Tuesday (July 5) at the beginning of the Asian session, spot gold narrow range shock, currently trading near $1809.25 / ounce, the last trading day coincided with the US holiday, gold prices fluctuated less, the overall pressure of the strong dollar, but the current market concerns about the recession continue to rise, geopolitical concerns still exist, and inflation expectations are high, still provide support for gold prices, the market pays close attention to the Fed meeting minutes that will be released this week and the US June non-farm payrolls report, the current general expectation of the US unemployment rate will rise, This expectation is expected to provide gold prices with a chance to rebound.
This trading day, pay attention to the RBA interest rate decision, the US May durable goods orders monthly correction value, pay attention to the US may factory orders and the performance of European and American stock markets, and also pay attention to the situation in Russia and Ukraine and the news related to the global monkeypox virus.
Macro Strategist: The U.S. economy may experience a "technical" recession
Gulpret Gill, global fixed income macro strategist at Goldman Sachs Asset Management, said on Monday that monetary tightening could continue or there could be a "technical" recession, in which real GDP grew negative for two consecutive quarters.
But, she said, "when you think about investment layouts and opportunities in the fixed income sector, what really matters is the size and characteristics of the recession."
Gill added that employment growth is expected to decelerate as the Fed raises interest rates to curb inflation. In June, the Fed raised its benchmark interest rate by 75 basis points to 1.5%-1.75%, the biggest increase since 1994. Markets expect the Fed to raise rates again later this month.
"What the Fed is trying to control is how weak the labor market is," Gill said. "They want the labor market to cool down to the point where companies can shelve new hiring plans, not necessarily layoffs on a massive scale."
Atlanta Union Reserves' watched GDP Novel model shows GDP is expected to shrink by 2.1 percent in the second quarter, meaning the U.S. is already in a technical recession in the first half of 2022.
Japanese financial group Nomura said in a research note: "There are more and more signs that the world economy is entering a synchronous slowdown."
"[This means] countries can no longer rely on export rebounds for growth, which also prompts us to forecast multiple recessions ( including in the eurozone, the United Kingdom, Japan, South Korea, Canada, Australia and the United States) "
Bruce Ikemizu, chief director of the Japan Gold Market Association, said in the latest report: "The fact that gold was bought immediately after falling below $1800 reflects that its safe-haven attractiveness is a supporting factor."
Analyst: The U.S. unemployment rate may rise more than expected in June
Markets expect policymakers to raise rates by another 75 basis points at the Federal Open Market Committee (FOMC) meeting in late July. Bloomberg Economic Research believes that the pace of interest rate hikes is not so fast. Investors need to carefully read the recent Fed officials' speeches and the upcoming June FOMC minutes (released on Wednesday) as can be seen that most expectations for a large Fed rate hike depend on changes in economic conditions as expected in fed officials' speeches. In other words, what determines the magnitude of the rate hike in July is the direction and extent to which the economy exceeds expectations.
Moreover, since the June meeting, both inflation and economic growth have been weaker than expected. Both the ISM Manufacturing Index and the Employment Index are contracting, and the ISM Services Index (Wednesday) is also likely to cool down quickly. The decline in real personal expenditure exceeded expectations. Gasoline and other commodity prices fell. The University of Michigan's long-term inflation expectations rose in June (which shocked the Fed at one point), and in the final data, the increase in the revised positive indicators was almost completely erased.
The focus of the week is on the labor market. If, as expected by Bloomberg Economic Research, the June non-farm payrolls report (Friday) shows the unemployment rate rising to 3.7 percent, then policymakers will again be surprised. This means that the labor market , which is often a lagging indicator of economic slowdown — is slipping faster than FOMC attendees expected (in the June Fed's economic forecast summary, the median dot plot shows that the unemployment rate only reached 3.7 percent by the end of the year). The May JOLTS report (Wednesday) may also show a decline in the number of job openings corresponding to each unemployed person.
Add all of this together, and a 75 basis point hike this month is far from certain. There are still many variables that could occur in the coming weeks.
The former chief economist at the Bank of Japan expects the Bank of Japan to raise its inflation forecast this month
The former chief economist at the Bank of Japan said inflation levels in Japan would be stronger and longer than the central bank currently expects, so the central bank could raise its inflation forecast later this month.
"Inflation will obviously be above 2 percent this year," said Seisaku Kameda, who led the preparation of the latest quarterly forecast in April. "The rapid depreciation of the yen is a significant factor."
Kameda's forecast suggests that the BOJ's position on inflation could come under more pressure as major central banks around the world fight runaway inflation. However, the senior economist said raising inflation forecasts does not mean that a policy shift is imminent.
The Bank of Japan will release its latest quarterly inflation forecast on July 21. Central banks' yield curve control plans have come under fire in recent weeks as tightening speculation heats up.
Kameda said that while the spread of cost-driven inflation is bound to push prices up even next year, central banks must be cautious in relaying the message so that investors don't see the new data as a signal that policy normalization is coming.
Kameda said it was too early to assert that the BoJ already saw the type of inflation needed to achieve stable price targets, and the standards would not change easily.
Bank of Canada: Short-term inflation expectations are at record high, and price pressures are expected to persist for a long time
The Bank of Canada report showed record expectations for inflation for Canadian businesses and consumers over the next two years, a worrying outlook that is expected to spark a market bet on a bigger rate hike.
Short-term inflation expectations are rising, released by the Bank of Canada on Monday in quarterly surveys of businesses and executives, which are expected to persist for longer as the country's labor market is tight and businesses are hit by rising input costs.
About 78 per cent of businesses expect Inflation in Canada to exceed 3 per cent over the next two years, up from 70 per cent three months ago. Respondents' average expectations for a salary increase next year were 5.8 percent, a record high.
The market expects the Bank of Canada to raise the policy rate (currently at 1.5 percent) by nearly 100% on July 13, with investors expecting the bank to raise the rate as highly as 3.5 percent by the end of the year.
The Bank of Canada said respondents still believed the central bank could achieve its inflation target and that inflationary pressures would eventually ease.
Germany's chancellor said it faces historic challenges and needs to act quickly to deal with soaring inflation
German Chancellor Schoelz said Germany needed to act quickly to deal with a "historic" spike in the cost of living, comparing the current situation to the inflation crisis of the 1960s and 1970s.
The German leader summoned representatives from employers, trade unions and the Bundesbank to formulate measures to alleviate consumer suffering. He said Monday after the first meeting that the goal of this rare concerted effort is to develop anti-inflation policies in the coming weeks.
"The current crisis will not end in the coming weeks," Scholz said outside the Chancellery in Berlin. "We have to be prepared that this situation will not change in the foreseeable future. In other words, we are facing historic challenges. ”
The German government has become increasingly anxious to deal with soaring prices, and the risk of price spikes is increasing as gas costs soar after Russia cut supplies. In an interview with television on Sunday, Scholz said the rising cost of living could exacerbate the gap between rich and poor, with a "explosive" impact on German society.
Since taking office last December, Scholz's three-party coalition has adopted two packages to mitigate the impact of rising costs. The measures, worth more than €30 billion ($31.4 billion), include an exemption from an electricity surcharge, a sharp discount on public transport tickets, and a one-time payment of €100 for each child and 300 euros for each income tax payer.
South Korea's June CPI rose 6.0% year-on-year to the fastest growth rate in nearly 24 years, beating expectations
Government data released tuesday showed South Korea's consumer price increase in June exceeded expectations, the fastest pace in nearly 24 years. The Consumer Price Index (CPI) for June grew 6.0% year-on-year, faster than the previous month's 5.4% growth and exceeding the market survey forecast of 5.9%
Data released on the same day showed south Korea's foreign exchange reserves fell for the fourth consecutive month in June, and the decline was the largest since the 2008 global financial crisis, in part due to the sale of dollars to support intervention in the South Korean won exchange rate. The Bank of Korea said its dollar-denominated foreign exchange reserves fell by $9.43 billion to $438.28 billion at the end of June.
Putin praised the victory of the Russian army in Luhansk; Zelenskiy said that the Ukrainian army was fearless
Ukrainian President Selenskiy said on Monday that the Ukrainian armed forces were undaunted in their efforts to "break" Moscow's intention to continue the war, which has lasted for nearly five months; Russian President Vladimir Putin praised the Russian army for its victory in the bitter battle at Luhansk.
Russia occupied the Udong city of Lisichansk on Sunday (July 3), ending the biggest battle in Europe in several generations and thus capturing all of Luhansk.
As the war entered its next phase, the Ukrainian army built a new defensive line in the eastern region.
"There have been no major changes on the battlefield in the last 24 hours," Zelenskiy said in a night video, "day after day to meet, counterattack and destroy the offensive of the occupiers." We're going to beat them. This is a daunting task that takes time and extraordinary effort, and we have no choice. ”
Earlier in the day, Putin congratulated the Russians on their "victory in the direction of Luhansk." He said in a brief video conference with the defense minister that the participating forces in this campaign should "take a good rest and then get ready for battle," and that troops in other regions will continue to fight.
The Battle of Luhansk was one of the closest Moscow to achieving its stated objectives since the attack on Kiev was repulsed in March. It was also Russia's biggest victory since it captured the southern port of Mariupol at the end of May.
The two sides fought fiercely in the North Donets Valley, both with thousands of casualties and claiming to have inflicted greater losses on the other side
Repeated Russian bombardments left Lisichansk, neighboring Severodnetsk and surrounding towns in ruins, many of which had heavy industrial factories that were used as defensive bunkers by the defenders. The Russian army repeatedly tried to encircle the Ukrainian army without success, and finally chose to repel the Ukrainian army with artillery.
Military experts say the battle could be a turning point in the war, with significant implications for the ability of both sides to continue fighting, despite the limited strategic value of the destroyed cities themselves.
Neil Melvin, of RUSI, a London-based think tank, said: "I think this is a tactical victory for Russia, but at a huge cost. ”
"The battle has been going on for 60 days and progress has been very slow," he said, "and I think the Russian side may declare some kind of victory, but the crucial battle is still not coming." ”
Moscow will hope that the Ukrainian retreat will allow the Russians to advance further westward to neighboring Donetsk. There Ukraine still controls the cities of Sloviansk, Kramatorsk and Bakhmut.
Summary of analyst views
Analysts at TD Securities believe that "over the past month, the price of gold has been completely disconnected from the market pricing of Fed interest rate hikes, but has strengthened the relationship with the US dollar, which indicates that gold's special liquidity is small." ”
Analysts at TD Securities explained, "Liquidity in global markets is losing, and gold flows are not immune. After all, the large number of speculative bulls that gold proprietary traders may be complacent seems to have nothing to do with the Fed's claims or stagflation views on the world, considering that this bull has accumulated as early as 2020, and conversely, while gold is still biased to the downside, participants will need a catalyst to get rid of the complacent precious metals bulls. ”
Han Tan, chief market analyst at Exinity, said, "Gold bulls are mired in aggressive policy action by the Fed as the prospect of rising US interest rates erodes the appeal to this precious metal, and the Fed expects to raise interest rates again by 75 basis points this month." The ECB is also widely believed to follow its global counterparts in raising interest rates. As price pressures widened, eurozone inflation reached a new high in June. ”
Tan said, "The market has not fully absorbed the expectation of a 75 basis point rate hike at this month's FOMC meeting. If policymakers are forced to become more aggressive in the face of persistently high inflation, it could mean another fall in gold prices."
However, ANZBank economists expect gold to find support at current levels and move towards $1900.
ANZ noted that "rising expectations of aggressive interest rate hikes and a stronger U.S. dollar are all headwinds for gold." Still, weak equities and ongoing geopolitical uncertainty should support investor demand. We expect gold to find a bottom near current levels and an upside is expected to rise towards $1900. ”
FXStreet analyst Eren Sengezer believes that if this week's Fed minutes hold a dovish tone, it could put pressure on the US dollar and open the door to a gold rally.
Sengezer noted: "On Wednesday, the Federal Open Market Committee (FOMC) will release the minutes of the June policy meeting. According to cmegroup's FedWatchTool, the market now expects a 66.5 percent probability of another 75 basis point rate hike by the Fed in July, compared to 84 percent a week ago. If the FOMC report raises the odds of a 75 basis point hike, gold could face additional bearish pressure. On the other hand, the dovish tone could weigh on the dollar and open the door to a rebound. ”
Sengezer also noted that "on Friday, the labor market is expected to lose momentum in June, with the non-farm payrolls figures up another 250,000 after 390,000 in May." Investors will also keep a close eye on wage inflation data. On an annual basis, average hourly earnings are expected to rise by 5.2 percent, unchanged from May. Unless non-farm payrolls data unexpectedly falls short of expectations, higher-than-expected wage inflation growth could boost the dollar and vice versa. ”
Overall, although the prospect of interest rate hikes by global central banks has been weighing on gold prices recently, the decline in gold prices has been relatively preferential, whether it is geopolitical concerns or recession concerns, which have provided safe-haven support for gold prices, and high inflation expectations have also added to the attractiveness of gold. In the short term, slightly dovish expectations for the Fed minutes and expectations for rising unemployment in the US are expected to provide an opportunity for a rebound in gold prices this week.
This article originated from Huitong Network
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