Gold prices rose for four consecutive months, and important data
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This week, the spot gold market showed a range of fluctuations, with the amplitude significantly narrowed compared with the previous period. After the PCE data was released on Friday, it rose only briefly and then quickly turned to a decline, recording a decline for the second consecutive week. It is worth noting that although gold rose for the fourth consecutive month in May, the monthly amplitude was significant, exceeding $170, indicating that market volatility is still high.
The Fed's interest rate cut expectations once again ushered in "good" news. The recently released economic and inflation data were both revised down, and the core PCE was lower than expected, but gold did not take this opportunity to break upward.
The US economic and inflation data in the first quarter performed poorly, and the unemployment rate rose year-on-year in some areas, indicating that the economy may be weakening. In addition, the rise in 30-year mortgage rates also put some pressure on home purchases and refinancing demand. The inflation indicator favored by the Fed continued to cool, and the core PCE monthly rate in April recorded a new low. After the release of this data, investors' expectations for the possibility of the Fed's first interest rate cut in September have increased. However, the market remains cautious about the Fed's decision because the Fed needs to make a difficult choice between balancing inflation and economic growth.
Although the consumer confidence index unexpectedly rose in May, with average expectations reaching the highest level this year, the market remains cautious about the impact of the Fed's high interest rate policy. Fed officials have recently stopped saying they expect further tightening this year, but officials who have been intensively dispatched after the short holiday still refused to predict the specific time of the first rate cut.
In the statements of officials, we can see different voices. "Big Hawk" representative Kashkari believes that the monetary policy stance is still restrictive, but has not completely ruled out the possibility of further rate hikes. He personally predicts that the number of rate cuts this year will not exceed two. Director Bowman supports slowing down the balance sheet reduction or slowing down at a smaller scale, believing that caution is needed when the use of reverse repurchases is still large. Dallas Fed President Logan holds a different view. He believes that high interest rates may not be as restrictive to the economy as policymakers expect, so all policy options need to be retained to maintain flexibility.
However, some officials are more optimistic about the prospects for rate cuts. New York Fed President Williams said that there is sufficient evidence that monetary policy is restrictive, interest rate hikes are unlikely, and inflation is expected to continue to fall in the second half of this year. Although Atlanta Fed President Bostic does not think there will be a rate cut in July, he also hinted that if September is suitable for a rate cut, the Fed will take action, but not for political considerations.
The market generally expects that at the upcoming policy meeting, Fed officials may lower their forecasts for the number of rate cuts this year from the previous three to one or two that are closer to the current expectations of the financial market. Judging from the pricing in the interest rate swap market, option traders generally believe that the Fed will maintain high interest rates for a longer period of time.
In addition, the suggestions made by Cleveland Fed President Mester are also worth paying attention to. She suggested that the Fed statement should be longer and an anonymous matrix should be published to show the series of forecasts of the corresponding figures in the SEP. This suggestion may increase the transparency and predictability of monetary policy. The Cleveland Fed has appointed former Goldman Sachs partner Hammark as the next chairman, who will bring new perspectives and experience to the Fed in finance, capital markets and risk management.
In addition, the latest Beige Book released by the Federal Reserve also revealed some new dynamics in the US economy. Since early April, most Fed districts have seen moderate economic growth and inflation, consumers' price sensitivity has increased, and retail spending has remained flat or grown slightly. This shows that although the US economy is still expanding, the growth rate has slowed down and it is facing the pressure of continued inflation and high interest rates. The Beige Book also mentioned that companies have become more pessimistic about the future prospects, which may further affect economic growth.
In the next June, the market will usher in a series of important economic data and events. The first is the release of non-farm data in May, which will directly reflect the situation of the US labor market. If the unemployment rate continues to rise, especially if it reaches 4%, then the alarm of the labor market may have sounded, which will force the Fed to consider starting insurance rate cuts in advance.
Next is the May US CPI data and the convening of the FOMC meeting. These two major events will jointly determine the market trend. The release of CPI data will reveal whether inflation will continue to decline, and the statement of the FOMC meeting will directly affect the market's expectations for future monetary policy. In particular, the release of the dot plot will reveal the forecasts of Fed officials for the number of interest rate cuts this year. If a voting committee lowers the expectation of interest rate cuts within the year, then the number of interest rate cuts expected by the entire Fed will decrease, which will have an important impact on the market.
We also need to be alert to a more extreme situation: if most Fed officials lower their expectations for rate cuts this year, the Fed's expected rate cuts this year will drop directly from three to one. Although the probability of this happening is small, once it happens, it will boost the dollar and bonds, while suppressing gold. Therefore, we need to pay close attention to the statements of Fed officials and changes in market expectations.
Of course, as a loyal trustor of spot gold bulls, we prefer to see a situation that is favorable to rate cuts, and a situation that is favorable to rate cuts is bound to be a positive boost to spot gold.
In the coming June, spot gold is about to have a storm, so let us move forward cautiously!
This week, the spot gold market showed a range of fluctuations, with the amplitude significantly narrowed compared with the previous period. After the PCE data was released on Friday, it rose only briefly and then quickly turned to a decline, recording a decline for the second consecutive week. It is worth noting that although gold rose for the fourth consecutive month in May, the monthly amplitude was significant, exceeding $170, indicating that market volatility is still high.
The Fed's interest rate cut expectations once again ushered in "good" news. The recently released economic and inflation data were both revised down, and the core PCE was lower than expected, but gold did not take this opportunity to break upward.
The US economic and inflation data in the first quarter performed poorly, and the unemployment rate rose year-on-year in some areas, indicating that the economy may be weakening. In addition, the rise in 30-year mortgage rates also put some pressure on home purchases and refinancing demand. The inflation indicator favored by the Fed continued to cool, and the core PCE monthly rate in April recorded a new low. After the release of this data, investors' expectations for the possibility of the Fed's first interest rate cut in September have increased. However, the market remains cautious about the Fed's decision because the Fed needs to make a difficult choice between balancing inflation and economic growth.
Although the consumer confidence index unexpectedly rose in May, with average expectations reaching the highest level this year, the market remains cautious about the impact of the Fed's high interest rate policy. Fed officials have recently stopped saying they expect further tightening this year, but officials who have been intensively dispatched after the short holiday still refused to predict the specific time of the first rate cut.
In the statements of officials, we can see different voices. "Big Hawk" representative Kashkari believes that the monetary policy stance is still restrictive, but has not completely ruled out the possibility of further rate hikes. He personally predicts that the number of rate cuts this year will not exceed two. Director Bowman supports slowing down the balance sheet reduction or slowing down at a smaller scale, believing that caution is needed when the use of reverse repurchases is still large. Dallas Fed President Logan holds a different view. He believes that high interest rates may not be as restrictive to the economy as policymakers expect, so all policy options need to be retained to maintain flexibility.
However, some officials are more optimistic about the prospects for rate cuts. New York Fed President Williams said that there is sufficient evidence that monetary policy is restrictive, interest rate hikes are unlikely, and inflation is expected to continue to fall in the second half of this year. Although Atlanta Fed President Bostic does not think there will be a rate cut in July, he also hinted that if September is suitable for a rate cut, the Fed will take action, but not for political considerations.
The market generally expects that at the upcoming policy meeting, Fed officials may lower their forecasts for the number of rate cuts this year from the previous three to one or two that are closer to the current expectations of the financial market. Judging from the pricing in the interest rate swap market, option traders generally believe that the Fed will maintain high interest rates for a longer period of time.
In addition, the suggestions made by Cleveland Fed President Mester are also worth paying attention to. She suggested that the Fed statement should be longer and an anonymous matrix should be published to show the series of forecasts of the corresponding figures in the SEP. This suggestion may increase the transparency and predictability of monetary policy. The Cleveland Fed has appointed former Goldman Sachs partner Hammark as the next chairman, who will bring new perspectives and experience to the Fed in finance, capital markets and risk management.
In addition, the latest Beige Book released by the Federal Reserve also revealed some new dynamics in the US economy. Since early April, most Fed districts have seen moderate economic growth and inflation, consumers' price sensitivity has increased, and retail spending has remained flat or grown slightly. This shows that although the US economy is still expanding, the growth rate has slowed down and it is facing the pressure of continued inflation and high interest rates. The Beige Book also mentioned that companies have become more pessimistic about the future prospects, which may further affect economic growth.
In the next June, the market will usher in a series of important economic data and events. The first is the release of non-farm data in May, which will directly reflect the situation of the US labor market. If the unemployment rate continues to rise, especially if it reaches 4%, then the alarm of the labor market may have sounded, which will force the Fed to consider starting insurance rate cuts in advance.
Next is the May US CPI data and the convening of the FOMC meeting. These two major events will jointly determine the market trend. The release of CPI data will reveal whether inflation will continue to decline, and the statement of the FOMC meeting will directly affect the market's expectations for future monetary policy. In particular, the release of the dot plot will reveal the forecasts of Fed officials for the number of interest rate cuts this year. If a voting committee lowers the expectation of interest rate cuts within the year, then the number of interest rate cuts expected by the entire Fed will decrease, which will have an important impact on the market.
We also need to be alert to a more extreme situation: if most Fed officials lower their expectations for rate cuts this year, the Fed's expected rate cuts this year will drop directly from three to one. Although the probability of this happening is small, once it happens, it will boost the dollar and bonds, while suppressing gold. Therefore, we need to pay close attention to the statements of Fed officials and changes in market expectations.
Of course, as a loyal trustor of spot gold bulls, we prefer to see a situation that is favorable to rate cuts, and a situation that is favorable to rate cuts is bound to be a positive boost to spot gold.
In the coming June, spot gold is about to have a storm, so let us move forward cautiously!
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