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On October 14th, Bank of England Monetary Policy Committee member Stephen Taylor said on Tuesday that the likelihood of a UK recession, though small, is increasing, partly due to high borrowing costs. Taylor noted that the Bank of Englands reluctance to cut interest rates quickly means a "soft landing" for the UK economy is now unlikely. Instead, a "bumpy landing" is more likely: inflation will fall below 2% by the end of 2026, and the economy will remain "weak" for an extended period. However, Taylor warned that the risk of a "hard landing" is increasing. "The UK economy is already hovering around zero growth, and if the data turns negative, the future trend could deteriorate rapidly. The probability of such an outcome is now non-negligible." In recent months, Taylor has repeatedly voted for faster rate cuts than the majority of the Monetary Policy Committee. His latest comments suggest he may vote for a rate cut again at the November meeting.On October 14th, British Chancellor of the Exchequer Reeves set the tone for next months difficult budget, stating at a cabinet meeting that high borrowing costs and debt levels mean less money will be available for public services. A government spokesperson said on Tuesday that Reeves attributed the current challenges to "growth and productivity data consistently falling short of official forecasts over the past 15 years." In last years budget, the UK government raised taxes, primarily on businesses, totaling approximately £40 billion. Although Reeves promised at the time that no further tax increases would be introduced in the short term, economists expect her to seek another tax increase in her new budget on November 26th. People familiar with the matter said Reeves plans to include a larger fiscal buffer in next months budget than last years £9.9 billion to reduce borrowing costs and strengthen the resilience of public finances to market volatility.U.S. Ambassador to NATO Whitaker: All allies, including Spain, must fulfill their defense commitments.US Ambassador to NATO Whitaker: No cuts in NATO defense spending are allowed.BlackRock CEO: The United States needs to accelerate regulatory clarity and increase investment in digital asset innovation.

Gold Price Prediction: XAU/USD declines near $1,750 as risk aversion anticipates NFP data release

Alina Haynes

Aug 02, 2022 15:03

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During Tuesday's opening European session, the gold price (XAU/USD) deepens its retreat from a nearly three-month-old resistance line, falling below $1,773. In spite of this, the precious metal exhibits a five-day rise around the greatest levels since July 5.

 

The metal's early-day rally may have been influenced by a broad dollar decline and Treasury rates. The XAU/USD exchange rate afterwards looked to have been influenced by China-related news and rising worries of an economic downturn.

 

Nonetheless, the visit of US House Secretary Nancy Pelosi to Taiwan and the probable difficulties for Chinese chipmakers as a result of the U.S. consideration of banning supplies of American chipmaking equipment further weigh on market mood. Similarly, a Chinese media story may indicate that the dragon country is prepared for a military exercise in Bohai, South China Sea.

 

In addition, Bloomberg's report that Beijing's Gross Domestic Product (GDP) has no fixed limits tends to dampen the market's risk appetite. People acquainted with the situation were quoted in the press as saying, "China's top leaders instructed government officials last week that this year's economic growth objective of "about 5.5 percent" should serve as guideline rather than a mandatory aim."

 

It should be emphasized that China is one of the world's largest users of gold, and that bad news stories about the country might impact on gold prices.

 

Elsewhere, the recently poor US PMIs mirrored last week's US Gross Domestic Product (GDP) for the second quarter to illustrate economic anxiety. Fed Chair Jerome Powell's veiled warnings that the hawks are losing steam might also dampen sentiment.

 

As a reflection of market mood, equities in the Asia-Pacific region and US stock futures see modest losses. However, the US 10-year bond yield decreases 5.5 basis points (bps) to 2.55 percent at the latest, threatening the gold bears via the weakening US dollar. In spite of this, the US Dollar Index (DXY) reestablished the monthly minimum before rebounding from 105.00.

 

The news concerning China and the recession, as well as the remarks of Chicago Fed President Charles L. Evans and Federal Reserve Bank of St. Louis President James Bullard, will be crucial for intraday gold dealers in the future.


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