On September 7, according to the market trend chart, recently, the price of spot gold has continued to decline. From September 5 to 10:35 on September 7, 3 trading days,
The price of spot gold has fallen by $18/oz, approaching $1,790/oz again, at $1,696.30/oz. What is the reason for this?
[US service industry maintains growth momentum in August]
The U.S. services sector rebounded for a second straight month in August on strong orders growth and employment, while supply bottlenecks and price pressures eased, reinforcing the view that the economy is not in recession despite output falling in the first half.
The Institute for Supply Management (ISM) data showed on Thursday that its index of non-manufacturing activity edged up to 56.9 last month from 56.7 in July, the highest in nearly four months, the second straight month after three months of declines. rise.
Economists had forecast that the non-manufacturing index would fall to 54.9. A reading above 50 indicates expansion in the services sector, which accounts for more than two-thirds of U.S. economic activity.
The services sector is being supported by a shift in spending from goods to services. The ISM service sector new orders indicator rose to 61.8 from 59.9 in July.
The services sector employment indicator rose to 50.2 from 49.1 in July.
The ISM survey’s measure of supplier deliveries fell to 54.5 from 58.3 in July, helping to curb rising service-sector inflation. A measure of input prices for the services sector fell to 71.5 from 72.3 in July, the lowest reading since January 2021.
[The dollar hit a new high in more than 20 years, and the yield on the 10-year U.S. Treasury bond hit the highest since June]
The U.S. dollar climbed nearly 0.4% on Tuesday, hitting a more than 20-year high of 110.57 during the session. The report on the U.S. services sector in August reinforced the view that the U.S. is not in a recession, which significantly weighed on gold prices.
Joe Manimbo, senior market analyst at remittance and foreign exchange operator Convera USA LLC, said: “Some important data on the U.S. economy suggests that there is no sign of a recession in the U.S. economy. That has helped push U.S. bond yields higher and added a boost to the dollar. More boost.”
Marc Chandler, chief market strategist at Bannockburn Global Forex, said the U.S. economy is slowing, but remains “the least ugly” of the major Western economies.
While the dollar’s path of least resistance is to the upside, the upside will be challenged next week after the U.S. consumer price index for August is released, he said. The data is expected to show that the pace of inflation has begun to slow. Early forecasts were for monthly headline inflation to ease and core inflation to be more sticky. “
The 10-year U.S. Treasury yield jumped 14.3 basis points to 3.334% on Tuesday and rose to 3.365% on Wednesday, its highest since June 16, on expectations the Federal Reserve will continue to raise interest rates and tighten monetary policy to curb inflation.
The Fed is expected to raise the federal funds rate another 75 basis points to a range of 3.0%-3.25% at its Sept. 20-21 meeting. That’s much higher than the 0%-0.25% range in March.
Traders see a 74% chance of a third straight 75 basis point rate hike at the Fed’s policy meeting later this month, according to CME’s FedWatch tool, compared with a 74% chance after Friday’s nonfarm payrolls data. dropped to 52%.
[The Reserve Bank of Australia raises interest rates by 50 basis points, adding that the tightening action is still not complete]
The Reserve Bank of Australia on Tuesday raised the overnight call rate by 50 basis points to a seven-year high of 2.35% and did not rule out more tightening in the future to curb sharply rising inflation.
The RBA did drop talk of “normalizing” policy as it ended its September policy meeting, suggesting rates are now closer to neutral, but it also said there was more work to do. Price stability is a prerequisite for strong economic performance and continued full employment, and the committee expects to raise interest rates further in the coming months, but has no preset path.
It was the fifth rate hike since May, in line with broad market expectations, and the statement was more balanced.
Markets tend to think that the RBA will raise interest rates by another 50 basis points in October, with rates peaking at around 3.85%. Inflation is currently at a 21-year high of 6.1% and could hit 7% by Christmas.
The RBA aims to keep inflation in the 2-3% range for the long term, and currently sees inflation not falling back to 3% until the end of 2024.
Marcel Thieliant, senior economist at Capital Economics, said: “The central bank will only be likely to moderate the pace of tightening until the third-quarter inflation data released in late October show that price pressures have eased. In any case, we reiterate our long-standing view that That is, the central bank will eventually raise the overnight call rate to 3.6%.”
Bank of Canada sees 75bps rate hike to restrictive territory for first time in 20 years
The Bank of Canada is widely expected to raise interest rates again by a massive margin on Wednesday, raising its policy rate into restrictive territory for the first time in 20 years.
Bank of Canada Governor Macklem has made it clear that the central bank is focused on raising interest rates to the “high end or slightly above” of neutral, the 2%-3% where monetary policy neither stimulates nor drags down the economy. interval. The neutral rate range has fallen over the past 20 years.
That should happen on Sept. 7, with money markets favoring the central bank will raise rates by 75 basis points, which would bring the policy rate to 3.25%. This will also be the fourth major rate hike this year, bringing the tightening policy started since March to a scale of 300 basis points.
“Because of the rate hikes on the front end, the Bank of Canada may want to pause the rate hike cycle to give the economy time to catch up,” said Taylor Schleich, head of economics and strategy at National Bank Financial. He expects a 75 basis point rate hike on Sept. 7, as both inflation and employment figures outpace GDP in terms of importance to the central bank.
National Bank of Canada Wealth Management expects the Bank of Canada to decide on a fifth rate hike at its meeting, with a 75 basis point hike the most likely outcome. In addition to this major decision, updates on monetary policy guidance will receive just as much attention. We expect the Bank of Canada to pause its rate hike cycle after introducing its policy rate into a restrictive range to give the economy time to catch up with the rapid tightening measures introduced so far. We probably won’t see this in the statement, but we’ll be looking for clues that the Bank of Canada is considering putting the brakes on, perhaps by emphasizing the need to be “data-dependent” going forward.