1. Market review: Spot gold continued its rally on Monday, reaching a high of $1,865.25 per ounce within the day. During the U.S. session, it pared back some of its gains and finally closed up 0.39% at $1,853.59 per ounce; spot silver was again blocked above the $22 mark and fell. , and finally closed down 0.04% at $21.8 an ounce.
2. Fed’s Bostic: May pause rate hikes in September depending on inflation
Atlanta Fed President Bostic said rate hikes could be paused in September after raising rates by 50 basis points in each of the next two meetings, depending on inflation. If inflation remains high, a rate hike of 25 or 50 basis points is possible in September. He expects inflation to remain high this year at 3%.
3. Biden: Considering removing some tariff barriers on China
U.S. President Joe Biden said Monday in Tokyo that he is considering removing some tariff barriers on China, stressing that they were not set up by his administration.
The Federal Reserve accepted over US$2 trillion in fixed-rate reverse repurchase for the first time, reaching US$2.045 trillion, a record high for three consecutive days.
4. US Economist: Global inflation shock is “an order of magnitude worse” than it was in the 1970s
5. At the annual meeting of the World Economic Forum in Davos, Stiglitz, the Nobel laureate in economics, said that current inflation is “an order of magnitude worse” than it was in the 1970s, and the Fed is “completely unprepared” for this crisis, It’s not just about oil, it’s a hodgepodge of food, oil supplies and the Covid-19 crisis.
6. Lagarde consolidates expectations for a July rate hike, but some activists are still dissatisfied
On Monday, European Central Bank President Christine Lagarde said the first rate hike in more than a decade could come in July, but played down the possibility of a 50 basis point hike amid concerns about economic growth. She said it was “very likely” that the negative interest rate policy would end by the end of the third quarter, and the net asset purchase program was expected to end by the beginning of the third quarter. However, Lagarde’s plan to raise rates by 25 basis points “maybe two times” is unpleasant for some at the ECB who want to move faster, according to people familiar with the matter.
It is not yet possible to judge whether the rise in gold prices is sustainable
Gold’s uptrend is likely to be short-lived, with prices currently trading below the 50-day moving average at $1914.76. Continued dollar strength could lead analysts to downgrade gold to bearish from neutral. The dollar was supported by relatively high 3-month and 10-year Treasury yields, while most other currencies’ 50-day moving averages were down.
Gold price action depends on real interest rates and the U.S. dollar
. Gold benefited last week from falling interest rates (both nominal and real) and the pullback from the recent rally in the US dollar. Gold is still a pullback in an uptrend, but we will continue to focus on real interest rates and the U.S. dollar as key influencers, and if these two make new highs, it will be difficult for gold prices to hold above $1,800.
The U.S. dollar continued to fall by about 1% today, and gold continued to rally. Gold prices may continue to rise in the short-term on the recent momentum, but I don’t think the environment is conducive to it. Higher interest rates are coming, which has been weighing on gold for the past month.
Positions show gold selling pressure has subsided
A weaker dollar provided support for gold. Additionally, gold is clearly once again favored by ETF investors. Speculative financial investors pulled out further in the week to May 17, with net long positions falling to the lowest level since last September, according to the Commodity Futures Trading Commission. However, in our view, this means that the selling pressure on gold from this group of investors should have subsided significantly.