Tuesday, 26 May 2020
Jakarta
--:--
Tokyo
--:--
Hongkong
--:--
New York
--:--

Fed's Easing Pace Questioned But Gold To Remain Around The $1,400 Level - Analysts
Monday, 8 July 2019 12:50 WIB | GOLD CORNER |Gold OutlookGold Corner

The precious metals sector got hit hard last Friday as the market re-priced its Federal Reserve rate cut expectations ” taking a 50-basis point cut off the table in July.

The analysts are now busy debating whether or not the Fed will cut rates in July and by how much in light of the latest solid job numbers out of the U.S.

The economy added 224,000 new positions in June, while the unemployment rate edged up to 3.7% and wage growth remained at 3.1%.

"The employment report was a lot stronger than expected. And if you look at the three-month average payroll employment growth, it clearly slowed so far this year, but remained at a reasonably solid level, Capital Economics U.S. economist Andrew Hunter told Kitco News.

"It is now looking less likely that the Fed is going to start cutting rates as soon as this month as the markets have been expecting. We still think the Fed will cut rates when the economy slows. It is probably more likely that they will start in September rather than July," Hunter added.

In response to the data, the market has readjusted its rate cut expectations, now projecting 95.1% chance of a 25-basis point rate cut on July 31st and just a 4.9% chance of a 50-basis point rate cut, according to the CME FedWatch Tool.

"Markets got a bit ahead of themselves during the past few weeks," said Hunter, noting that traders went from believing that the Fed might consider cutting rates to suddenly pricing in the possibility of a 50-basis point cut in July. "In light of the data last Friday, it is almost certainly likely to prove premature," he stated.

This market's readjustment had a big short-term impact on the precious metals, as the U.S. dollar rose, taking gold and silver down about 2% on the day. At the time of writing (5/7/19), August Comex gold was last at $1,400.05, down 1.44% on the day and September silver was at $15.00, down 2.19% on the day.

Digesting the sudden move in gold prices, analysts have pointed out that even though the metal lost some of its previous strong gains, gold™s long-term outlook remains supported around the $1,400 an ounce level on global growth concerns.

"While the price of gold could pare some of its gains in the near term, we think that it will remain high during the rest of this year. As such, we are happy to reiterate our end-2019 forecast for gold at $1,400 per ounce," said Capital Economics assistant commodities economist Kieran Clancy.

Some analysts see a recovery in gold prices as soon as this week.

"Gold prices are heading upward," TD Securities strategist Daniel Ghali told Kitco News. "At this point, the likelihood of a 50-basis point cut is getting priced out of the market. For gold that is a negative. But, the Fed is still likely to cut 25 basis points regardless in July."

The strong employment data might have even been a good thing for gold long-term, Ghali pointed out.

"[An employment] miss probably would have seen gold prices react more aggressively to the upside. Whereas, ¦ when the dust settles [from strong data], it wouldn't be much of a damper on gold prices. We still expect gold prices to trade north of the $1,400 level," he said.

On the upside, Ghali is watching the last high of $1,440 an ounce and on the downside $1,380.

The U.S. dollar has responded positively to the U.S. nonfarm payrolls data and pressured the commodities space down with the U.S. dollar index last trading at $97.31, up 0.61% on the day, said RJO Futures senior market strategist John Caruso.

"It is not a question on whether or not the Fed is going to cut. They are going to cut. It is a question of how aggressively they are going to cut and how soon," Caruso told Kitco News.

Short-term, Caruso sees gold prices ticking down this week, but then recovering closer to the Fed meeting at the end of July.

"This is just a near-term corrective setback based on Fed expectations, he said. œAs we start to approach the Fed meeting, you are going to start to see gold finding its footing and turning back significantly higher in August and September."

Long-term, Caruso is expecting great things from gold. "I am still overwhelmingly bearish dollar and bullish gold and silver prices throughout the back half of this year. I am a buyer of gold between $1,380- $1,360 as your accumulation zone in gold," he said.

What To Watch This Week

The biggest event this week likely be the Fed Chair Jerome Powell's testimony in front of Congress on Wednesday and Thursday with the market scouring for clues as to the timing and pace of the next rate cut.

"Powell is going to be testifying to Congress this week. It's possible that if they are planning to wait a bit longer and see more data before cutting rates, he could give a hint that the expectations of a July cut are premature," Hunter said.

The FOMC meeting minutes from June are also due out on Wednesday but are likely to sound dated and take a backseat to Powell™s testimony, according to Capital Economics.

"Powell testimony could make June FOMC minutes old news," economists wrote. "If Fed officials still want to wait for more data before pulling the trigger, the release this week of the minutes from the previous meeting is an opportunity to push back against those market expectations. That said, they will be pre-empted by Chair Jerome Powell's semi-annual testimony to the House earlier the same day."

U.S. inflation data from June is also a key event to watch on Thursday, said Ghali while noting that Fed's approach to inflation could tame the impact of this release on the markets.

"The Fed is increasingly comfortable with the symmetrical inflation targeting approach. I don't think CPI on its own is going to change the outlook for gold," he explained.

Source: Kitco News

RELATED NEWS
Wall St., Main St. Look for Gold to Regain its Luster...
Monday, 25 May 2020 14:32 WIB

Wall Street and Main Street look for gold prices to rise this week, according to the weekly Kitco News gold survey. Traders and analysts who make up the Wall Street poll continued to cite the mass li...

Wall St., Main St. Both Look For Gold Prices To Keep Shining...
Monday, 18 May 2020 11:17 WIB

Wall Street and Main Street alike remain bullish on gold prices for this week, according to the weekly Kitco News gold survey. Professional investors and traders cited the ongoing quantitative-easing...

Wall St., Main St. Look for Bounce in Gold Prices...
Monday, 4 May 2020 12:06 WIB

Wall Street and Main Street were both undeterred by last week™s pullback in gold, calling for the metal to rise this week, according to the weekly Kitco News gold survey. Wall Street is not as heav...

Harga emas siap untuk level $ 1.800: Pasar amati dua event minggu ini...
Monday, 27 April 2020 11:27 WIB

Strategi para pedagang emas tampaknya penurunan harga beli karena logam mulia bersiap-siap untuk menguji level tertinggi 2012, menurut analis. Lebih banyak data ekonomi yang buruk pekan lalu tampakny...

Gold-Price Sentiment Overwhelmingly Bullish...
Tuesday, 14 April 2020 08:27 WIB

Participants in the weekly Kitco gold-price survey look for the metal to maintain its upward momentum this week as central banks and governments keep rolling out measures to prop up an economy that is...

LATEST NEWS
Gold eases as equities rally; Hong Kong woes limit losses

Gold edged lower on Tuesday as hopes of economic recovery lifted share markets with many countries easing coronavirus-driven lockdowns, although Sino-U.S. tensions over Hong Kong limited bullion's losses. Spot gold was down 0.3% at $1,724.74 per...

Dow futures surge more than 500 points on hopes of a coronavirus vaccine

Stock futures traded sharply higher early Tuesday to begin a holiday-shortened week, as optimism grew about a potential coronavirus vaccine. Futures on the Dow Jones Industrial Average pointed to an implied opening gain of more than 550 points....

Hong Kong stocks close sharply higher

Hong Kong shares rallied Tuesday as worries over a controversial Chinese security law proposed for the city were overshadowed by hopes for the global economy as governments continue to ease lockdown restrictions. The Hang Seng Index jumped 1.88...

POPULAR NEWS
Gold Falls as Potential Japan Stimulus Boosts Risk Appetite
Monday, 25 May 2020 15:13 WIB

Gold declined on Monday as Japanese equities rose on news of a potential stimulus program that boosted investors™ risk appetite, though fresh...

Gold Down Over Escalating U.S.-China Tensions
Monday, 25 May 2020 13:36 WIB

Gold was down in Asia on Monday morning, with escalating U.S.-China tensions continuing to impact demand for even the safe-haven asset. Gold...

US Marks Memorial Day as Coronavirus Toll Nears 100,000
Monday, 25 May 2020 18:51 WIB

Monday is Memorial Day in the United States “ a day set aside to honor the hundreds of thousands of U.S. servicemen and women who sacrificed their...

Oil Dips as U.S.-China Tensions Add to Nerves on Global Economy
Monday, 25 May 2020 08:31 WIB

Oil edged lower as an escalating war of words between the U.S. and China added to caution over the prospects for a global recovery in...