The Morning Star has appeared! Next week, can the price of spot gold break through 1930 and rise further?
Spot gold prices "recovered" on Friday, approaching $1930 per ounce, and formed a morning star pattern. Will spot gold prices break through $1930 and rise further next week? Although the US June non-farm payroll data released on Friday (July 7) remained strong overall, with the unemployment rate falling as expected and the annual rate of hourly earnings unexpectedly rising, there is evidence that the lagged effects of monetary policy may be starting to show in the economy. The Federal Reserve is likely to end its rate hike cycle in July 2023, limiting the downside potential for gold in the future. At 20:30 Beijing time on Friday (July 7), the US Department of Labor released a June non-farm employment report that fell short of expectations. Some economists believe that companies hoarding labor masked the economic weakness. Spot gold jumped over $12 in a short period. Federal Reserve Expected to Resume Rate Hikes in July For the Federal Reserve, the June non-farm report was still not the best. Job creation exceeding 200,000 is still very strong; the unemployment rate fell as expected, and the annual rate of hourly earnings unexpectedly rose. This suggests that more policy tightening is needed to cool the economy. Gold prices gave back most of their short-term gains within 30 minutes. Glenmede Private Wealth's chief investment officer on the June non-farm payroll: This is unlikely to be seen as a non-farm employment report that allows the Fed to breathe a sigh of relief and think that things are done. If anything, it may confirm the Fed's belief that they are making progress in the right direction. This is not a sudden and significant shift in the labor market in the direction the Fed expects. ANNEX Wealth Management's chief economist on the June non-farm payroll: Job growth remains strong, but the number of people working part-time for economic reasons surged by 452,000. Simple headcount statistics mask whether these jobs resulted in more actual hours worked. Hours worked are growing slower than wages. The job market remains strong, and the surface situation is becoming even stronger. The Federal Reserve's minutes from its June meeting, released on Wednesday (July 5), showed that policymakers unanimously agreed to keep interest rates unchanged to allow time to assess whether further rate hikes are needed, but a vast majority of policymakers expect further policy tightening will ultimately be required. This solidified market expectations that the Fed will raise rates in July. The minutes showed that "almost all participants considered maintaining the federal funds rate at the existing 5% to 5.25% range to be appropriate or acceptable." But the minutes also emphasized that "most participants judged that the uncertainties surrounding the economic and inflation outlook remained high, and that additional information would be valuable in considering the appropriate stance of monetary policy." New York Fed President John Williams said on Wednesday (July 5) that the Fed may have to raise interest rates again, but he did not say whether he favored a rate hike at the July Federal Open Market Committee (FOMC) meeting. Dallas Fed President Lorie Logan said on Thursday (July 6) that there was no shortage of reasons to raise interest rates at the Fed's June policy meeting. Her comments confirmed that the Fed needs more rate hikes to cool the still-strong economy. Comerica Bank chief economist Bill Adams said: "If job growth and/or inflation continue to be hotter than expected in the second half of the year, the Fed may not just do another 25-basis-point rate hike, but two, and then hold steady for the first half of next year." After the Fed released the minutes of its June policy meeting, the market increasingly expects the Fed to resume rate hikes this month and keep rates higher for longer to curb inflation. This puts downward pressure on gold. TD Securities economist: Inflation remains too high, so the Fed will continue to make restrictive statements. While gold will not plummet, there is unlikely to be significant gains for some time. After all, the market is still pricing in a rate hike for the next FOMC meeting. Rate Hike Cycle to End in the Second Half of the Year Fed Chairman Powell claimed after the June meeting that there would be at least two more rate hikes in the second half of the year. But traders currently expect the Fed to raise rates by only 25 basis points in July, and then keep rates in the 5.25%-5.50% range until a rate cut in May 2024. There is uncertainty about the Fed's future rate hike path, and the dollar lacks bullish conviction. Forexlive analyst Adam Button pointed out that the 14 consecutive months of non-farm payroll additions exceeding market expectations have finally been broken, although the reported data is only slightly different from market expectations. Marketwatch economist Jeffry Bartash: The US added 209,000 jobs in June, the smallest increase in more than two and a half years, which may be a sign that the US labor market is cooling as rising interest rates gradually weaken the economy. Other data released this week showed that US manufacturing contracted for the eighth consecutive month in June, falling to its lowest level since May 2020; US services grew faster than expected in June, but the input price index for businesses fell to its lowest level in more than three years, indicating that closely watched services inflation will continue to cool. ANZ economists believe that gold prices may consolidate as the Fed remains hawkish in the short term. Nevertheless, the Fed is likely to end its rate hike cycle in the second half of 2023, which is a structural positive for gold prices in the medium to long term. United Overseas Bank maintains a positive outlook for gold. They continue to believe that US interest rates will peak in the coming months as the Fed reaches the end of its rate hike cycle. Gold remains an important diversifier of portfolio risk. Overall, they maintain a positive outlook for gold and predict that gold will exceed $2000 per ounce in trading in the second half of 2023 and beyond, rising further to $2100 per ounce in the first half of 2024. Mitsubishi UFJ Financial Group economists report that it will become clearer in July whether or to what extent the US dollar index will weaken further. The PCE inflation data at the end of June showed further deceleration, and if the employment market and CPI data also show weakness, the Fed may extend the pause in rate hikes. In this case, the Fed's tightening cycle could end, which could help push the dollar lower. Even if the FOMC does raise rates in July, with the market close to fully pricing this in, and with most other G10 central banks pricing in further rate hikes, there is still limited room for the dollar to strengthen in the second half of the year. Will the price break through $1930 per ounce and rise further?
Time:
2023-07-10 07:58
On Friday, the price of spot gold "stopped falling and rebounded", approaching $1930 per ounce. At the same time, a morning star pattern was formed. So, next week, can the price of spot gold break through $1930 and rise further?
Although the US non-farm payroll data released on Friday (July 7) was still strong overall, with the unemployment rate falling as expected and the year-on-year rate of hourly earnings unexpectedly rising, there is evidence that the lagged effects of monetary policy may be starting to show in the economy. The Federal Reserve is likely to end its rate hike cycle in July 2023, limiting the downside potential for gold in the future.
At 20:30 Beijing time on Friday (July 7), the June non-farm employment report released by the US Department of Labor was below expectations. Some economists believe that companies hoarding labor masks the weakness of the economy. Spot gold jumped more than $12 in the short term.
The Fed is expected to resume rate hikes in July.
For the Fed, the June non-farm report is still not the best. Hiring of more than 200,000 people is still very strong; the unemployment rate fell as expected, and the year-on-year rate of hourly earnings unexpectedly rose. This shows that more policy tightening is needed to cool the economy, and gold prices gave back most of their short-term gains within 30 minutes.
Glenmede Private Wealth's chief investment officer commented on the June non-farm payroll report: "This may not be seen as a non-farm employment report that allows the Fed to breathe a sigh of relief and think that things are done. If anything, it may confirm the Fed's idea that they are making progress in the right direction. This is not a sudden and significant shift in the labor market in the direction the Fed expects."
ANNEX Wealth Management's chief economist commented on the June non-farm payroll report: "Job growth remains strong, but the number of people working part-time for economic reasons surged by 452,000. Simple headcount statistics mask whether these jobs resulted in more actual hours worked. Hours worked are growing slower than wages. The job market remains strong, and the surface is getting stronger."
The minutes of the Fed's June meeting released on Wednesday (July 5) showed that policymakers unanimously agreed to keep interest rates unchanged to allow time to assess whether further rate hikes are needed, but the vast majority of policymakers expect further policy tightening will ultimately be needed. This solidified market expectations that the Fed will raise rates in July.
The minutes showed that "almost all participants considered maintaining the federal funds rate at the existing 5% to 5.25% to be appropriate or acceptable." But the minutes also emphasized that "most participants believed that the uncertainty surrounding the economic and inflation outlook remained high, and additional information would be very valuable in considering the appropriate monetary policy stance."
New York Fed President John Williams said on Wednesday (July 5) that the Fed may have to raise interest rates again, but he did not say whether he supported a rate hike at the July Federal Open Market Committee (FOMC) meeting.
Dallas Fed President Lorie Logan said on Thursday (July 6) that there was no shortage of reasons to raise interest rates at the Fed's June policy meeting. Her comments confirmed that the Fed needs more rate hikes to cool the still-strong economy.
Bill Adams, chief economist at Comerica Bank, said: "If job growth and/or inflation continue to be hotter than expected in the second half of the year, the Fed may not only need to make another 25-basis-point rate hike, but two, and then stand pat in the first half of next year."
After the Fed released the minutes of its June policy meeting, the market increasingly expects the Fed to resume rate hikes this month and keep rates higher for a longer period to curb inflation. This puts pressure on gold.
TD Securities economist: Inflation remains too high, so the Fed will continue to make restrictive statements. Although gold will not plummet, there is unlikely to be any significant gains for some time. After all, the market is still pricing in a rate hike for the next FOMC meeting.
Rate hike cycle ends in the second half of the year.
Fed Chairman Powell claimed after the June meeting that there would be at least two more rate hikes in the second half of the year. But traders currently expect the Fed to raise rates by only 25 basis points in July, and then keep rates in the 5.25%-5.50% range until a rate cut in May 2024. There is uncertainty about the Fed's future rate hike path, and the dollar lacks bullish conviction.
Adam Button, an analyst at Forexlive, pointed out that the 14 consecutive months of non-farm payroll additions exceeding market expectations have finally been broken, although the reported data is only slightly different from market expectations.
Jeffry Bartash, an economist at Marketwatch: The US added 209,000 jobs in June, the smallest increase in more than two and a half years, which may be a sign that the US labor market is cooling as rising interest rates gradually weaken the economy.
Other data released this week show that US manufacturing contracted for the eighth consecutive month in June, falling to its lowest level since May 2020; US services grew faster than expected in June, but the producer price index fell to its lowest level in more than three years, indicating that closely watched services inflation will continue to cool.
Economists at ANZ Bank believe that the Fed will remain hawkish in the short term, and gold prices may consolidate. Nevertheless, the Fed is likely to end its rate hike cycle in the second half of 2023, which is a structural positive for gold prices in the medium to long term.
DBS Bank said it remains positive on gold. They continue to believe that US interest rates will peak in the coming months as the Fed reaches the end of its rate hike cycle. Gold remains an important diversifier of portfolio risk. Overall, they remain positive on gold and predict that gold will exceed $2000 per ounce in trading in the second half of 2023 and beyond, rising further to $2100 per ounce in the first half of 2024.
Mitsubishi UFJ Financial Group economists reported that whether or to what extent the US dollar index will weaken further will become clearer in July. The PCE inflation data at the end of June showed further deceleration, and if the employment market and CPI data also show weakness, the Fed may extend the pause in rate hikes.
In this case, the Fed's tightening cycle could end, which could help push the dollar lower. Even if the FOMC does raise rates in July, with the market nearing full pricing, and with most other G10 central banks pricing further rate hikes, there is still limited room for the dollar to strengthen in the second half of the year.
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