FX168 Financial News (Hong Kong) News spot gold fell on Wednesday (March 1), the US market fell to a minimum of 1,234.45 US dollars / ounce, but bargain hunting intervention signs. On Wednesday, a number of Fed officials’ hawkish rhetoric boosted the dollar and US stocks. The expectation of a rate hike in March rose, overshadowing the brief support of President Trump’s first speech in Congress on the price of gold. One of the Fed’s most influential officials, New York Fed President Dudley said that tightening monetary policy appears to be “more urgent,†and San Francisco Fed President Williams said there is no need to delay the rate hike. The data released during the day is mixed, US 1 The monthly PCE price index is close to the 2% target, but the actual PCE hit the largest decline since September 2009; the US Markit manufacturing PMI final value in February was 54.2, lower than expected, indicating that the US manufacturing expansion rate slowed slightly in February. The US manufacturing index rose to its highest level in August 2014. US construction spending unexpectedly fell in January, as public sector spending fell for three consecutive months, and recorded the largest decline since 2002, offsetting the growth of private project investment; this may indicate that the US first quarter GDP growth rate is more moderate. The Bank of Canada announced on Wednesday that interest rates will remain unchanged and the economy is still weak.
The US dollar rose on Wednesday. As of press time, the US dollar index rose 0.34, or 0.34%, to 101.69 points. US stocks rose sharply on Wednesday, the Dow rose 1.23% to 21068.08 points; the S&P 500 rose 1.16% to 2391.04 points; the Nasdaq rose 1.09% to 5889.97 points. Crude oil rose on Wednesday, the US oil index rose 0.06% to $54.04 per barrel; the oil index rose 0.04% to $56.53 per barrel.
Judging from the strength of US stocks and the US dollar on Wednesday, the market has high hopes for the Fed to raise interest rates in March, and before that, the gold market has only a 30% probability of raising interest rates in March, and investors are now raising interest rates in March. Moving to a 68% probability, the price of gold has to be revised. Analysts said that Fed Chair Yellen will speak on Friday, and Yellen’s speech may also point to a rate hike in March, which is not good for gold prices. On Tuesday, US President Trump gave a speech in Congress for the first time. Those who wanted Trump to make details of the stimulus plan were very disappointed. Trump did not provide more details on tax reform and basic implementation expenses. Therefore, the uncertainty of Trump's policy is still supporting gold. At present, the decline of gold is still supported by bargain hunting. Considering the political uncertainty such as the European election, the probability of a sharp fall in gold is still relatively low.
US PCE price index is close to 2% target but actual PCE hit the biggest drop in September 2009
Well-known financial website Zerohedge wrote on Wednesday (March 1) that the core data that most analysts focus on in the US personal consumption report is the personal consumption expenditure (PCE) price index. According to the US Department of Commerce (DOC), the US PCE price index rose by 1.9% in January from the same period of last year. The core PCE price index rose by 1.7% in January from the same period of last year, slightly lower than the Fed’s 2.0% inflation target, but it is already from 2012. The year is the closest to the Fed’s 2% inflation target.
(US personal income, expenditure and savings, source: Zerohod, FX168 financial network)
More data shows that US personal income in January increased by 0.4% from the previous month, which is estimated to increase by 0.3%. However, US personal consumption expenditure increased by 0.2% in January, which was less than the expected 0.3%.
Since the US personal income growth in January was greater than the increase in personal consumption expenditure, the savings rate began to rise from a few years low, rising from 5.4% in December to 5.5%.
(US savings rate, source: Zerohod, FX168 financial network)
In terms of revenue, the main source of personal income growth in the United States is the service industry salary, which increased by $22.5 billion in January, while the wage increase in commodity manufacturing was only $4 billion, while social welfare contributed another $9 billion.
Despite this, considering the rise in prices, the actual personal consumption expenditure adjusted by inflation in the US in January fell by 0.3% from the previous month, the largest decline since September 2009.
In addition, due to rising inflation, US personal disposable income failed to grow in January, and actual personal disposable income fell to 1.5%, the lowest level in more than three years, which also sounded the alarm for US consumer spending prospects.
(America's actual annual disposable income ratio changes, source: Zerohod, FX168 financial network)
Reuters commented that the US personal monthly expenditure rate in January said that US consumer spending rose less than expected in January, and because inflation rose at the fastest rate in four years, which made household purchasing power decline, it is expected that the economy will grow moderately in the first quarter.
The Wall Street Journal, commenting on the US PCE price index, said that this round of US PCE price data indicates that inflation is gradually approaching the 2% target set by the Fed; the PCE price index as the Fed's anchored inflation indicator has been lower since April 2012. 2% is also one of the reasons why the Fed ignores the strong employment and economic growth and chooses not to raise interest rates. Today's rising inflation may increase the probability that the Fed will raise interest rates as soon as possible.
US February ISM manufacturing index rose to 57.7, the highest since August 2014
An industry report released on Wednesday (March 1) showed that the US manufacturing index rose to its highest level in August 2014.
According to data released by the Institute for Supply Management (ISM), the manufacturing purchasing managers' index (PMI) for February was 57.7, with an estimated 56.0 and 56.0 in January.
(US Manufacturing Purchasing Managers Index, Source: FX168 Financial Network)
The data is above the 50-point gap, which means the service industry is expanding.
The ISM said that the manufacturing input price index for February was 68.0, with an estimated 68.0 and 69.0 in January.
The February new manufacturing sub-index was 65.1, the highest since December 2013, when it was 65.1 and January was 60.4.
The February manufacturing employment sub-index was 54.2, with an estimated 55.9 and 56.1 in January.
The ISM non-manufacturing index reflects the level of prosperity of US non-manufacturing business activities and was developed by the association after surveying nearly 400 corporate procurement and supply managers in 60 industries across the United States. These industries include agriculture, mining, construction, transportation, communications, wholesale trade and retail trade.
The American Institute of Supply Management (ISM) said that the US ISM manufacturing PMI index in February indicated that the current US GDP growth rate was 4.5%.
US construction spending in January fell by 1% from the previous month. Public expenditure recorded the largest decline in 2002.
The US Department of Commerce (DOC) announced on Wednesday (March 1) that US construction spending unexpectedly fell in January, as public sector spending fell for three consecutive months, and recorded the largest decline since 2002, offsetting the growth of private project investment; This may indicate that the US first quarter GDP growth rate is more moderate.
Detailed data shows that US construction spending in January fell 1.0% from the previous month to 1.180 trillion US dollars, an increase of 0.6%. After the construction expenditure in December was revised, it increased by 0.1%, and the previous value decreased by 0.2%.
More data shows that private spending rose by 0.2% in January from the previous month, while public spending fell by 5.0% from the previous month.
(US construction expenditure charts, source: FX168 financial network)
The data was published by the US Department of Commerce, and construction expenditures are a measure of the total value of monthly construction completions in the United States, covering both new and improved construction projects in the private and public sectors. Data estimates include labor and raw material costs, construction and engineering work, daily expenses, interest and tax payments, and contractor profits during the construction period.
Outlook outlook
Mitsubishi analyst Jonathan Butler said, "The interest rate hike is being counted in futures rather than spot gold, so the risk is downward."
In a report, Commerzbank said that "Fed Chair of the Federal Reserve Yellen will speak on Friday, and Yellen’s speech may also point to a rate hike in March, which has an impact on the price of gold."
FastMarkets analyst William Adams said that "the price of gold has reacted to the rise of other markets and is declining. Because Trump's speech has not made any substantial moves, everyone will be disappointed."
Saxo Bank analyst Steve O'Hare wrote on Tuesday (February 28) that Monday (February 27), due to the pressure on the USD/JPY, the price of gold once broke the 200-day moving average and touched 1264. The dollar/ounce was at a three-and-a-half-month high, but then the dollar and US Treasury yields rebounded and the price of gold fell below $1,250 per ounce. Saxo Bank recommends taking advantage of the opportunity for the price of gold to fall to $1,245, with a stop loss of $1,230 and a target of $1,278 or even $1,300.
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