Spot gold weakened on Tuesday (April 5), as the Federal Reserve may be more aggressive in raising interest rates to control inflation, with the probability of the Fed raising interest rates by 50 basis points in May close to 75%. But the prospect of further Western sanctions on Russia limited gold's losses. The United States and Europe are planning new sanctions to punish Russian forces for killing civilians in Ukraine.
On Tuesday (April 5), spot gold weakened as the Federal Reserve may be more aggressive in raising interest rates to control inflation. But the prospect of further Western sanctions on Russia limited gold's losses. The United States and Europe are planning new sanctions to punish Russian forces for killing civilians in Ukraine.
At 19:59 Beijing time, spot gold fell 0.26% to US$1,927.42 per ounce; the main COMEX gold futures contract fell 0.15% to US$1,931.3 per ounce; the US dollar index fell 0.04% to 98.956.
Ukraine: Negotiations are getting more difficult
The United States and Europe are planning new sanctions to punish Russian forces for killing civilians in Ukraine. Ukrainian President Volodymyr Zelensky warned that more such incidents could be found on land recaptured from Russian invaders, making negotiations with Russia more difficult.
Ukrainians have found bound bodies shot in the vicinity, a mass grave and other signs of executions in territory it has retaken from Russian troops. The Kremlin has denied any allegations related to the killing of Butcha civilians.
German Chancellor Scholz said Western allies would agree on further sanctions on Moscow in the coming days. Sullivan, Biden's national security adviser, said the U.S. would announce new sanctions this week.
German Finance Minister Christian Lindner said the EU must work to sever all economic ties with Russia. But he acknowledged that a blanket ban on all Russian energy imports would hit EU members more economically than Russia.
The French Council for Economic Analysis said that high EU-wide tariffs on Russian energy imports would prove more effective than a blanket embargo, even though it would have limited impact on most countries.
JPMorgan Chase believes that the Ukraine war and sanctions on Russia have had a significant economic impact, and the unpredictability of the war itself and the uncertainty surrounding the global commodity supply chain may have an explosive impact on global economic growth.
Stephen Innes, managing partner at SPI Asset Management, said in a note: “Gold remains supported as an important portfolio hedge during these uncertain times, and will remain supported in a situation where inflationary pressures remain strong but growth is slowing. Brilliant."
The Fed is far from successfully controlling inflation
Former Federal Reserve Governor Lawrence Lindsay said on Monday that higher inflation will force consumers to significantly limit spending. "Inflation is eroding consumers' purchasing power, and consumers will have to cut spending." He also said that the Fed is far from successfully controlling inflation. "It's still a long way off." The U.S. non-farm
payrolls report released last week was strong in March, continuing to provide support for the Federal Reserve to raise interest rates by 50 basis points at its May meeting. CME's "FedWatch" tool puts the probability of the Fed raising interest rates by 50 basis points in May close to 75%. Inflation causes mortgage rates to rise in two ways. First, lenders charge higher fees, so their profits aren't offset by higher prices. Second, the Federal Reserve keeps inflation in check by raising interest rates. Dimon, an economist at JPMorgan Chase & Co., said the Federal Reserve and the government were right to take drastic action during the pandemic, but the stimulus could last too long. He believes the rate hikes needed to curb inflation will be "significantly higher than market expectations." Dimon also had some advice for the Fed: It shouldn't worry about the consequences of rising market volatility unless that volatility affects the economy. The Fed's plan should be flexible and act quickly according to local conditions. OANDA senior market analyst Jeffrey Halley said gold is still stuck in a range of around $1,915 to $1,950 an ounce, with no signs of a directional breakout yet. “Risks to gold remain skewed to the downside, especially if the dollar climbs. Only a break above $1,970 could temporarily change that outlook. Gold has resistance at $1,940 and $1,950 an ounce. Conversely, a confirmation of a break below $1,880 could change that outlook for the time being. Sparking a sell-off that could push gold down to $1,800 an ounce.”
Spot gold is expected to rise above $1938 again
From the daily chart, the price of gold may start an upward ((iii)) wave trend from $1,889, with the upper resistance looking at the 23.6% target at $1,958. Wave ((iii)) is a sub-wave of the up 5 wave that starts at $1779.
On the hourly chart, the price of gold has started an upward iii wave from $1,915, and is expected to rise above the 38.2% target at $1,938 and touch the 61.8% target at $1,952. Wave iii is a sub-wave of wave (i) that also started at $1889, and wave (i) belongs to wave ((iii)).