Can Gold Price (XAUUSD) Hit High Levels Again!? Is Recession Coming To US Economy!? Jerome Powell (FED) Is About To Speak!

Gold Has A Chance For The Rejection Of The Support

Summary:  With a tug of war between inflation and recession concerns ensuing, central bank speakers (such as Fed Chair Powell’s testimony) and economic data (such as flash PMIs) will continue to be parsed closely in the week ahead. Asia’s trade and inflation data also out this week will press further the need for further tightening in the region. Commodities start to be pressured as well - we have an energy crisis brewing in Australia and US gasoline developments will be key. Focus will shift further away from industrial metals as China lockdowns will likely linger, to safe havens like Gold.

Powell’s testimony to the government

Fed Chair Powell delivers his semi-annual testimony on monetary policy before the US Senate Banking Committee in the week ahead. He will likely be grilled on what a more aggressive Fed could mean for jobs and the economy. This could be key as the debate around a 50 vs 75bps rate hike in July is still open.

US recession fears continue to get tested

A series of Fed surveys are due from the US this week, which will be scrutinized to signal if there are risks of a recession on the horizon. These include the Chicago Fed National Activity index, Kansas City Fed Manufacturing Activity index, as well as the final print of University of Michigan sentiment index. Also on the horizon is the preliminary print of the S&P Markit manufacturing PMI for June which is seen to be slowing down from May’s print of 57, but still remain strongly in expansion. Services PMI is however likely to gain some strength. Meanwhile, US home sales are tipped to show further strain on Wednesday with existing home sales data out for May. Gold (XAUUSD) is likely to see more strength if data disappoints, suggesting that stagflation fears are on the rise.

Dollar topping out

The US dollar top looks to be in place as other major central banks follow the Fed with strong tightening signals. Swiss National Bank announced a surprise 50bps rate hike on Thursday, along with Bank of England’s hawkish 25bps rate hike which has opened the door for a 50bps rate hike in August. Adding to the dollar’s weakness were reports that ECB President Christine Lagarde told finance ministers that the Bank’s new anti-crisis tool will launch if borrowing costs for weaker nations climbs too fast. While it is still hard to imagine a sustained case for any central bank to out-hawk the Fed, there may be signals that the dollar rally is peaking if yields start to top out.

Pivot from industrial metals to gold to continue

With global growth already starting to fatigue and now China is not likely to come out of lockdown this year; the biggest risk is the world enters a recession, before inflation is brought under control, and thus stagflation occurs. So we expect gold to shine as it historically does in such events. We anticipate further interest in gold equites this week with recession calls getting louder. Across Saxo globally last week we observed an increasing number of clients buying Gold Futures contracts, compared to the average number of trades over the last three months. And across the market on the ASX last week; gold stocks were some of the best performers as investors rotated out of industrial mining stocks and into gold equities, for their safe haven qualities. Our long-term bullish view in gold and sliver has strengthened of late. And as our Head of Commodity Strategy says we see potential in gold hitting a fresh record in the second half.

Flash PMIs and Eurozone economic bulletin from the ECB

Flash PMIs for the Euro area will be on watch to signal the extent of slowdown in the economy as shortage of natural gas supplies continues to weigh on business sentiment especially after the latest disruptions to Gazprom’s supplies to Germany. UK’s inflation is also out on Wednesday, and expected to climb higher to 9.2% y/y from April’s 9.0% y/y amid rising food and fuel costs.

Asian inflation pressured higher

Bank of Japan stuck to its easy monetary policy despite the pressures from global tightening and market participants challenging the Bank’s yield curve control over the last week as the Fed delivered a 75bps rate hike and other central banks jumped on the tightening bandwagon as well. Japan reports nationwide CPI in the week ahead, which is expected to stay above the central bank’s 2% target, but unlikely to threaten Kuroda to change his mind as wage growth pressures remain subdued. Singapore also reports May CPI which is expected to rise to 5.5% y/y from April’s 5.4%, likely led by food (with Malaysia’s chicken ban an added factor) and transport costs, but also due to the recovering demand as the economy reopens. Monetary Authority of Singapore is likely to tighten policy further at its next meeting in October. Malaysia also reports May CPI this week which will also show upside pressures amid supply-driven factors but also showing a reviving consumer demand.

Korea export data for the first 20 days of June

The data may offer investors a glimpse of the status of the industrial activities in the region given Korea being a key supplier of industrial intermediate goods. Fewer workdays (13 days) than the same period last year (15.5 days) will bias the data negatively and make the anticipated year-on-year decline difficult to interpret.

China’s Standing Committee convenes

The NPC Standing Committee is scheduled to convene from June 21 to 24.  Agenda items include reviewing and ratifying the State Council’s financial report and audit report of fiscal income and outlays for 2021. Investors tend to focus on if the NPC Standing Committee will increase this year’s local government special bond (LGSB) quota, which was determined in March this year at the “Two Sessions”, to boost infrastructure spending in the second half of 2022.  The NPC Standing Committee will also review the Anti-Monopoly Law amendment draft.   

Gasoline on watch

With gas prices surging above US$5 per gallon, the Biden administration has ramped up calls to increase and lower costs at the pump especially in light of the mid-term elections in November. Discussions around capping gasoline and diesel exports have also picked up and may see further announcements over the coming week. Even if the government were to change its stance on energy, and provide some capital investment, that won’t have an impact on prices immediately. The oil market will remain very tight until crude demand destruction becomes more noticeable in the fall. The US releases its weekly crude oil inventory report on Thursday and this will be keenly watched.

Australia in energy crisis; blackouts to continue; coal, oil, gas companies’ profits in question

Australia remains in an energy crisis, with no solution in sight. Parts of the East Coast of Australia suffering blackouts amid a lack of wholesale supply and rising demand due to an early onset of winter. Parts of QLD, NSW and the ACT are being asked to cut back energy use with Australia’s power operator, the Australian Electricity Market Operator (AEMO) operating on reserves. Last week, the AEMO suspended spot electricity trading after power generators were selling power above the maximum price range (due to lack of power supply). Prior to that, the AEMO was calling for supply to fill the gaps, and introduced a cap price at $300 per megawatt hour. However, wholesale electricity prices surged above that, and then some fossil fuel generators withdrew capacity saying they could not operate ‘profitability’ under the cap. So households are left limiting power and coal and gas companies are left with profits being squeezed. AEMO says it’s far too early to resume normal operations; as energy availability remains limited, some power generators are offline for maintenance/faults, and sourcing issues and fuel costs issues continue.

Key calendar events

Monday 20 Jun

United States Market Holiday
Germany Producer Prices (May)
Eurozone Construction Output (May)

Tuesday 21 Jun

Hong Kong SAR CPI (May)
United States National Activity Index (May), Existing Home Sales (May)

Wednesday 22 Jun

Bank of Japan policy meeting minutes
New Zealand Annual Trade Balance (May)
United Kingdom CPI (May), PPI (May)
United States Mortgage Market Index (Jun)
Canada CPI (May)
Eurozone Flash Consumer Confidence (Jun)

Thursday 23 Jun

South Korea PPI Growth (May)
Australia S&P Global Flash PMI, Manufacturing & Services (Jun)
Japan au Jibun Bank Flash PMI, Manufacturing & Services (Jun)
UK CIPS/S&P Global Flash PMI, Manufacturing & Services (Jun)
Germany S&P Global Flash PMI, Manufacturing & Services (Jun)
France S&P Global Flash PMI, Manufacturing & Services (Jun)
Eurozone S&P Global Flash PMI, Manufacturing & Services (Jun)
US S&P Global Flash PMI, Manufacturing & Services (Jun)
Singapore CPI (May)
United States Current Account (Q1)

Friday 24 Jun

United Kingdom GFK Consumer Confidence (Jun), Retail Sales (May)
Germany Ifo Business Climate New (Jun)
Malaysia CPI (May)
US University of Michigan consumer sentiment (June, final)
US new home sales (May)


Source: Saxo Spotlight: What’s on investors and traders radars this week? | Saxo Group (

Gold Has A Chance For The Rejection Of The Support

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