The market expects the Fed to raise interest rates by 75 points, and gold is weakened

Market participants now expect the Fed to raise rates by 75 basis points at its July 26-27 meeting, rather than the 100 basis points previously expected, although expectations for a 100 basis point rate hike by the Fed this month have fallen, adding to gold. There is a possibility of a short-term squeeze in the market, but the euro-dollar exchange rate fell below parity last week, which profoundly reflects that the European Central Bank's policy tightening pace is far behind the Fed, and the gold price outlook continues to be bearish.

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In the past week, because the CPI in the United States has risen again in June, the market has slightly expected to trade inflation, but inflation is still at a high level after all, and the Fed's monetary tightening cycle is still in place, so it is difficult for gold to have a strong upward drive. And recession expectations are also oscillating between intermittent fermentation and convergence after overpricing.

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The U.S. dollar is continuing its corrective decline as market concerns about more aggressive Fed tightening have eased. The Fed's less aggressive rate hike path could help the U.S. economy avoid a recession. Gold prices will continue to be affected by broader sentiment during the Fed silence.

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The Fed's aggressive stance could push the U.S. into a recession, causing enough demand destruction in the commodities markets to cool blistering inflationary pressures while pushing up U.S. bond yields and the dollar, two of the biggest challenges for gold right now. resistance.

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The price of gold has crossed the trend reversal threshold, which marks the confirmation that the gold market has temporarily entered a bear market trading mechanism. High inflation is putting pressure on corporate earnings and affecting household incomes. However, with lower oil prices and reduced demand for household durable goods in June, the demand price mechanism imbalance will ease and price pressures will soon peak. Upbeat retail sales and other demand indicators were driven more by price pressures than aggregate household demand. Therefore, the reduction in the quantity scale on the demand side will depress the inflation rate.

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The U.S. dollar index is currently up 0.1%, making U.S. dollar-denominated gold more expensive for buyers holding other currencies. U.S. Treasury yields rose as upbeat economic data released last week and a period of silence from the Federal Reserve set the stage for risk appetite. Although gold is seen as an inflation hedge, rising interest rates and bond yields have raised the opportunity cost of holding gold as a non-yielding asset.

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Analysts at TD Securities said: “Investors slashed their net open interest (3 million ounces) by 6% as it became clear that real interest rates on short-term Treasuries would continue to rise with little chance of an upside as Nominal policy rates jumped and inflation expectations subsided with the coming recession.” “Continued Fed rate hikes and reduced economic activity should lead to continued declines in gold bulls and likely continued pressure on gold prices in the weeks ahead.”

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Gold is still in a tepid state, unable to re-stand above $1,720. Even if the US dollar fell overnight, it failed to rebound. The technical outlook for the gold market is very bearish. The initial support level of the gold price looks at $1,700, and it will continue to break down and close below $1,675 for several consecutive trading days, which will indicate that the market outlook will usher in a larger decline.