This week, with the ECB announcing a big 75 basis point interest rate hike, the dollar index suspended its uptrend on Friday, and international gold prices saw a small rebound. However, in the week under the hawkish comments of a number of Fed officials, the market on the Fed’s September rate hike is expected to further heat up, limiting the recovery of gold prices. It is understood that the Fed officials officially stepped into the September interest rate meeting before the silencing period, a number of officials grabbed before this deadline to talk about the U.S. economic situation, monetary policy and other topics. Federal Reserve Chairman Jerome Powell reiterated this week, the Federal Reserve needs to take “direct and forceful” action on inflation, will persist until the task is completed; the Fed’s work is to ensure that inflation expectations are anchored at 2%, ready to adjust the scale of tapering according to the needs of the economy. Powell pointed out that the longer inflation is above target, the greater the risk.
Fed Governor Waller said he favors a move to raise interest rates by a significant 75 basis points again this month. Speaking at the Institute for Advanced Studies in Vienna, Austria, Waller said, “Inflation is too high, and it’s too early to say whether it’s falling in a meaningful and sustained way. I support a significant increase in the policy rate at our next meeting on Sept. 20 and 21 to bring it to a setting that clearly limits demand.”
Kansas Fed President Esther George, who also has a vote this year, said high inflation gives policymakers a “clear” enough reason to withdraw monetary liquidity. However, she was more cautious about the pace of interest rate hikes, that should prioritize stability rather than speed. George said that policymakers need to carefully observe the economic situation to determine the next step to tighten how much.
The current market for the Fed in September further rate hike expectations are rising. More and more economists believe that the Federal Reserve in September or will raise interest rates by 75 basis points. According to the CME “Fed Watch”, the probability of a rate hike of 75 basis points in September has been close to 90%. BlackRock (BLK.N)’s chief investment officer Rick Rieder said on social media platforms that “there is a high likelihood of a 75 basis point rate hike at the Sept. 21 Fed meeting.” He added that “the Fed’s monetary policy is clearly not yet ready to turn, and the market’s forecasts are overly hasty”.
At the same time, the market is not very optimistic about the next trend of gold prices. As of September 6 week, COMEX gold futures speculative net long position decreased by 19,510 to 1,217, a recent six-week low. COMEX silver futures speculative net short position increased by 3,573 to 24,632, a recent high of more than three years, which suggests that the willingness of investors to be long the precious metal continues to cool.
Marc Chandler, managing director of Bannockburn Global Forex, said any rally in gold prices is a short-term correction to the current downtrend. He said he saw weak headline CPI and market skepticism about a 75 basis point rate hike by the Federal Reserve later this month. However this could be an illusion as headline inflation is still set to rise and core inflation could rise. As a result, gold’s rise should be corrective rather than the formation of a new uptrend.
Jinrui futures precious metals research team said that as the Fed’s September interest rate meeting draws nearer, the precious metals are expected to remain in an oscillating weak pattern under the expectation that the Fed will remain hawkish. However, taking into account the intensification of the geopolitical crisis and the risk of recession, the medium- and long-term safe-haven value of gold will be gradually reflected, so the downside of the gold price space is also expected to be limited. Need to observe the international gold price in 1650-1680 U.S. dollars / ounce price support situation. As for silver, affected by industrial attributes, its trend is expected to continue to be weaker than gold.
Founder Medium Term Futures Institute analyst Shi Jialiang believes that the pace of the Fed’s monetary policy adjustments, recession concerns and the progress of the geopolitical situation will continue to dominate the precious metals market. He said that the recent Fed policy tightening is expected to warm up, making the precious metal prices back after the continued low-level oscillation. At present, the international gold price core support is still 1675-1680 U.S. dollars / ounce range, this support level is the bull and bear transformation of the key points, if broken will enter the bear market. However, he believes that, with the policy tightening is expected to shift and gradually landing, the core point of gold price support is still effective.
Look to the market, Shi Jialiang said, with the Fed policy tightening impact gradually by the market price, superimposed on geopolitical tensions are heating up again, recession worries intensified and asset allocation needs and other factors, gold can continue to pay attention to 1800 U.S. dollars / ounce mark and 1875 U.S. dollars / ounce.
