANDA Asia Pacific, said: "Even if the gold price rises, gold investors will still be much more cautious when doing more than $1,800." Reuters technical analyst Wang Tao also expects spot gold to retest every Support at $1776 ounces.
Halley said: "Although the Fed may raise its monthly reduction target, they may say quite strongly that it will not raise interest rates in the near future. But this is not good news for gold because it will still push up the dollar and yields. ."
Avtar Sandu, senior commodity manager at Phillip Futures in Singapore, said in the report: "The Fed's too tough attitude or the selling pressure caused by bullish economic data may lead to a wave of long liquidation and push the price of gold to $1,680 per ounce."
Reduced stimulus and interest rate hikes tend to push up government bond yields and increase the opportunity cost of holding interest-free gold. On Monday (November 1), gold rose slightly, but the US dollar stabilized near the more than two-week high touched last Friday, limiting the gold gains.
(Spot gold daily chart)
GMT+8 At 15:50 on November 1, spot gold was quoted at $1,785.13 per ounce.
Gold maintains range fluctuations, two factors affect the attractiveness of gold
In the past year, global gold prices have basically fluctuated in the range of 1,650 to 1,950 US dollars per ounce. This volatile and directionless trading is largely due to lack of investor interest. With the beginning of the vaccination process and the relaxation of epidemic restrictions, market participants have shifted their focus to growth-related assets such as stocks and reduced their exposure to safe-haven assets. In terms of commodities, market participants have also shifted from gold and silver to growth-related commodities such as crude oil and industrial metals. The weakening of interest in gold is also evident from the continued outflow of funds from ETFs.
As the Fed and other central banks' debates about tightening monetary policy intensified, gold has lost some of its appeal. After the economic downturn triggered by the new crown epidemic, central banks have injected a lot of liquidity into stimulating economic growth.
Central banks in New Zealand and other countries have begun to raise interest rates to ease inflationary pressures, and the Fed also tends to tighten monetary policy. The comments of Fed officials show that the standard for beginning to tighten monetary policy has been basically met, and the Fed may announce this week that it has begun to reduce the scale of bond purchases. However, Fed officials did not say that they will raise interest rates after the end of bond purchases. However, the Fed’s forecasts and market expectations indicate that interest rate hikes may occur before the end of 2022.
Gold prices are still supported, but may face selling pressure in the short term
First of all, the fear of the epidemic is far from over. Cases reappear and the vaccination process is uneven. Therefore, countries may be forced to continue to adopt some form of restrictive measures, which may affect economic growth.
Secondly, the stock market is still at a high level. We are seeing signs of exhaustion, inflationary pressures continue to rise, the possibility of currency tightening is increasing, supply chain problems, energy crises, labor shortages and other challenges are increasing. If there is a sustainable correction in the stock market, we may see investor interest shift to other asset classes such as gold.
The surge in global inflationary pressures has also increased the attractiveness of gold. Although central banks may consider normalizing monetary policy, they may take a prudent approach unless economic growth gains a foothold. In view of the different market factors, gold may continue to fluctuate in a wide range, but the increasing challenges facing the global economy may increase its hedging attractiveness and support gold prices. International prices may remain in the range of US$1650 to US$1950.
In the short term, Jeffrey Halley, senior market analyst for OANDA Asia Pacific, said: "Even if the gold price rises, gold investors will still be much more cautious when doing more than $1,800." Reuters technical analyst Wang Tao also expects spot gold to retest every Support at $1776 ounces.
Halley said: "Although the Fed may raise its monthly reduction target, they may say quite strongly that it will not raise interest rates in the near future. But this is not good news for gold because it will still push up the dollar and yields. ."
Avtar Sandu, senior commodity manager at Phillip Futures in Singapore, said in the report: "The Fed's too tough attitude or the selling pressure caused by bullish economic data may lead to a wave of long liquidation and push the price of gold to $1,680 per ounce."
Reduced stimulus and interest rate hikes tend to push up government bond yields and increase the opportunity cost of holding interest-free gold. On Monday (November 1), gold rose slightly, but the US dollar stabilized near the more than two-week high touched last Friday, limiting the gold gains.
(Spot gold daily chart)
GMT+8 At 15:50 on November 1, spot gold was quoted at $1,785.13 per ounce.
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