SMM News: us President Donald Trump this week attacked the Federal Reserve for excessive interest rates and complained about the "devaluation" of the euro and other currencies against the dollar. Next week, the Federal Reserve will meet in Washington to discuss monetary policy. The Fed's interest rate cut, which has been hyped recently, has consistently limited the decline in gold prices. Spot gold has recovered nearly $8 from its low in the past week, driven by Trump tweets. Several Fed officials, including Fed Chairman Powell, have hinted at openness to monetary easing.
Us President Donald Trump this week attacked the Fed for its high interest rates and complained that the euro and other currencies had "depreciated" against the dollar, putting the US at a great disadvantage. Next week, the Federal Reserve will meet in Washington to discuss monetary policy. The Fed's interest rate cut, which has been hyped recently, has consistently limited the decline in gold prices.
Gold prices stopped falling on Trump's tweets, with spot gold recovering nearly $8 to $1327.92 an ounce from a near-week low of $1319.94, supported by a fall in the dollar index and weakness in US stocks.
(spot gold 60 minutes chart)
Daniel Briesemann, an analyst at Commerzbank, said demand for gold should remain high because of various trade conflicts and related uncertainties, however, gold prices are vulnerable to profit-taking as speculative buying fuelled last week's rally.
Trump resumes "shelling" of the Federal Reserve
"the Fed's interest rates are too high, coupled with absurd quantitative tightening," Trump said in a tweet on Tuesday (June 11). They have no idea what's going on! " . In addition, Trump added that inflation in the United States is very low, which is a good thing.
Trump's tweet about the euro appeared to be due to a Bloomberg column about summer tourists in Europe, which Trump linked to his often disgruntled dollar exchange rate.
White House economic adviser Cudlow said Trump did not call for a devaluation of the dollar, saying the president was very comfortable with a stable dollar and once again that the Fed raised interest rates too quickly in the fourth quarter of last year.
Alan Ruskin, a strategist at Deutsche Bank, said in an interview that the enthusiasm of some dollar bulls would be curbed because of President Trump's comments. The euro is undervalued by about 7 per cent against the dollar, which means its fair value is above 1.20, the current exchange rate is at 1.133, and to be fair, the dollar is only moderately overvalued, Ruskin said.
Expectations of interest rate cuts are rising
Markets are still focused on the Fed's monetary policy outlook, and expectations of the Fed cutting interest rates as early as next week are rising. Several Fed officials, including Fed Chairman Powell, have hinted that they are open to loosening monetary policy.
Bank of America economists pointed out that the yield on the 10-year Treasury note at the end of 2019 was expected to fall to 2 per cent from 2.6 per cent because the Fed was clearly "disturbed by uncertainty and market pricing". Economists expect interest rates to fall by 75 basis points by early next year.
Inflation was 1.5 per cent in April, according to the Fed's preferred indicator, and has been below the 2 per cent target for most of the past seven years. Fed officials are expected to discuss the need to cut interest rates at a meeting on June 18-19 to protect the U. S. economy from trade disputes. Investors expect the possibility of a 25 basis point cut in July to be 75 per cent.
Huitong warned that since he was elected president, Trump has repeatedly attacked the Federal Reserve for excessive interest rates, and once such remarks occur, the dollar will always be subject to varying degrees of pressure during the week; at a time when expectations of a rate cut are rising in July, the risk of a short-term return to the dollar's decline has increased significantly, which is expected to help gold prices rise again.
According to the Huitong Finance and Economics Exchange Software, the US dollar index was 96.70 on June 12, when Beijing time was 8-30 and the US dollar index was 96.70.
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