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U. S. inflation indicators fell significantly, gold prices rose strongly

December 16, 2022


The main reason for Gold's rebound is that the Federal Reserve has indicated it may slow rate increases in the future. Looking ahead, it is expected that it will take some time for gold to return to the fundamental bull market cycle, given that the Fed's rate-raising process is continuing but the magnitude is only beginning to converge. Gold prices are expected to continue to move up and then fall back. Beijing, Nov. 16(Xinhua) -- Comex Gold jumped nearly 6 percent last week to close at $1,774.20 an ounce. On the intraday side, gold t + D followed suit, rising 4.21% to close at 407.26 yuan per gram. I had previously predicted that the odds of gold falling below $1,600/oz by the end of the year were slim, and that gold would seek to gradually bottom out above that level, and so far have been broadly consistent. The main reason for Gold's rebound is that the Federal Reserve has indicated it may slow rate increases in the future. On the one hand, the stronger-than-expected CPI slowdown in October bolstered expectations that the fed would slow its rate rise; and, on the other, the midterm election results increased risk aversion. Looking ahead, it is expected that it will take some time for gold to return to the fundamental bull market cycle, given that the Fed's rate-raising process is continuing but the magnitude is only beginning to converge. Gold prices are expected to continue to move up and then fall back.


Consumer Bureau of Labor Statistics Rose 7.7% in October from a year earlier, down from market expectations of 7.9% and down sharply from 8.2%, the lowest level since January, and 0.4 per cent month-on-month, also better than market expectations of 0.6% , growth in line with the previous 0.4% . Discounting volatile food and energy prices, the core CPI rose 6.3% from a year earlier, better than market expectations of 6.5% and down from 6.6%, according to the breakdown. Core inflation rose 0.3% month-on-month, better than expectations of 0.5%, and down sharply from the previous 0.6%. Overall, US CPI growth has slowed more than expected, with the fall in core CPI in particular reducing the urgency for the Fed to tighten policy further, giving the Fed more leeway. The interest rate futures market has now raised the probability of a 50 basis point rise in December to 85%, up from 57%, and broadly in line with previous forecasts for its path. As a result, the price of gold is expected to remain within the $1650-$1800/oz range until the end of the year.

 

At the same time, the United States midterm election is close to being settled and the partisan rivalry has reached a material conclusion. If the Democrats lose control of both houses of Congress, the President's policies will be greatly hindered. The United States will receive less policy support in a recession, deepening and prolonging the recession, and the upward momentum of the dollar will continue to weaken until it is exhausted, uS bond yields may struggle to rise further. As a result, in a trend scenario, the US economy may face more downward pressure, risk appetite will continue to deteriorate, and gold, with its natural safe-haven nature, will become more attractive to market liquidity. To sum up, the periodic turning point in the price of gold arrived on schedule after the mid-term elections, but the current trend of gold prices is still seen as a rebound rather than a reversal, due to the longer duration of tightening policy due to more resilient inflation. Of course, with the two parties in the U. S. Congress is almost a reality, the future“Tight money, loose fiscal” situation is unlikely to repeat, so the major cycle to maintain bullish gold upward trend remains unchanged.


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