SMM News: during the Asian trading session on Tuesday, major currencies traded in a familiar range, while spot gold approached the 1330 mark. The US-Mexico agreement boosted risk appetite, but the Fed's interest rate cut is expected to strongly support gold prices. Overnight Trump attacked the Fed again, raising speculation about the possibility of a rate cut. Mr Trump said Fed policymakers had become "very destructive" and the market then focused on data such as PPI and CPI in the US. If a new round of data shows US inflation and weak economic growth, it will further consolidate the Fed's expectations of a rate cut.
Trump accuses the Fed of "making a big mistake"! Spot gold tries to counterattack
On Monday morning, Trump once again complained about Powell's policies on a public show.
While praising his administration's efforts to reach a deal, Trump is also unhappy with Fed Chairman Powell (Jerome Powell) and other Fed officials for raising interest rates.
"the Fed is very 'destructive'," Trump said. They made a big mistake. They raised interest rates too fast. It's not just Powell's problem. You know, there are some people at the Fed who really-they're not mine. "
Fed observers point out that the possibility of cutting interest rates is rising as a result of continued pressure from Trump and deteriorating economic conditions. Mr Trump has long criticised the Fed's interest rate decision and called on the central bank to cut its short-term benchmark interest rate, which is now in the range of 2.25 per cent to 2.5 per cent. Trump also called on the Federal Reserve to stop the process of shrinking its bond portfolio.
Over the past year, Trump has repeatedly intimidated the Fed in tweets, interviews and impromptu speeches, leading some investors to believe that the Fed's decision to shelve this year's rate hike is a response to the White House. Investors sometimes don't understand what Powell means, adding to the confusion.
Analysts point out that looking ahead, Powell will have to apply what he has learned to a question that may define his term of office, that is, whether to cut interest rates at future meetings to maintain economic growth.
Trump began calling for a rate cut after the Fed hinted earlier this year that it would not raise interest rates again. Fears of a deepening slowdown could force the Fed to cut interest rates. Friday's weak non-farm payrolls report heightened concerns.
Fed analysts see the weak jobs data as a sign that the slowdown in the US economy is spreading to the job market and that the central bank is increasingly likely to cut interest rates this year. The shift from "patience" to "ready to act" has been a shift in the Fed's rate-cutting attitude in the past two weeks.
Bank of America strategist Mark Cabana and economist Joseph Song wrote in a report that the historical curve of one-month to six-month federal fund futures shows that the central bank is likely to take the first action in its interest rate cut cycle within a month.
Michael Feroli, chief US economist at JPMorgan Chase, said, "it is clear that we are more confident in the Fed's expectations of easing policy," and believes that even if the United States and Mexico reach an immigration agreement, the threat of US tariffs on Mexican imports can be avoided. The Fed is still expected to cut interest rates by 25 basis points in September and December, respectively.
Spot gold remained volatile in a narrow range below 1330 on Tuesday and is now around $1329. Spot gold continued to fall back yesterday, falling more than $10 to below the 1330 mark, hitting as low as $1325
The next data is critical. On this trading day, the United States will release May PPI data, followed by the more critical US CPI data on Wednesday.
Foreign media pointed out that PPI, which will be released on Tuesday, is expected to rise 2.0 per cent from a year earlier. Core PPI, excluding food and energy, is expected to grow by 2.3 per cent.
But the Fed and investors will pay more attention to Wednesday's CPI report. The overall and core CPI increased by 1.9% and 2.1%, respectively.
The concern is that the CPI will be in line with the Fed's preferred inflation indicator, the core consumer spending (PCE) price index. The PCE price index rose 1.6% in April from a year earlier, consistently below the official target of 2%.
If a new round of data shows US inflation and weak economic growth, it will further consolidate the Fed's expectations of a rate cut.
Powell and his colleagues are expected to begin preliminary discussions on the decision-making route for interest rate cuts at an upcoming meeting, but a conclusion is unlikely to be reached at the June 18-19 meeting. Economists said Fed policymakers could adjust their post-meeting statements to show openness to easing, possibly as soon as July 30-31.
Barclay economists Michael Gapen and Jonathan Millar advanced interest rate cuts to July and September, but expected a 50 basis point cut for the first time and a 25 basis point cut for the second. "if interest rates are cut by 50 basis points, the underlying intention will be to surprise the market." Millar, a senior US economist, said. "because of the limited ammunition, they wanted to make a big move."
Ole Hansen, head of commodity strategy at Shengbao Bank (Saxo Bank), said interest rate cuts could be bad for gold in the short term as loose monetary policy supports the stock market. However, the Fed cut interest rates more than expected, will be the biggest "helper" of gold bulls.
Phillip Streible, senior market analyst at RJO Futures, points out that it looks like gold will have enough momentum to reach $1400 an ounce by the end of the year. However, gold is facing some strong technical resistance. Gold has repeatedly tested resistance levels of about $1350 since hitting a 2015 low.
Todd Horwitz, chief market strategist at BubbaTrading.com, wrote that we had been expecting a correction in gold prices and did not expect it to rise in a straight line. The market does not generally rise or fall in a straight line. There will always be a period of time when they will be suspended, consolidated or reversed. This time is no exception.
According to Horwitz, the rally was perfect, almost breaking through its highest level since February. Horwitz is still bullish on gold, waiting for silver to break through and see the pullback as a buying opportunity. We will specify the purchase level over the next day or two because the pattern will show a valid footstep.