On Tuesday (November 20), the spot gold price hit an eight day high, as the Fed's cautious view of the global outlook and weak domestic data in the United States both indicated that the Fed would raise interest rates more slowly, which hit the market sentiment of the US dollar. However, around the uncertainty of Sino US trade negotiations, traders showed renewed interest in the US dollar.
According to the Huitong Finance eHuitong software, at 21:20 Beijing time, spot gold rose 0.22% to 1226.87 US dollars/ounce; COMEX gold futures contract rose 0.17% to 1227.3 dollars/ounce; USD Index It rose 0.16% to 96.357.
Spot gold prices hit a new high of 1228.42 dollars/ounce since November 7; The dollar index hit a new intraday low of 96.025 since November 7. Peter Fung, director of Yongfeng Precious Metal Trading, said: "The market entered the holiday mode before Thanksgiving in the United States, and the recent pressure of the US dollar has provided some support for gold."
The market's doubts about the Fed's interest rate rise are growing
Recent data have shown that economic growth in other parts of the world is slowing down, and US trade tariffs have begun to affect the global economy. This has prompted some investors to ask how long the Federal Reserve can continue to tighten policy.
The next night, one of the most influential policymakers of the Federal Reserve and the chairman of the Federal Reserve of New York, Williams, mentioned that the Federal Reserve is not a predetermined route, but will adjust its monetary policy to maintain a strong economy and low inflation. Although he said that the Federal Reserve may raise interest rates.
However, he also stressed that "it really needs to be in the context of a very strong economy." Therefore, the financial market's doubts about raising interest rates are still growing. Futures traders further cut their bets on the Fed's meeting on December 18-19 on Monday.
Traders also expect that on the basis of interest rate hikes at the end of this year, the possibility of the Federal Reserve raising interest rates at most twice next year is 90%, higher than 78.7% a week ago. In contrast, the decision makers of the Federal Reserve estimated in September that they would raise interest rates three times in 2019.
The Federal Reserve is likely to reduce the number of interest rate hikes
Confidence of US home builders fell the most in more than four and a half years in a single month, indicating that rising borrowing costs are depressing the real estate market. Huitong observed that the unexpectedly weak property market data pushed the yield of 10-year U.S. government bonds down, and prompted some traders to question whether the dollar's rise had come to an end.
Goldman Sachs analysts said in their 2019 outlook report that the US dollar may fall as much as 6% against other major currencies, because the boost effect brought by tax cuts and credit easing has gradually faded this year, and the US economy has slowed down.
Although many developed economies are slowing down, the economic growth of the United States, the world's largest economy, is still strong. With the aftermath of the US $1.5 trillion tax reduction policy, the official unemployment rate is at the lowest level in nearly half a century. The Federal Reserve is expected to raise interest rates again next month and raise interest rates three times next year.
However, the latest survey shows that the median estimate of the probability of recession of the US economy has risen from 30% of the previous estimate to 35%. The median estimated probability of recession in the next 12 months is still 15%.
The glow of the US economy is expected to begin to fade this quarter. The market expects that the annual growth rate of gross domestic product (GDP) in the fourth quarter of 2018 will be 2.7%, lower than 4.2% in the second quarter and 3.5% in the third quarter.
The economic growth of the United States is expected to further slow down by the end of next year. The market also expects that the GDP growth rate will slow down to 2.0% - 2.5% in 2019 and 1.8% by the middle of 2020.
The FX678 research judgment believes that although the possibility of the United States falling into economic recession in the next two years is still low, there is indeed a risk that the Federal Reserve will slow down the rate of interest rate rise. This is the latest week American Index The main reason for the pressure is that hedge buying takes the opportunity to push up the gold price.
There is no sign of easing trade friction
The Asia Pacific Economic Cooperation (APEC) Summit ended last Sunday (November 18), and the leaders attending the summit failed to reach a joint communique, which was the first time in the history of the APEC Summit. In this regard, Chinese State Councilor and Foreign Minister Wang Yi said that there were reasons why the Conference did not issue the Declaration.
Wang Yi pointed out that this was mainly because individual economies insisted on imposing their own text on other parties to justify protectionism and unilateralism, and they did not accept the reasonable amendments proposed by China and other parties. This practice has aroused dissatisfaction from many economies, including China, and is obviously inconsistent with the principle of consensus that APEC adheres to. Consensus is the value and basic rule of APEC, which concerns the common interests of all parties and cannot be ignored or abandoned.
James Knightley, chief international analyst of AZ Bank, said: "The economy is facing more and more resistance, including the delayed impact of the previous interest rate rise and the strength of the US dollar, the uncertainty of trade protectionism when external demand slows down, and the support of fiscal stimulus measures is expected to gradually weaken. The main upward risk of inflation seems to come from the tight job market and whether wages can continue to rise, but we expect economic growth to slow down in 2019, This should lead to the gradual weakening of inflationary pressure at the end of next year. "
Huitong observed that there is no sign of easing the Sino US trade confrontation, which has begun to impact export sensitive economies such as Germany and Japan. Global economic growth is facing increasing constraints, which is the driving force for the dollar index to regain strength in the session.
The plan of the Federal Reserve to raise interest rates next month is not expected to change
Although the expectation of the Federal Reserve to raise interest rates next year has cooled down, the plan of raising interest rates next month is not expected to be affected. Williams also said that as the Federal Reserve moves towards a more normal policy stance to keep the economy expanding, it will push forward the plan of gradually raising interest rates next month.
Williams reiterated that the US economy and the job market are "strong", prompting employers to hire employees they would not otherwise hire. Williams is a close ally of Federal Reserve Chairman Powell, and has a permanent vote on monetary policy.
Williams said: "What will we do at the next FOMC meeting? We will try our best to do what we have been doing - we will find a path for monetary policy to gradually return to a more normal level of interest rates. We have raised interest rates, but they are still at a very low level. We hope to maintain this expansion as long as possible."
His gradual statement shows that the hot domestic economy of the United States is the focus of the core decision makers of the Federal Reserve, although there are signs that the overseas economy is slowing down.
After visiting a technical work training center near the Bronx Museum of Art, Williams said: "This is an economy with many unmet needs in the fields of health care and education. There are no lack of employment opportunities. The economy has ups and downs, which is just a way of life. Now it is very good."
Ray Attrill, head of foreign exchange strategy at National Australia Bank (NAB), said: "Williams' comments are reasonable, but not as dovish as those made by Clarida and Kaplan last week. The market may reflect on whether the comments made last Friday are interpreted as overly dovish, which may lead to the reversal of the weak trend of the dollar."
Richard Clarida, Vice Chairman of the Federal Reserve, and Kaplan, Chairman of the Dallas Federal Reserve, said last week that they were worried about the possible slowdown of the global economy. This factor has led to the end of the market's large-scale interest rate hike cycle, even if senior officials of the Federal Reserve hinted that more interest rate hikes would be carried out.
Although some central bank officials expressed some prudent views last week, most people, including Powell and Williams, paved the way for further tightening policies as planned.
Attrill also said that if the global stock market continues to correct and volatility continues to rise, the safe haven buying may flow to the US dollar again. "If we see the volatility index (VIX) rise to 25, I would expect the US dollar to strengthen." The index is currently located near 20.10.
Spot gold or up to $1236
The spot gold price rose above $1225, which is 61.8% Fibonacci retracement of the downward range of $1243-1196, indicating that bulls are expected to make a comeback.
According to the hour chart, the gold price may have started the five wave upward trend from $1196. At present, it is deducing the three wave upward trend from around $1218. The future market is expected to reach 38.2% target of $1229 and 61.8% target of $1236.
However, observing the seasonal cycle, the gold price may still be in the short position pattern of the big trend, because the super big C wave trend has started from $1366, and the lower 38.2% target is looking at $1032.
