Gold clings to recovery as Fed speakers supported no rate increase September – Crypto News – Crypto News
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XAU/USD hovers around $1760 amidst a buoyant US dollar XAU/USD hovers around $1760 amidst a buoyant US dollar

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Gold clings to recovery as Fed speakers supported no rate increase September – Crypto News

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  • Gold price discovers support as Fed policymakers see no interest-rate increase in September.
  • The USD Index hovers near 105.00, preparing for a fresh upside amid the risk-off mood.
  • Fed’s Goolsbee said the central bank is aiming to push the economy on a “golden path”.

Gold price (XAU/USD) rebounded meaningfully on Friday as Federal Reserve (Fed) policymakers suggested that the central bank will not raise interest rates further in the September monetary policy meeting. The precious metal capitalizes on remarks from Fed policymakers, which seem to be backed by cooling inflation and slowing employment growth.

Meanwhile, the appeal for the US Dollar is still strong as fears of a global economic shakedown are still elevated. The US Dollar Index (DXY) is hovering near a five-month high and hopes of more gains are still strong. For the Gold price, a meaningful action will come after the release of the US Consumer Price Index (CPI) data for August, which is scheduled for next week. Scrutiny of the employment report and inflation will provide meaningful cues about the interest rate decision from the Fed for its September monetary policy meeting.

Daily Digest Market Movers: Gold price consolidates amid subdued US Dollar

  • Gold price finds buying interest near $1,915.00 and recovers above Thursday’s high around $1,924.00 as the upside momentum in the US Dollar starts exhausting.
  • The precious metal attracted bids as Federal Reserve policymakers delivered neutral commentary on Thursday about September’s interest rate policy.
  • Dallas Fed Bank President Lorie Logan said it “could be appropriate” to skip an interest rate increase at September’s meeting, but warned that more tightening may be needed to bring down inflation to 2%.
  • New York Fed Bank President John Williams said there is no urgency for an interest-rate increase this month as inflation is falling and the economy is better balanced. However, Williams kept options open to keep interest rates higher for longer.
  • About the labor market outlook, Fed’s Williams said that labor demand is coming down and the Unemployment Rate could rise to the 4% range.
  • Fed’s Beige Book, released on Wednesday, conveyed that labor growth remained subdued. The report also said that the economy grew at a modest pace in the last few weeks and inflationary pressures abated.
  • While the Fed’s survey conveyed that labor market conditions are slowing, economic data indicates that broader employment conditions remain strong.
  • Unit Labor Costs in the April-June quarter jumped to 2.2% against expectations and a Q1 reading of 1.6%. Decent wage growth defies signs of cooling inflation as it could strengthen the consumer spending momentum.
  • On Thursday, the US Department of Labor reported that individuals claiming jobless benefits for the first time dropped to 216K for the week ending September 1, less than the 234K expected and the former release of 229K. Jobless claims came in below expectations for the third straight week, suggesting that labor demand could strengthen again.
  • Chicago Fed Bank President Austan Goolsbee said the central bank is aiming to push the economy to a “golden path,” meaning a situation where inflation recedes without triggering a recession.
  • After neutral commentaries from Fed policymakers, chances that interest rates will remain unchanged at 5.25%-5.50% for the remainder of the year rose to 55% against the 53% recorded earlier.
  • Meanwhile, the US Dollar Index remains below the immediate resistance of 105.00 as investors shift focus to US inflation data for August, which will be published next week.
  • Before that, investors will also focus on China’s inflation data. Steady deflation risks in China would strengthen the appeal for the US Dollar.
  • The US Dollar has been capitalizing on the potential risks of global economic turmoil. European and Asian economies are facing the wrath of higher interest rates.
  • The US Senate confirmed World Bank economist Adriana Kugler at the Fed’s Board of Governors.

Technical Analysis: Gold price oscillates above $1,920

Gold price stabilizes above the $1,920.00 support after recovering from a weekly low at $1,916.00. The precious metal attempts to shift above the 20-day Exponential Moving Average (EMA) around $1.925, while the 50-day EMA is still declining. Momentum oscillators indicate that the overall trend is sideways. The 200-EMA continues to act as a support for Gold bulls.

Central banks FAQs

Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.

A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.

A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.

Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.

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