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Gold price does not rule out the possibility of a recent decline

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发表于 2018-9-25 16:14:19 | 显示全部楼层 |阅读模式
The next move in the gold market will depend on what the Fed will say in future monetary policy this week. Any hints the Fed will give to the pace of subsequent interest rate hikes will have a greater impact on the short-term dollar and gold movements.
Beijing time this Thursday (September 27) 02:00, the Federal Reserve will announce the interest rate resolution. Then at 02:30, Federal Reserve Chairman Powell will hold a press conference. The market will pay close attention to any clues the Fed will raise interest rates in the future.

In the past five weeks, gold prices have been fluctuating around the critical psychological barrier of $1,200 per ounce. The market generally expects that the Fed’s rate hike this week is almost a nail. On Monday (September 24th), December gold futures closed at $1204.4 per ounce, up 0.26% on the day.

Some analysts believe that the recent fluctuations in gold prices are very "boring", while other analysts see the gold market as a "curly spring", waiting for market sentiment to change while bottoming. The price of gold has fallen by nearly 12% since April. Many analysts believe that the price of gold has fully reflected the current monetary policy trajectory of the Fed, and it is expected to see a short-term rebound.

Bill Baruch, president of Blue Line Futures, said: "The gold market is making a comeback. We only need a catalytic factor to trigger a market rebound, and this may come from the Fed."

The Fed’s view of neutral interest rates is crucial to the next step in gold
Some commodity market analysts believe that the Fed's view of neutral interest rates is crucial to the next move of gold.

Neutral interest rates are interest rates in which monetary policy is neither loose nor tight. According to discussions at the last monetary policy meeting, the Fed itself believed that interest rates would be close to neutral. The minutes of the July monetary policy meeting showed that participants pointed out that the federal funds rate is approaching the expected neutral level range.

However, economists and analysts want to understand whether this sentiment has changed as inflation continues to heat up and the US labor market is fully employed.

Bill Baruch believes that the Fed has no reason to be more hawkish. He believes that Powell hopes to remain stable because the uncertainty of the US economy is growing. The United States has experienced strong summer economic growth, but this rate is not sustainable.

Jasper Lawler, head of research at London Capital Group, believes that the dollar has been strongly appreciated as the market has been expecting the Fed to take aggressive monetary policy actions, dragging down the price of gold. But he added that this particular deal is losing momentum and may face a reversal this week.

Lawler said: "After the strong appreciation of the dollar, the market needs more than the Fed's current stable interest rate hike. From a risk/reward perspective, the gold market looks good at these levels." Over the past week, the US dollar index has been It fell nearly 1% in a week.

George Gero, general manager of wealth management at Goldbank Canada, pointed out that bond yields continue to rise, highlighting the growing risk of the Fed changing its prospects for neutral interest rates. The 10-year US Treasury yield has risen to 3.07%, the highest level since mid-May. So far this month, the 10-year US Treasury yield has risen by nearly 8%.

Can not rule out the recent decline in gold prices
Ronald-Peter Stoeferle, fund manager at Incrementum AG, said that although he believes gold prices are attractive at current levels, he does not rule out the possibility of a recent decline in gold prices.

He believes that as the US economy remains active, the labor market is fully employed, and the US stock market hits new highs, the Fed may raise its expectations for neutral interest rates. He said: "As long as the stock market continues to rise, the Fed will continue to raise interest rates, which will curb the rise in gold prices."

But Stoeferle pointed out that the rebound in gold prices is only a matter of time, because monetary policy increases the risk of a recession in the United States. He believes that in the long run, as interest rates rise, the Fed will speed up its balance sheet, the US deficit growth will be out of control, and the US economy will face a harmful environment.

Stoeferle believes that gold will continue to build for a period of time, but the longer the gold is built, the stronger it will be, and the more space it will rebound. He said: "When investors and the market realize that the US recession is approaching, the price of gold will break out."

He added that speculative short positions in gold and negative sentiment hit historical highs, which has been a "prelude" to the rebound in gold prices in the past 16 or 7 years.

Hecht Commodity Report founder Andrew Hecht pointed out in a report on Friday (September 21) that next week if the Fed raises interest rates, it may return the gold price to its recent low of $1,180. But if the Fed publishes a dovish statement that raises doubts about the 2019 rate hike, it will push the price back to $1,220 per ounce.

Royal Bank of Canada cuts gold price expectations
After falling for five months, the price of gold is currently hovering around $1,200 per ounce. The weak performance of the gold price led the Royal Bank of Canada (RBC) to cut the gold price forecast for the remainder of 2018 and 2019.

In the latest forecast released on Monday (September 24), the bank currently expects the average price of gold in the fourth quarter to be $1,266 per ounce, lower than the previous forecast of $1,281 per ounce. At the same time, Royal Bank of Canada analysts cut the average price forecast for 2018 to $1,279 per ounce, and the average for the full year of 2019 is expected to be $1,338 per ounce, lower than previously expected at $1,352 per ounce.

Although the Royal Bank of Canada lowered its gold price forecast, the bank is still optimistic that the price of gold will eventually push up. “Although the weak gold price may continue, we still believe that the price of gold is below the basic reasonable level.”

The bank pointed out that although the uncertainty of the global market continues to increase, one of the factors that make the price of gold low is that the risk concept of investors has undergone major changes.

The bank believes that in order for the gold price to rebound, the market needs to expect that the ongoing trade conflicts and other events will have a considerable negative impact on the economy - this effect is enough to offset the impact of the dollar's strength, and enough to allow investors to flow to "considered Safe-haven assets."

Although Royal Bank of Canada believes that the price of gold will not reach $1400/oz soon, it believes that the current price is a good "entry node" for investors.

As for what factors may push the price of gold out of $1, the Royal Bank of Canada warned investors that they should pay close attention to the US midterm elections in November.

Royal Bank of Canada said: "We look forward to the mid-term elections on November 6 to focus on any changes in trade policy sentiment and overall US policy sentiment. How this will permeate risk appetite and economic trends is important. Whether we are Seeing this turning point in 2018, we will still see the redistribution of capital flows, the normalization of positions, and the re-adjustment of the major macro factors affecting gold in 2019."

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