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Gold Price, Sep 22, 2022: When Will the Demand of Safe-haven Boost Gold Prices?

Gold Price Today, Sep 22nd, 2022

Gold Price BBI Info

1. Market review: On Wednesday, spot gold staged a roller coaster market, first falling below the $1,660 mark, and then pumping back about $34 to a maximum of $1,687.98, and finally closed up 0.56% at $1,674.22 per ounce; spot silver challenged 20 After the failure of the dollar mark, it fell back and finally closed up 1.50% at $19.56 per ounce.

2. At 2:00 am Beijing time on Thursday, the Federal Reserve announced a 75 basis point interest rate hike, raising the benchmark interest rate to 3.00%-3.25% range, the interest rate level rose to a new high since 2008. So far this year, the Federal Reserve has raised interest rates five times in a row, and the last three consecutive interest rate hikes by 75 basis points. The Federal Reserve reiterated that it is appropriate to continue to raise interest rates. The Committee is highly concerned about inflation risks, and Fed officials expect monetary policy to take a tougher line. , there will be at least one rate hike of 75 basis points in 2022.

3. The focus of the Fed’s interest rate decision

75bps rate hike to 3-3.25%, the highest rate since 2008

Reiterates that continued rate hikes are appropriate

Indicators show moderate growth in spending and production; employment growth is strong and unemployment remains low

The dot plot shows at least one more rate hike of 75 basis points this year and no rate cut next year. Rate hike expectations rise sharply from June

Raise inflation expectations for the next three years, lower GDP forecasts for the next three years, and raise the federal funds rate forecast for 2022-2024

4. The focus of the press conference

Deliberately pushing the policy stance to a sufficiently restrictive level

High focus on the impact of inflation on the dual mandate

Will look for firm evidence of a pullback in inflation in coming months

Restoring price stability means maintaining restrictive policies for a while

Be wary of the risk of premature easing

Top priority is to bring inflation back to target and keep inflation expectations firmly in check
Powell remains hawkish, saying the U.S. economy is strong and does not expect to consider selling mortgage-backed securities (MBS) anytime soon.

5. The total number of existing home sales in the United States in August recorded an annualized rate of 4.8 million, the lowest since May 2020.

6. On Wednesday, Russian President Vladimir Putin delivered a speech on the referendums in the “Luhansk People’s Republic”, “Donetsk People’s Republic”, Kherson and Zaporozhye regions. Putin also announced a partial mobilization in Russia. A partial mobilization order has been signed for the first time since World War II. According to the Russian Satellite Network report, the Russian Defense Minister ordered the implementation of part of the president’s mobilization order. According to a report by the TASS news agency on the 21st, Belarus has not considered the issue of military mobilization for the time being.

Gold Price Market Viewpoints

1. Technicals remain bearish for gold
Deteriorating liquidity and rising U.S. bond yields will continue to attract safe-haven inflows into U.S. dollar Treasuries, but stagflation and recessions could reverse that. Rising recession risks could reinvigorate safe-haven demand for gold. The short-term technical pattern is still unfavorable for gold, a loss of 1675 will bring the price of gold down to the 1600 level, and the bears may hold down to 1600 or even lower. The current resistance is at 1700. If it is successfully broken through, it is expected to test 1735. If it breaks through the key level of 1800, it may reverse the current downward trend. We expect the gold price to reach 1620 by the end of this year, and fall to 1575 in the first quarter of 2023, and then next year. It rebounded to 1650 by the end of the year.

2. The influence of safe-haven demand on the trend of gold prices is gradually boosted
Although gold has fallen to near two-year lows and has repeatedly tested key support, the movement in gold prices shows that safe-haven demand is gradually becoming an important driver of gold’s movements. The outbreak of the Russian-Ukrainian conflict at the end of February caused gold to rush up briefly, but the threat of geopolitical risks has gradually faded out of the sight of most investors. Now the focus of the market is still on inflation and the central bank’s interest rate hike.

3. A soft landing for the U.S. economy is almost impossible
According to the Fed’s latest rate forecast, a soft landing for the U.S. economy is almost impossible. Powell also acknowledged that economic growth will be below trend for some time, which should be interpreted as speaking of a “recession.” From now on, the situation will become more dire. But on the positive side, today’s dot plot shows that the Fed appears to be starting to rein in the inflation outlook.

4. Continued rate hikes will exacerbate downside risks to the economy
The Fed’s stance is still quite hawkish, believing that there is still a need for further interest rate hikes and a more-than-expected slowdown in economic growth in order to bring core inflation back to 2%. The Fed’s hawkish stance also makes us consider adjusting our expectations for the US federal funds rate, which may be higher than the previous level of 4-4.25%. Continued interest rate hikes will increase the downside risk of economic growth.

5. The Fed’s latest forecasts for interest rates and economic variables suggest that further interest rate hikes are needed and the economy moves closer to the brink of recession to bring inflation back to its 2 percent target.

6. Our bank predicts that the Fed will raise interest rates by 75 basis points in November, 50 basis points in December, and raise interest rates twice by 25 basis points each time before March next year. The Fed’s terminal rate range is expected to reach 4.75-5.00%, higher than the previous estimate of 4.00-4.25%. For bond traders, Powell’s comments appear to have somewhat undercut central bankers’ hawkish forecasts of where rates will go before next year.

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