In the morning trading of Asian market on Tuesday (November 20), after a slight rise in gold, there was a wave of rapid decline, but the overall trend was more neutral and remained above $1220, due to the recent speech of the Federal Reserve and the continuous fermentation of risk aversion in the market. Considering the recent mixed factors, it is expected that gold will settle horizontally before Thanksgiving, but then it may choose the direction.
Williams follows the dovish speech of the Federal Reserve or suggests the early end of the interest rate increase cycle
After the collective pigeon flying of Federal Reserve officials last Friday, the US dollar has seen a significant decline. The market hopes that New York Fed Chairman Williams can release the signal of hawkish bias to boost the US dollar.
Although the Federal Reserve Williams has adhered to its consistent position, emphasizing that the U.S. economy is performing very well, the unemployment rate is at a low level, and the Federal Reserve will keep the pace of gradually increasing interest rates, he also pointed out that if necessary, the Federal Reserve will adjust the interest rate path, and the Federal Reserve may slightly increase interest rates. This is almost consistent with the recent comments of Fed officials.
ANZ Bank believes that the speech of the Federal Reserve Williams is dovish and based on data, consistent with the recent speech of the Federal Reserve officials, the Federal Reserve may make a significant adjustment to the dot matrix in December, and the path of interest rate increase in 2019 becomes more uncertain. The previous forward-looking index indicates that the Federal Reserve will raise interest rates three times in 2019, but the market currently believes that it is possible to raise interest rates twice, It is expected that the Federal Reserve will raise interest rates in December this year and again in the middle of 2019.
Brent Schutte, chief investment strategist of Northwest Mutual Wealth Management Company, believes that in the face of potential economic slowdown, the process of the Federal Reserve's interest rate increase has also brought pressure to the market. The Federal Reserve is still releasing the signal of raising interest rates, which may be just to stabilize market sentiment, but in fact, the Fed's policy tightening cycle is not far from ending.
Goldman Sachs said on Monday that it expected that the growth rate of the US economy would slow to the global average next year. Meanwhile, data released by the National Association of Home Builders on Monday showed that confidence in the U.S. real estate market has weakened, increasing concerns about economic growth.
A recent survey showed that 50 of the 69 analysts interviewed said that the risk of the Federal Reserve's interest rate path would slow down and tighten next year, while the rest believed that it would accelerate the tightening.
Therefore, as the signs of economic slowdown in the United States become more and more obvious, it may lead the Federal Reserve to end the current interest rate increase cycle ahead of schedule, thereby putting pressure on the dollar and boosting Gold price 。
The Brexit draft is expected to upset the parliament, and the risk of Brexit without an agreement increases risk aversion
With the recent challenges to Teresa's ruling position, the risk of Britain leaving the EU without an agreement is further rising. According to the British Sun, 42 Conservative MPs have confirmed that they have submitted letters of distrust of British Prime Minister Teresa May. If there are six more letters, Teresa will face a vote of distrust, which will aggravate the concern of the market.
However, Teresa is not currently in a desperate situation. The German Minister of European Affairs recently said that even for the most determined Brexit faction, the current agreement is better than Brexit without an agreement, suggesting support for Teresa; The British Minister of Northern Ireland Affairs also said that there would be no new Brexit agreement. If this agreement was rejected, the UK would leave without an agreement.
Even Davis, a former British minister who was skeptical of Teresa, said that no re-election was expected, so Teresa's ruling status would not change in a short time.
At present, the biggest obstacle in Britain still comes from home. Andreas Stano Larson, research analyst of Nordic Bank, said that Teresa May will have a difficult week, because she will have to prepare for the special Brexit Summit held on Sunday, November 25 without appointing a new minister. At the same time, she also faces huge domestic obstacles.
If Teresa May finally decides to submit the draft agreement to the House of Commons, she will face an arduous battle to win a majority of seats. In other words, if the agreement is submitted to the Parliament, the risk of failure to pass the agreement is very high.
Therefore, it is still necessary to pay attention to the progress of Brexit in the near future. Any unexpected situation may promote the further recovery of risk aversion in the market, and then push gold higher.
Italy may veto the euro zone budget plan, increasing the uncertainty of European economic prospects
Recently, Italy said that it would continue to implement the target of 2.4% budget deficit. At the same time, Italy also stressed that lowering the target would be an insurmountable boundary, and Italy would face further pressure from the EU in the near future. Italian Finance Minister Jean Claude Tria said recently that it is difficult to reach consensus on the euro zone reform package soon, which makes the economic prospects of Europe face uncertainty.
In fact, Italy's financial problems are just a microcosm of Europe's many problems. Moody's recently said that the hard exit from Europe and the further deterioration of Italy's sovereign credit quality have made the prospect of Europe's insurance industry stable and facing downside risks. At the same time, Italy's debt problem has also increased the risk exposure of European banks.
Faced with many obstacles, Europe is actively promoting its budget plan to ease difficulties. German Finance Minister Scholtz said that 95% of the euro zone budget has been completed. However, recently it was reported that Italian Deputy Prime Minister Salvini said that he might oppose the euro zone budget plan, which triggered a risk aversion in the market and further boosted the gold price.
technical analysis
From the daily chart, gold has now stood on the 30 day moving average, with obvious support below in a short time. As long as it stays above $1213.8 for a short time, the trend of neutral and more bullish will not change.
At the same time, the relative strength index has reached above 50, which is likely to rise further in the future.
On the 4-hour chart, although a rising wedge has formed, which does not rule out the possibility of gold retreating in a short time, as the short cycle moving average turns upward and the 40 day moving average begins to level, if the gold retreats in a short time, it is expected to do a sideways consolidation in the 1210/1220 range and then choose the direction.
Future prospects
As for whether the Federal Reserve will implement the neutral interest rate, or they will allow it to be temporarily higher than the neutral interest rate, there are many repeated comments that the market awaits further clarification on the prospect of interest rate rise in December and next year. In such an environment, gold will move sideways until Thanksgiving, and the trading volume is expected to remain light.
However, it should be noted that gold may choose its direction after the recent consolidation trend.
At the same time, it is reported that Italian Prime Minister Conde will meet with European Commission President Juncker in Brussels on Saturday, which may have a discussion on budget issues, thus affecting the gold price.
