Gold price stalls at key juncture; China's multilateral disputes worsen; Fed to discuss "new policies" at September meeting
In Asian morning trading, spot gold opened lower but subsequently edged up 0.14% to $1971.40 per ounce. Spot silver outperformed gold, rising 0.34% to $28.16 per ounce. Federal Reserve Governor Lael Brainard said on Tuesday that the U.S. economy still faces significant threats from uncertainties related to the coronavirus crisis, and that loose monetary policy remains crucial for risk aversion.
Time:
2020-09-02 13:31
Early Wednesday morning (September 2nd), spot gold opened lower but subsequently rose slightly by 0.14% to $1971.40 per ounce, spot silver also outperformed gold with a 0.34% increase, reaching $28.16 per ounce. Federal Reserve Governor Lael Brainard said Tuesday that the U.S. economy still faces significant threats from uncertainties related to the coronavirus crisis, and that loose monetary policy is crucial for risk aversion.
The Federal Reserve's future policies will be framed by the new policy.
Federal Reserve Governor Lael Brainard, one of the designers of the new long-term strategy of the "average inflation target" adopted by the Federal Reserve last week, said the Federal Reserve needs to introduce new measures in the "coming months" to help the economy overcome the impact of the coronavirus pandemic and achieve the Federal Reserve's new commitment to faster job growth and rising inflation.
Brainard believes the new strategy will help support the economy's recovery from the coronavirus and promote employment in the long term. Some analysts believe that the Federal Reserve's new "framework" is incomplete, lacking more details on how the Federal Reserve intends to implement it. Brainard said in her speech that this issue needs to be addressed. Brainard said: "As the economic recovery may face COVID-19-related headwinds for some time to come, it will be important for monetary policy to shift from stability to easing." This decision "will be guided" by the new strategy, which balances efforts to promote further job growth with risks of rising inflation. The Federal Reserve's policy discussions at the September meeting and beyond will be framed by the new strategy.
This week, speeches by Federal Reserve officials will continue throughout the coming week, marking the last public remarks before the Federal Reserve officials' "quiet period" before the September monetary policy meeting, and are expected to provide further forward guidance.
Geopolitical tensions intensify, China embroiled in multilateral disputes
The United States has taken a number of further actions against China. The Office of the United States Trade Representative said it has extended the tariff-free period for a range of Chinese products to the end of 2020, but this is a shorter extension than the one-year extension previously granted. These products do not include those subject to the "Section 301" tariffs imposed a year ago by U.S. President Donald Trump on a range of Chinese consumer goods. "Section 301" tariffs on goods worth approximately $125 billion have been reduced from 15% to 7.5% as stipulated in the first phase of the US-China trade agreement.
Meanwhile, the United States also remains wary of China's military strength. According to the latest report released by the U.S. Pentagon, China's military capabilities in missile development and shipbuilding may have surpassed those of the United States, and it could double its nuclear warhead stockpile in the next 10 years. U.S. Secretary of State Pompeo announced that the United States intends to prevent arms trade between China and Iran. In a statement to WMAL-FM, Pompeo said: "China is one of the countries that wants to sell weapons to Iran, and it will make a lot of money from it. I believe China will buy some systems from Iran. We must prevent this from happening." He expects the United States to re-impose international sanctions on Iran, which will "narrow the space for transactions between China and Iran." Pompeo also said that he would release news about China in "days and weeks," and used the analogy of the "Cold War" to describe the relationship between the United States and China.
Relations between China and Australia are also deteriorating rapidly. China announced a suspension of imports of barley from Australia's largest grain exporter, CBH Grain Pty, after finding harmful weeds in the cargo. Just a day earlier, China announced an anti-subsidy investigation into Australian wine, and Australian-Chinese female host Cheng Lei was also detained in China. The Australian side said it was unclear why Cheng Lei was detained. A spokesperson for CBH said the company would work with the government to challenge the ban, but had not found any evidence to support the claim. "CBH confirms that all grain shipped to China meets all phytosanitary export requirements of the Chinese government, so we are very disappointed to hear about the suspension of exports."
Employment data dominates the market this week
This week is also filled with various employment-related data, including initial jobless claims and non-farm employment reports.
The market expects the slow improvement in the U.S. labor market in August to continue as fewer business closures bring more workers back to their jobs.
At 8:15 PM tonight, ADP's August private sector employment numbers are expected to increase by 1 million, significantly higher than the 167,000 reported in July.
At 8:00 PM Thursday, initial jobless claims for the week ending August 28 are expected to fall to 950,000, marking the second time in the past six months that the number has fallen below 1 million.
At 8:30 PM Friday, the U.S. non-farm employment report will be released, with the market currently expecting an increase of 1.518 million in non-farm payrolls in August, and August unemployment rate is expected to fall from 10.2% to 9.9%, and the average hourly earnings are expected to fall from 0.2% to 0%.
Gold breaking through $1970 is worth celebrating
Although gold has not yet broken through the key psychological level of $2000 per ounce, ActivTrades ' chief analyst Carlo Alberto De Casa said: "The Federal Reserve's decision and the new inflation target have opened up space for a new round of rebound in gold." "Despite the continued rise in U.S. stock indices, investors believe it is necessary to increase the proportion of gold in their portfolios to guard against new turmoil in the stock and foreign exchange markets."
FXStreet analyst Anil Panchal believes that gold's ability to break through the 21-day SMA of $1970 per ounce has given bulls hope. Weak U.S. interest rates 、 PMI index strength also failed to boost the U.S. dollar index are all favorable to gold.
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Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.