Gold trading reminder: Powell said it is expected to cut interest rates this year, gold prices continue to rise and hit record highs, pay attention to initial filing data

During the Asian session on Thursday (March 7), spot gold fluctuated within a narrow range at high levels and is currently trading around $2,148.32 per ounce. Economic data and Federal Reserve Chairman Powell's speech enhanced market expectations for interest rate cuts this year. The U.S. dollar index fell to a new low in more than a month. Gold prices continued their gains on Wednesday and once reached a record high of $2,152.11 per ounce, closing at $2,147.88 per ounce. The increase was about 0.95%, rising for six consecutive trading days.

The London Bullion Market Association (LBMA) said the London gold price indicator hit a record high of $2,142.85 per troy ounce at an afternoon auction on Wednesday.

This trading day needs to continue to pay attention to the speech of Federal Reserve Chairman Powell, the change in the number of initial jobless claims in the United States and the change in market expectations for the Federal Reserve to cut interest rates, and pay attention to the speeches of other Federal Reserve officials and the European Central Bank interest rate decision.

In testimony before Congress on Wednesday, Powell said he expected the Federal Reserve to cut interest rates and that a U.S. recession was unlikely, but he stopped short of committing to any timetable for easing policy because he was unsure of further progress in lowering inflation.

In prepared testimony, Powell said that inflation has fallen "significantly" since hitting a 40-year high in 2022, but policymakers still need to have "greater confidence" that inflation is falling before cutting rates.

"He made it clear that the Fed does expect to cut interest rates this year. That's what the market needs to hear. Was there some ambiguity in his words? Yes, but overall the message was clear," said Quincy Krosby, chief global strategist at LPL Financial , what is clear is that it is not a question of whether the Fed will cut interest rates, but when.

Ole Hansen, commodities strategist at Saxo Bank, said: “Powell’s neutral to slightly dovish bias added momentum to gold and especially silver during the U.S. session.

Mark Luschini, chief investment strategist at Janney Montgomery Scott, said that in addition to Powell's testimony, Wednesday's economic data also boosted hopes for a rate cut and confidence in the labor market.

Data showed that U.S. private employment growth was slightly lower than expected in February. Market expectations were for an increase of 150,000, and ADP employment increased by 140,000 in February.

The U.S. Department of Labor's Job Vacancy and Labor Turnover Survey (JOLTS) showed that job vacancies dropped slightly in January, while the number of job openings decreased, and labor market tensions continued to gradually ease.

The U.S. Bureau of Labor Statistics said that on the last day of January, the number of job openings, which measures labor demand, fell by 26,000 from the end of last month to 8.863 million. Market expectations were for 8.9 million job openings in January.

The job vacancy rate remained unchanged at 5.3%. Recruitment fell by 100,000 to 5.687 million. The hiring rate fell to 3.6% from 3.7% in December. Since the Federal Reserve raised interest rates by 525 basis points in March 2022, the labor market is gradually slowing down.

The number of employees resigning fell by 54,000 to 3.385 million, the lowest level since January 2021

The resignation rate, a measure of labor market confidence, fell to 2.1%, the lowest since August 2020 and down from 2.2% the previous month.

The February non-farm payrolls report due out on Friday is expected to provide more clarity on labor market conditions. According to surveys, the U.S. Department of Labor is expected to report on Friday that non-farm payroll employment increased by 200,000 in February. The economy added 353,000 jobs in January. The unemployment rate is expected to remain unchanged at 3.7%, with wage growth slowing to an annual rate of 4.4% from January's 4.5%.

Michael Hsueh, FX and commodities strategist at Deutsche Bank, said: "There is certainly macro data pushing us in this direction and following the Fed's policy expectations... but the gold market reaction is many times greater than what the long-term fair value model suggests. .”

"Commodity trading advisors are buying gold right now, with funds holding about 80% of their largest historically long positions," said Ryan McKay, senior commodities strategist at TD Securities.

"Gold may continue to move higher as bullish sentiment remains dominant. However, gold may take a little time to digest Powell's overall comments, as well as looking at Friday's employment report," said Tai Wong, an independent metals trader in New York.

Traders now see a 72% chance of the Fed cutting interest rates in June.

According to CME's "Fed Watch": the probability that the Federal Reserve will keep interest rates unchanged in the range of 5.25%-5.50% in March is 95.0%, and the probability of cutting interest rates by 25 basis points is 5.0%. The probability of keeping interest rates unchanged by May is 81.3%, the probability of a cumulative 25 basis point interest rate cut is 18.0%, and the probability of a cumulative 50 basis point interest rate cut is 0.7%. The probability of keeping interest rates unchanged by June is 27.5%, the probability of a cumulative 25 basis point interest rate cut is 61%, the probability of a cumulative 50 basis point interest rate cut is 11.2%, and the probability of a cumulative 75 basis point interest rate cut is 0.4%.

On this trading day, the 2024 FOMC voting committee and Cleveland Fed President Mester will speak on the economic outlook, and investors also need to pay attention.

San Francisco Fed President Daly said on Wednesday that U.S. monetary policy is in a "good place" and that the challenge for the Fed is to adjust policy to ensure that it neither maintains interest rates for too long nor cuts them too soon. (Full Story)

Minneapolis Fed President Neel Kashkari said on Wednesday that stronger economic data since the beginning of the year may make it appropriate for the Federal Reserve to cut interest rates only twice this year, or even just once.