Spot gold rose for the second week in a row to an one-month high. Although investors are preparing for the Fed's accelerated monetary tightening, which has led to a stronger dollar, the ECB's unexpected dovish posture is also good for the dollar, but US inflation has broken through 8 per cent at an annual rate of more than 40 years, and it is difficult for Russia and Ukraine to cease fire in the short term. the resulting safe-haven demand and further inflationary upward pressure have kept gold prices in the upward channel.
The European Bank is almost the most pigeon in the world.
While central banks around the world are racing to rein in soaring inflation, such as New Zealand and Canada, which aggressively raised interest rates by 50 basis points this week, the ECB only confirmed plans to end stimulus measures in the third quarter, becoming one of the world's most cautious major central banks.
Some policy makers believe that the current high inflation is almost entirely the result of external supply shocks and that price growth is likely to fall on its own over time. High energy prices weaken savings, and the resulting shock will eventually drag down growth, dragging inflation back below target.
But President Christine Lagarde issued a stern warning on inflation, pointing out that early signs that long-term inflation expectations are higher than the 2 per cent target set by the ECB are emerging. "the last thing we want is the risk of inflation expectations getting out of anchor and needs to be closely monitored."
In the face of soaring inflation, the ECB's move this week was seen as moderate, putting pressure on the euro and indirectly bearish gold prices. The impact of rising energy prices and supply chain disruptions on consumer confidence is likely to dim the economic outlook, limiting the pace of monetary tightening by the European Bank.
The annual rate of inflation in the United States is above eight.
Inflation in the United States has reached an annual rate of 8.5%, the highest in more than 40 years. The US unemployment rate fell to a two-year low of 3.6 per cent in March. High inflation and low unemployment will lay the groundwork for the Fed to raise interest rates by 50 basis points next month.
Economist Veronica Clark said: ". The risk of further upward inflation posed by rising commodity prices could lead to supply disruptions in the summer, leading to heightened expectations of a more hawkish Fed. "
"We are going through a period of chaos that could last for a long time, with structural inflation rising as the population ages, savings and asset spending fall, while globalisation is hit by a range of factors, including trade confrontations, new crowns and the war in Ukraine," said Joe Brusuelas, chief economist at RSM.
Historically, rising inflation has been good for hard currency. However, gold is a non-interest-bearing asset, and gold is not very popular relative to other asset classes in the environment of global interest rate hikes. There is little room for gold to rise in the medium to long term.
The Federal Reserve is almost hawkish.
The Federal Reserve launched a new cycle of raising interest rates in March, and the Fed raised interest rates in March with a conservative attitude of only 25 basis points. But now it seems that with the economy continuing to be strong, the Fed needs to take more urgent action to curb inflation.
Fed governor Brainard said on Tuesday (April 12) that the Fed will raise interest rates and reduce its bond holdings as early as June to help reduce high inflation. This is a further sign that cautious policy makers within the Fed are considering speeding up interest rate hikes into the city.
Barkin, chairman of the Richmond Fed, said that if high inflation becomes more common in the future than before the COVID-19 pandemic, "our efforts to stabilize inflation expectations may take some time, and we will tighten monetary policy more aggressively than we do now."
Federal Reserve Governor Waller said Wednesday (April 13) that the Fed needs to raise interest rates aggressively to combat inflation. He supports the Fed to raise interest rates by 50 basis points in May and, if "possible", to continue at such a pace in June and July. New York Fed Chairman Williams said Thursday that the Fed should consider raising interest rates by 0.5 percent at its next meeting in May.
In an interview with the Financial Times, St. Louis Fed Chairman Brad said bluntly that in order to deal with soaring prices, the Fed must put on the brakes on economic activity and that the Fed needs to make more active efforts to eradicate the worst inflation in 40 years.
Bipan Rai, head of foreign exchange strategy at CIBC Capital Markets in Toronto, said the comments by Fed officials highlighted the Fed's current lack of direction, which provided assurance that the dollar would continue to strengthen after the shock. "the path with the least resistance is still to tighten policy, aggressively raise interest rates and shrink the balance sheet."
Russian-Ukrainian peace talks reach an impasse
Russian President Vladimir Putin on Tuesday described on-off peace talks as a "dead end". Biden announced on Wednesday that he would provide an additional $800 million in military aid to Ukraine.
Russian troops have retreated from some parts of northern Ukraine after suffering heavy losses and failing to occupy the capital, Kiev. Ukraine and its Western allies say Moscow is redeploying a new offensive in the East Donbass region.
"Russia appears to be preparing to launch a major offensive in eastern Ukraine-which has triggered a lot of demand for gold as a safe haven," Daniel Briesemann, an analyst at Commerzbank, said in a report.
Commodity prices soar
The war between Russia and Ukraine has also led to a surge in global food prices as both countries are major exporters of commodities such as wheat and sunflower oil.
The war in Ukraine has supported soaring prices of raw materials and is squeezing businesses and consumers. Gasoline prices surged to an all-time high of $4.33 a gallon in March, the main driver of rising inflation, according to the American Automobile Association.
The political risk premium caused by the escalation of the war in Ukraine has risen again, pushing up commodity prices, creating an environment for higher inflation and adding gold's anti-inflationary charm.
