TREX Global:Powell's speech helped U.S. bond yields rebound, be wary of short-term pullback pressure on gold prices

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Powell said the Fed's independence is the core of its ability to resist inflation and should avoid participating in social policies

Federal Reserve Chairman Jerome Powell said on Tuesday that the central bank's independence from political influence is central to its ability to fight inflation, but that requires the central bank not to engage in issues such as climate change that exceed its congressional mandate.
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Speaking at a forum on central bank independence hosted by the Riksbank, Powell said: "Restoring price stability when inflation is high may require some measures that are unpopular in the short term, including us raising interest rates to drive a slowdown. Given that our decisions are not directly under political control, this allows us to take these necessary steps without regard to short-term political considerations."

Referring to inflation, Powell said it was crucial that the Fed retains the ability to manage it as it sees fit, including raising interest rates to keep inflation in check, even if it means slower growth and higher unemployment.

U.S. Treasury yields climb as markets await U.S. December inflation data

U.S. Treasury yields rose on Tuesday as the market braced for highly-anticipated consumer price data later this week that could affect how much the Federal Reserve raises interest rates as it struggles to keep inflation under control.

Treasury prices have rebounded briefly over the past two days, with the 10-year U.S. Treasury yield plunging more than 20 basis points to as low as 3.508% on Monday after last week's U.S. employment and service activity data showed that inflation slowed more than expected.

A report on Thursday is expected to show that consumer prices rose 6.5 percent in December from a year earlier, while core CPI is seen rising 5.7 percent, about three times the Fed's 2 percent target.

Powell speech fails to boost dollar

At the beginning of the Asian market on Wednesday (January 11), the U.S. dollar fluctuated within a narrow range and is currently trading around 103.32. The speech by Federal Reserve Chairman Powell overnight did not involve too much monetary policy and interest rate hike prospects. The U.S. dollar index remained at nearly seven months The lows were choppy as traders awaited U.S. inflation data later in the week to help cement expectations for a rate hike.

The U.S. dollar has been on a downward trend recently, with investors and traders questioning whether the Fed will have to raise its target interest rate above 5% to curb stubbornly high inflation. The effect of the Fed's aggressive increase in borrowing costs in 2022 has already begun to show.

World Bank sees global growth of 1.7% in 2023, risk of recession

The World Bank on Tuesday cut its 2023 growth forecasts for many countries to levels on the brink of recession, as the impact of central bank rate hikes intensifies, the war between Russia and Ukraine continues and the world's main economic engines stall.

The World Bank said it now expects global GDP to grow by 1.7% in 2023, the slowest pace in almost three decades, excluding the recessions of 2009 and 2020. In its last Global Economic Outlook report in June 2022, the World Bank forecast global growth of 3.0% in 2023.

The World Bank slashed its growth forecasts for the U.S. and the euro zone to 0.5 percent and said a sharp slowdown in advanced economies could herald a new global recession, less than three years away from the last one.

Gold technical bullish signals increase

Fxstreet analysts pointed out that there is also a new bullish signal in the long-term trend of gold, namely the impending formation of a "golden cross" on the daily chart. When the 50-day moving average crosses upwards above the 200-day moving average, it creates a bullish signal, reflecting a long-term trend reversal. Furthermore, the signal is strengthened by prices above these averages, which are expected to form a golden cross as early as this week.

Gold is currently at the intersection of the 50-day and 200-day moving averages. In July, for example, a "death cross" (50-day moving average below the 200-day moving average) sparked a 7% sell-off over the next three weeks. After forming a golden cross in February 2022, it rallied nearly 15% in the ensuing two-and-a-half weeks, a second test of all-time highs above $2,070.

This time around, the rally looks a bit tight, so we see short-term gains to the $1900-$1910 area possible before the bulls may need to replenish.

In the long-term, gold price gains are unlikely to stop above $1,900. Analysts expect another test of the 2070 all-time high before the end of 2023. This time, it will succeed. Much of the optimism is fueled by growing investor doubts about the stability of major reserve currencies amid heavy debt loads and speculation that central bankers will allow inflation to remain slightly above target, despite current assurances.

TREX Global’s view:In the short term, the rebound in U.S. bond yields and the blockage of the 1880 mark have put gold prices under pressure for a short-term correction. Focus on the support around the 5-day moving average of 1864 and the 10-day moving average of 1845 respectively, but the market may cool down on U.S. inflation Expectations, geopolitical conditions, and technical bullish signals attract bargain hunters, which are expected to limit the room for a pullback in gold prices. Before falling below the 10-day moving average, the market outlook is still biased towards bulls.

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