Gold trading reminder: The U.S. dollar has fallen for three consecutive times, and the price of gold is expected to continue to rise after crossing the trend line!

On Tuesday (October 5) Asian time, spot gold was trading around 1767. On Monday (October 4), the price of gold rose slightly to a high in more than a week. The weaker U.S. dollar and the risk aversion sentiment in the stock market boosted demand for gold, but the accelerated growth of factory orders and expectations of the Federal Reserve's imminent reduction in debt purchases have restricted The increase in the price of gold.

Pay attention to the US September ISM non-manufacturing PMI and August trade account data.

Fundamentals are bullish

[The U.S. dollar fell, traders pay attention to the US employment report to be released on Friday]

The U.S. dollar recorded a three-day losing streak against a basket of currencies on Monday, falling from a one-year high hit last week . Traders are paying attention to the US employment data to be released this Friday to find clues about the Fed’s next move.

(Daily chart of the US dollar index)

As the Chinese mainland market was closed until Thursday due to the National Day holiday, and the South Korean stock market was also closed on Monday, investors' attention was firmly focused on the upcoming US data.

Friday’s US employment data is expected to show continued improvement in the job market. It is expected that 488,000 jobs will be added in September , which is enough to prompt the Fed to start reducing its stimulus before the end of the year.

The Fed has hinted that it may begin to reduce the size of monthly debt purchases as early as November, but traders worry that the sharp reduction in new jobs may delay the Fed's plan.

Bechtel said, “If the increase is around 300,000, will the Fed react negatively? Probably not. With the momentum of the reduction already very strong, if this recent volatile data is only slightly lower than expected, the Fed It’s difficult to make a 180-degree turn from the position of the company."

He said, "If we see some more extreme situations, such as the reduction of non-agricultural jobs, then another matter, the Fed may at least be forced to suspend."

[The average number of deaths from new coronary pneumonia in the United States last week exceeded 1,800]

Based on statistics from Johns Hopkins University and the U.S. Department of Health and Human Services, in the past week, the average daily increase in deaths from new coronary pneumonia in the United States still exceeded 1,800, continuing to maintain a high level; the average daily increase in confirmed cases was 107,312 , Still ranks first in the world, but it has dropped to a new low in the past two months; the number of existing hospitalized patients with new coronary pneumonia is 71,325, a decrease of 12.7% from the previous week.

Although the number of newly confirmed cases and hospitalized patients has declined, some American experts have warned that the outbreak in the United States has repeated itself and is far from over.

[S&P and Nasdaq closed at their lowest since July]

The U.S. stock market closed sharply lower on Monday. The S&P 500 and Nasdaq index closed at their lowest levels since July . Investors dumped large technology stocks and other growth stocks as bond yields rose. Fears of default have also added to caution.

(S&P 500 daily chart)

U.S. Treasury yields have risen because investors worry that the U.S. Congress will not be able to reach an agreement on raising or extending the debt ceiling, and look forward to the September employment data released this week, which may pave the way for the Fed to reduce the scale of asset purchases.

US President Biden said on Monday that unless Republicans and Democrats work together to vote to raise the debt ceiling in the next two weeks, the federal government may exceed the $28.4 trillion debt ceiling and default on an unprecedented level .

Recent data shows that consumer spending has increased, manufacturing activities have accelerated, and inflation has risen, causing the market to bet that the Fed may begin to tighten loose monetary policy earlier than expected.

Fundamentals are bad

[U.S. factory orders increase in August]

New orders for manufactured goods in the United States accelerated in August, indicating that the manufacturing sector remained strong, but due to shortages of raw materials and labor, economic growth appeared to have slowed in the third quarter.

The US Department of Commerce announced on Monday that factory orders in August increased by 1.2%. The July data was revised to an increase of 0.7%, and the previous value was an increase of 0.4%. Factory orders have increased for four consecutive months. Economists interviewed previously predicted that factory orders are expected to increase by 1.0% in August. Orders in August jumped 18.0% year-on-year.

Ryan Sweet, senior economist at Moody's Analytics, said: "Factory orders continue to increase, which bodes well for the manufacturing industry, but the manufacturing industry is still being tested by global supply chain issues ."

Supply shortages have suppressed shipments of industrial products. After a 1.5% increase in July, shipments rose only 0.1% in August.

The manufacturing industry accounts for 12% of the total economy. Despite the reverting of spending to the service industry, the demand for goods remains strong. Companies are rebuilding inventory that was depleted in the first half of the year.

The shortage of inputs and the resulting price hikes, coupled with the latest wave of infections promoted by the Delta variant virus, may lead to a significant slowdown in US gross domestic product (GDP) growth in the third quarter.

With almost no increase in shipments, factory inventory increased by 0.6% in August, and the increase in July was similar. Factory uncompleted orders jumped 1.0% in August after rising 0.5% in July.

The US Department of Commerce also reported that the non-defense capital goods orders deducting aircraft in August increased by 0.6% compared with the previous month, and the previous value increased by 0.5%. This is an indicator for measuring enterprise equipment spending plans. However, in recent months, the growth momentum has slowed down.

[Brad: Inflation may still remain high for some time to come]

St. Louis Fed President Brad said on Monday that for the first time in years, American companies have encountered no problems in raising prices to customers. While the market is worried that expectations of high inflation have become entrenched, he warned that inflation may remain high for some time to come.

Corporate contacts in the Federal Reserve region where Brad is located and across the country “usually say,'Don’t worry, my company will be profitable because I want to raise prices, and we have no trouble raising prices in this environment,’” Germany said at an event organized by the International Economic Forum of the Americas.

Brad is one of the strongest supporters in the Federal Reserve that believe that positive measures should be taken to curb higher-than-expected inflation. He believes that two interest rate hikes are needed in 2022. At present, interest rates are still at a level close to zero, which has been at this level since the outbreak of the new crown pandemic in early 2020.

"What I want to say is that I am concerned about changes in mentality around economic prices and the relative freedom of companies that can easily pass on increased costs to customers. This has not been the case for many years," Brad added.

[WTO raises global trade growth this year and next year]
The World Trade Organization (WTO) raised its forecasts for global trade growth in 2021 and 2022 to 10.8% and 4.7% respectively, citing the recovery of economic activity in the first half of this year . If it can reach the 2021 forecast, it will be the largest year-on-year growth rate since 2010.

WTO Director-General Oconjo Iweala said: "Trade is a key tool in the fight against the new crown epidemic. This strong growth highlights the important role that trade will play in the recovery of the global economy."

In general, after the price of gold bottomed out on Monday and closed up, it temporarily crossed the shackles of the trend line, or it is expected to lay the foundation for further increases in the future.

(Spot gold daily chart)

GMT+8 8:28, spot gold was quoted at US$1,767.18 per ounce.