statement of events

This Wednesday at 10:30 pm Sydney time, the U.S. Department of Labor released April inflation report CPI data. The data showed that the overall U.S. CPI annual rate in April was 4.90%, both the expected value and the previous value were 5%; the core CPI annual rate in April was in line with The expected value is 5.50%, lower than the previous value of 5.60%. Both the overall and core CPI annual rates fell. The weaker-than-market data supported the Federal Reserve to keep interest rates unchanged in June and suspend interest rate increases.

The market’s expectations for the Federal Reserve to raise interest rates in June have cooled, and the U.S. dollar index has weakened. After the data was released on Wednesday night, spot gold jumped more than 16 US dollars to 2,045.67 US dollars per ounce. The gold price once shot up to near the 2,050 mark, but then the gold price gave up all the gains. , and once fell back to near the 2020 mark, because the market realized that U.S. inflation is still at a high level, and an interest rate cut is unlikely in the short term. Spot gold prices fluctuated within a narrow range on Thursday and are currently trading around $2,032.92 per ounce.

Event cause analysis

While the U.S. CPI data fell in April, the U.S. is also in a debt ceiling deadlock, and government credit default swap spreads have reached a record high, supporting gold prices to continue to rise. U.S. President Joe Biden and members of Congress agreed on Tuesday to further talks aimed at breaking an impasse over raising the $31.4 trillion U.S. debt ceiling. Biden, House Speaker McCarthy and three other senior congressional leaders are scheduled to meet again on Friday. We are now just three weeks away from an unprecedented potential debt default in the United States. The U.S. Treasury Department warned last week that it may have to stop borrowing entirely and rely entirely on tax revenue to pay its bills by June 1. The assumption that the U.S. government will repay its debt on time is the cornerstone of much global market activity. Most analysts and investors believe that, as in the past, a solution will be found at the last minute. But tensions are starting to spread, with the White House estimating that a long-term default will wipe out more than 8 million jobs.

The outlook for the Federal Reserve’s June policy meeting depends on several high-frequency data released before then, and April inflation data ranks among the best. Although the annual core inflation rate is still more than twice the 2% target, the Fed still hopes to solve the inflation problem as soon as possible. The market believes that after the Federal Reserve completed a cumulative 500 basis points of interest rate hikes and expected that the restructuring among regional banks will lead to a credit crunch, unless inflation accelerates again, the Federal Reserve is unlikely to further tighten monetary policy simply because of inflation problems. Many financial market participants believe that the Federal Reserve will avoid raising interest rates at its June meeting and begin to digest the possibility of a rate cut within the year.

But most analysts believe that a summer interest rate cut is too early for the Fed. The Fed’s target is 2%, inflation is unlikely to reach the target this summer, and price pressures are still too high, although labor demand and demand for some commodities are gradually cooling. There are some signs of this, but overall demand continues to outstrip supply. New York Fed President Williams said on Tuesday that it was too early to say that the central bank had completed its mission. “We have not said that we are done raising interest rates. If further tightening of policy is appropriate, we will do so.”

Although tightening financial conditions related to banking stress will help to further cool the economy, the prospect of further interest rate hikes by the Federal Reserve remains, and the April non-farm payrolls report released on Friday showed that even in the face of the Fed’s actions, the labor market Still very strong, which may force the central bank to continue raising interest rates at some point in the future. Fed officials generally believe that the worst stress on the banking sector, which began in March with the collapse of several regional banks, is now over. Still, Williams said the consequences of stress in the banking sector would figure prominently in his thinking about the future of monetary policy. “I will be particularly focused on assessing the evolution of credit conditions and their impact on the outlook for growth, employment and inflation.”

In his speech, Williams said he expected the personal consumption expenditures price index to fall to 3.25% this year and return to the 2% target in 2025. He noted signs that price pressures were moderating, but that core services inflation, which excludes housing, persisted. He also said the unemployment rate should rise to between 4.0% and 4.5% this year.

From a fundamental perspective, given ongoing economic concerns, including a potential U.S. debt default, a variety of factors support gold prices in another attempt to reach record highs. From a technical point of view, after the gold price was blocked by the upper limit resistance of the Bollinger Band overnight, the K-line also recorded a cross star, and it faces a certain risk of a correction in the short term. It is also necessary to follow up on the changes in the number of initial jobless claims in the United States and the U.S. PPI data in April.