Spot gold fell slightly in Asia on Tuesday, trading around 1877. Gold prices held steady on Monday, underpinned by a decline in the dollar and continued dovish statements by Fed officials, while a rally in the stock market and the expected reduction in the size of Biden’s infrastructure plan are expected to dampen buying interest in the market. In the short term, the rise in gold prices is weak and may fall into high shocks. The 1900 mark is a huge challenge for bulls. If gold wants to break through, it needs more fundamental bullish factors to ferment.
On Monday, U. S. inflation expectations fell the most since 2020. A number of Fed officials once again spoke to allay market concerns about persistently high inflation, reiterating that the time has not yet come to reduce the size of the easing policy. At the same time, major Wall Street investment banks focused on break-even inflation in their weekly research report, and several financial institutions, including Bank of America, Barclays and Goldman Sachs, believed that real interest rates had room to rise. There is still controversy over the Fed’s timetable for scaling back its asset purchases and raising interest rates. Cooling inflation expectations and higher real interest rates are expected to put new pressure on gold.
On the other hand, in the weeks since President Joe Biden proposed the first major tax increase since 1993, there have been growing signs that Democratic lawmakers are worried about it, which could weaken the plan eventually passed by Congress. On the other hand, Republican Senator McConnell drew a red line on tax increases last week. In terms of size, while Biden’s team proposed reducing the size of Biden’s infrastructure and jobs program by about 1/4 to $1.7 trillion, Republicans are still seeking to reduce the plan to $1, 000bn. Biden’s tax increase plan, which once prompted the market to buy gold to preserve its value, is weakening in the face of bipartisan pressure.
Us stocks climbed on Monday, with the Nasdaq index jumping more than 1 per cent as investors tried to assess the inflationary path as Treasury yields fell to boost high-priced stocks such as technology stocks. The Dow closed up 0.54%, the S & P 500 closed up 0.99%, and the Nasdaq closed up 1.41%. Inflation fears have temporarily cooled. Stock market volatility has intensified in recent weeks, and the panic index, which measures the risk of stock market volatility, fell 8.68% to 18.4 on the day, indicating that risk aversion in the market is not high and gold has been suppressed to some extent.
The focus of this week:
Data will be released on Thursday, including the number of initial jobless claims in the week from May 22 to May 22, the revised annualized quarterly rate of actual GDP in the first quarter of the United States, the monthly rate of US durable goods orders in April, the quarterly annualized rate correction of the (PCE) price index of US personal consumption expenditure in the first quarter, and the monthly rate of contracted sales index of existing homes in the United States in April.
On Friday, data such as the annual rate of the core PCE price index in April, the monthly rate of personal expenditure in April, PMI in Chicago in May, and the final value of the consumer confidence index of the University of Michigan in May will be released.
You can check the Economic Calendar: https://www.jrfx.com/en/tools/calendar.html
The market expects the real annualized quarterly rate of GDP in the US to be revised at an annualised rate of 6.5 per cent in the first quarter, slightly higher than the initial value of 6.4 per cent. If the data meet or exceed expectations, or boost the dollar and depress gold; conversely, it is expected to support gold prices. In addition, Goldman Sachs expects the US core PCE price index to be 0.52 per cent monthly and 2.8 per cent annual in April, based on the published consumer price index (CPI) and the production price index (PPI). A strong PCE indicator, a closely watched inflation indicator, could speed up the Fed’s discussion of scaling back its bond purchases, putting pressure on gold; conversely, it would provide more support for gold.
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