Last night, besides unemployment benefits, the US also announced GDP data. Despite the GDP downturn, the job market performed well, with a decrease in initial claims for unemployment benefits, and severe overheating in Q1 PCE, jokingly, it feels like the US might even need to raise interest rates again. Of course, this is a joke, as expectations for a rate cut have been continuously lowered this year, but the possibility of a rate hike has become very small.
Looking at last night's data, it aligns with the Fed's most desired outcome. The economy is achieving a soft landing, with economic growth slowing down, good job data, and gradually decreasing inflation pressure, all of which are signs of a soft landing.
However, with the data released, expectations for a rate cut were greatly reduced again, because if the economy is only mildly reducing and inflation pressure is decreasing, it aligns with expectations for a rate cut. But once the economic recession accelerates and inflation pressure increases, it does not fit the environment for a rate cut. The release of this data clearly aims to maintain the strength of the dollar and lower the market's expectations for a rate cut.
The US stock market accelerated its decline at the open, as seen from the performance of the three major stock indexes, with the Dow Jones suffering the most. The financial reports of tech stocks this week were not very optimistic and did not reverse the downward trend in the US stock market. According to expectations, the US stock market would not easily collapse before a full rate cut. However, now faced with the choice between protecting the exchange rate or the US stock market, the US has chosen the former.
Recently, US funds have been continuously flowing out, weakening US stocks, worsening the US macroeconomic environment, and high rates for US Treasury bonds, all factors that have led to a decrease in risk market traders' willingness to invest in risky assets. Interestingly, after a few hours of decline, the three major stock indexes experienced a powerful rebound, whether this rebound will continue depends on tonight.
Only those who are hopeful can appreciate others, and only those who recognize you can understand your thinking. On the path of trading, there is no uniform road, only finding what suits oneself is the best path.
Gold Analysis:
With the Fed about to start raising rates, the tone of Fed Chairman Powell's speech is expected to be hawkish, leading to further declines in gold and silver prices. This was the mainstream view in the market yesterday, yet, we still stand by our analysis and judgment, not following the trend to be bearish on gold and silver, but reiterating our bullish stance multiple times in our analysis.
Indeed, as everyone saw yesterday, gold and silver both surged significantly!
In the same market, everyone has different opinions and interpretations, which are more about their understanding of the market. This is not to boast about our capability or level, but to make everyone realize that to prosper in this market, one must have the ability to think independently, analyze independently, and consistently execute. Only by doing so, can one stand out and become one of the top 20% performers.
The upcoming Fed meeting will keep the interest rate decision unchanged, with a focus on forward-looking information released by Fed Chairman Powell's speech having a significant substance.
1: The next meeting is unlikely to consider raising rates.
2: The Fed will start to slow down the pace of reducing its balance sheet from June, lowering the speed of US Treasury securities reduction from $60 billion a month to $25 billion, and maintaining the speed of reducing mortgage-backed securities at $35 billion a month;
3: Unexpected weakness in the labor market would prompt the Fed to cut rates, an important piece of data to pay attention to is the unemployment rate, which will be clarified by tomorrow's non-farm payroll; an increase in unemployment supports the Fed's move to cut rates.
4: Short-term inflation expectations have risen, considering policy to be tight and exerting pressure on demand, decision-making will occur in stages depending on upcoming data.
This indicates that the current high interest rates have impacted the economy.
Future meetings will not consider raising rates, delaying the reduction of the balance sheet, the current high interest rates have affected economic growth, reiterating the 2% inflation target, etc. I did not perceive Chairman Powell's speech as hawkish; on the contrary, it hinted at the possibility of a rate cut, and overall, I personally believe it leaned more towards dovish, otherwise, why would gold and silver both soar significantly?
The expected positive impact of the Fed meeting on gold and silver has been realized, meaning the overall macroeconomic fundamentals support further rises in gold and silver prices in the future. I remain steadfast in my view presented at the beginning of the year that gold and silver will maintain an upward trend throughout the year and will reach new historical highs.
Gold rose from a low of $2281 yesterday evening to a high of $2328, gaining nearly $50 over the day, just as I mentioned earlier, if supportive factors emerge, gold is highly likely to recover the decline from the previous day, and indeed it did.
After rising, it stabilized its gains, finally closing around $2320, recording a bullish candlestick on the daily chart with slight shadows above and below, thus stopping the decline, but still within the downward channel in the rising structure, fortunately, short-term indicators have improved, and the daily chart needs further adjustment to stabilize in order to turn bullish finally.
After the previous adjustment, gold's rise yesterday helped recover within the range, continuous consecutive sharp rises are unlikely, one should still be cautious of further fluctuations, especially since non-farm payroll data is yet to come tomorrow.
In the short term, gold faces resistance at $2330, with strong support near the $2300 mark. I will continue to lean on support near $2300 to enter bullish positions, breaking above $2330 could see $2350, and only with $2350 firmly held, can stage-wise rise reach $2400.
Market trends change in an instant, so it's essential to trade flexibly. For more specific and timely position sharing, follow TMGM Mark
