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On February 11th, Federal Reserve official Logan stated on Tuesday that she is "cautiously optimistic" that the Feds current policy rate level can push inflation back to the 2% target while maintaining a stable job market. Economic data in the coming months will test this assessment. Logan stated, "If this happens, it would indicate that our current policy stance is appropriate and that we dont need to cut rates further to achieve our dual mandate." However, she added that if inflation falls while the labor market cools significantly, "further rate cuts might become appropriate. Right now, however, Im more concerned that inflation remains stubbornly high." She noted that after three rate cuts last year, downside risks to the labor market "appear to have eased significantly," but this has also introduced additional risks to inflation. She pointed out that with short-term borrowing costs already in what is widely considered a "neutral" policy range, current interest rates have limited restraining effect on the already strongly rebounding economy and inflation that has consistently exceeded the Feds target for nearly five years. Logan expects inflation to make progress this year, with some initial signs of improvement already observed.Federal Reserves Logan: A central clearing mechanism should be provided for the Feds standing repurchase facility.The US 3-year Treasury auction on February 10th yielded a winning bid of 3.518%, compared to 3.61% previously.The bid-to-cover ratio for the 3-year U.S. Treasury bond auction ending February 10 was 2.62, compared to 2.65 previously.Federal Reserves Logan: The labor market is stabilizing and downside risks have clearly subsided.

Before the US PMI is released, the gold price is expected to rise beyond $1,740 per ounce

Daniel Rogers

Aug 23, 2022 14:48

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On the back of conflicting forecasts for US Purchasing Managers Index (PMI) data, the gold price (XAU/USD) is trying to break above $1,740.00. A new monthly low of $1,727.85 was recorded for the precious metal on Monday, but it has since rallied strongly. Given the lack of impetus in the upward trend, the gold price is likely to stay volatile. However, a pullback may be less profitable.

 

The consensus for the S&P Global Manufacturing PMI is 51.5, which is down from the prior reading of 52.2. When compared to its previous reading of 47.3, the Services PMI has room to grow.

 

The yellow metal has been supported by the disappointing early estimates of US Durable Goods Orders. From a previous release of 2%, the market expects the economic figures to sharply decrease to 0.5%. It's important to note that the most recent reading showed no change in underlying pricing pressures, which stood at 5.9%. So, we expect to see little change, if any, in the Durable Goods Orders numbers. Unfortunately, a precipitous drop in economic statistics portends a precipitous drop in demand.

 

The other thing that will be in the spotlight is Federal Reserve (Fed) chair Jerome Powell's remarks from the Jackson Hole Economic Symposium. US economic conditions and Fed Powell's direction on inflationary pressures and interest rates will be determined by him.

 

Gold prices on an hourly scale are looking to continue their recovery after breaking above the $1,729.44 61.8% Fibonacci retracement (set from the low of $1,680.91 on July 21 to the high of $1,807.93 on August 10). Gold has been testing the resistance of the 20-period Exponential Moving Average (EMA) around $1,738.00; a sustained move above this level would signal a change in trend toward the bullish side.

 

Furthermore, the Relative Strength Index (14), which had been negative in the 20.00-40.00 range, has moved into the bullish 40.00-60.00 zone, indicating that gold prices are currently not bearish.

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