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On January 29th, Chris Grisanti, Chief Market Strategist at MAI Capital Management in New York, stated that the Federal Reserves statement and press conference today were noticeably hawkish. The description of economic activity was upgraded from moderate to solid, while the wording regarding downside risks to employment was removed. At the press conference, Powell stated that after a period of weakness last year, the employment situation has stabilized. Inflation, while trending towards stability, remains slightly high. Overall, the Feds focus has shifted from unemployment to inflation. I dont believe there will be a rate cut in the short term. Furthermore, given the strong market performance and continued economic strength, I dont think there will be a rate cut in 2026, a stance that is more hawkish than current market expectations.FOMC Statement: 1. Interest Rate Decision: The benchmark interest rate was kept unchanged at 3.50%-3.75%, pausing the three-phase rate cuts since September of last year. 2. Voting Divergence: The interest rate decision was passed by a 10-2 vote, with Governors Milan and Waller supporting a 25 basis point rate cut. 3. Interest Rate Outlook: The statement did not signal the timing of the next rate cut. It reiterated that interest rates are assessed based on data, the economic outlook, and risks. 4. Economic Outlook: The assessment of economic activity was revised upward, stating that it is expanding at a "solid" pace; uncertainty about the economic outlook remains high. 5. Labor Market: The statement removed the statement that downside risks to employment have increased; the labor market has shown some signs of stabilization. 6. Inflation: Inflation remains slightly high. Powells Press Conference: 1. Interest Rate Outlook: Interest rates are at the upper end of the neutral range; there is no predetermined policy path, and the data will speak for itself; if tariff inflation peaks and then declines, it will indicate that policy easing is possible; raising interest rates is not anyones base case. Non-voting members also widely supported the interest rate decision. 2. Economic Outlook: The U.S. economy is fundamentally sound; the outlook for economic activity has improved significantly, and the economy is generally stronger than predicted in December. 3. Employment Outlook: The labor market may be stabilizing after a period of softening; risks to both inflation and employment have diminished. 4. Inflation Outlook: Inflation remains slightly above target; core PCE inflation is likely to rise by 3% in December; tariff inflation is expected to peak in the middle of the year. 5. Political Stance: Remaining tight-lipped on sensitive issues; no plans have been decided after the Fed Chairs term ends; the next Chair is advised to stay away from politics. 6. Other Aspects: The housing market remains weak; no data suggests investors are hedging against dollar risks; little macroeconomic information has been gleaned from the rise in gold prices. 7. Latest Forecasts: Overall expectations for rate cuts have been slightly dampened, with pricing in a 46 basis point rate cut for the year and a 60% probability of a June rate cut. 8. Market reaction: Between the release of the statement and Powells speech, spot gold and silver prices initially fell and then rose, while the US dollar did the opposite. Gold hit a new all-time high, with a fluctuation of over $60. US Treasury yields and US stocks fluctuated slightly. On January 29th, Federal Reserve Chairman Jerome Powell responded to questions about what he would tell his successor. He stated that he would tell the next Fed chairman not to get involved in politics. Powell said at a press conference, "Dont get involved in elected politics. Dont get involved in elected politics." He added, "Our window to democratic accountability is Congress. Going to Congress and engaging with the people is not a passive burden, but an active and regular obligation. If you want democratic legitimacy, you have to earn it through interaction with our elected oversight bodies.""New Bond King" Gundlach: Does not believe there will be further interest rate cuts during Fed Chairman Powells tenure.Note: Federal Reserve Chairman Powells press conference has ended.

Forecast for the price of gold: XAU/USD tussles with $1,730 resistance before US inflation

Daniel Rogers

Sep 13, 2022 10:57

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As traders anticipate the crucial US Consumer Price Index (CPI) on Tuesday, the price of gold (XAU/USD) grinds higher above a fortnight peak after a two-day advance to $1,725 per ounce. The market's optimism and anticipated preparations for today's inflation data may be responsible for the metal's most recent increases.

 

The market's cautious optimism appears to have been supported by rumors that Ukraine is succeeding in driving the Russian troops away from some of its conflict zones, even though this also increased concerns about Russia's strong response. The expectation of additional stimulus from powerful economies like China, the US, the UK, and Europe might be on the same lines. It's important to keep in mind that a Chinese holiday and a light schedule may have contributed to the XAU/recovery USD's because Beijing's lack of political or economic problems may have supported metal prices. In addition, recent news from the Wall Street Journal (WSJ) that US gas prices have fallen for a 13th week in a row helped to relieve market pressure and encouraged a risk-taking attitude that was favorable to the gold price.

 

However, the recent easing of the headline economics and the inflation expectations seems to have pushed back the gold bears despite a light schedule, even though the policymakers from the US Federal Reserve and the European Central Bank (ECB) remain hawkish elsewhere.

 

In the midst of these maneuvers, Wall Street posted another day of profits despite rising US Treasury yields, which at the time were up five basis points (bps) to 3.36%. The US Dollar Index (DXY), which fell for a second straight day to the lowest levels in a fortnight, eventually dipped to approximately 108.30, was affected by the same factors.

 

Moving on, the US CPI for August is critical in light of the most recent easing of pricing pressure. According to the projections, the headline figure will decline to -0.1% MoM from 0.0% the previous month, while the CPI excluding food and energy is expected to hold steady at 0.3% MoM. The US dollar may continue to decline if the inflation numbers are weaker, which might support the XAU/continued USD's gain.

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