Event
In the early morning of March 17, Beijing time, the Federal Reserve announced a March interest rate resolution, announcing that it would raise interest rates by 25 basis points, and the target interest rate range for federal funds rose to 0.25-0.50%, in line with market expectations.
Comment
The price of gold fluctuated obviously before the release of the interest rate increase news, and rose after the release of gold. First of all, before the announcement of the Fed's March interest rate decision, global gold prices fluctuated in a certain range affected by interest rate hikes, with daily prices as high as $1926.57 / oz and as low as $1905.22 / oz. Second, with the announcement of the Fed's interest rate hike, the price of gold fell briefly and rebounded quickly. In the process, the price of gold hit as low as $1895.67 an ounce, while in the subsequent shock upward process, the price of gold reached a peak of $1934.84 an ounce two hours after the rate hike. The upward volatility of gold prices after the rate hike reflects the gradual release of the market's bearish expectations of a Fed rate hike.
Interest rate hikes are expected to be further released in the short term, and gold enters an important allocation point. The liquidity of the gold market is high, and market expectations often play an important role. Before the Fed announces a formal rate hike, the price of gold usually falls under the influence of market expectations of an interest rate hike, while it usually goes up when the rate hike actually falls. Looking back at the past six interest rate hikes, gold rose or fell by an average of 10.37%,-0.99% and-1.32% in the year, half a year and month before the Fed raised interest rates, while the average rise and fall in the following year, half a year and a month was 6.67%, 7.81% and 0.02%, respectively. After raising interest rates, the gold market performed better than before, indicating that the release of market worries has given a positive boost to gold prices.
The macro economy remains fragile and gold is logically dependent for a long time. First of all, the impact of interest rate hikes on inflation is limited, and this round of interest rate hikes may be difficult to bring substantial relief to the high level of inflation. CPI growth in the US has continued to rise year-on-year during the past six interest rate hikes. Specifically, during the six interest rate hikes, the year-on-year growth rate of US CPI increased by 0.7pct, 4.0pct, 0.3pct, 1.1pct, 1.0pct and 1.7pct, respectively. According to the latest inflation data released by the US Department of Labor, the US CPI grew 7.9% in February 2022 compared with the same period last year, and the current inflation level is at a 40-year peak, so it is expected that the overall US inflation level will remain high during this round of interest rate hikes, driving the gold price to continue to strengthen. Second, the US economy is at risk of recession and the market has shown clear concern. From the perspective of the spread between long-term and short-term treasury bonds, as of March 16, 2022, the spread on 10-to-2-year Treasuries has fallen to 0.24%, indicating that the current market is worried about a short-term recession. Third, the Fed's interest rate hike may have a certain impact on the economic status of the United States, reducing the attractiveness of the dollar. Most of the changes in the global share of GDP in the US have declined in the course of six interest rate hikes since 1980. The process of raising interest rates is expected to continue for a long time. According to the latest bitmap released by the Federal Reserve, the Fed is expected to raise interest rates six times this year. Therefore, the process of raising interest rates may bring some disturbance to the global economic position of the United States, which in turn will reduce the attractiveness of the dollar and push up the price of gold in dollar terms.
Investment suggestion
Gold prices continue to rise in the context of the gold industry-related production enterprises may benefit, such as: Zijin Mining, Western Gold, Chifeng Gold and so on.
Risk hint
International geopolitical changes, abnormal fluctuations in commodity prices, macroeconomic policy changes.
