Spot gold fell, how many times did the FED raise interest rates in the second half of the year? The market may be slapped in the face again

International gold prices fell on Monday (July 3) as a stronger dollar weakened the safe-haven appeal of gold. Investors await the Federal Reserve's June meeting notes to be released later this week and the U.S. non-farm payrolls data for June. Federal Reserve Chairperson Powell previously claimed that there will be 2 more interest rate hikes in the second half of the year, but the market expects only one 25 basis point hike in July. Forecasts for the U.S. labor market and inflation rate in 2023 are generally less accurate. You know, the market also predicted that the U.S. economy will recession this year and the Federal Reserve will cut interest rates in the second half of the year.

Gold prices fell on Monday as a stronger dollar weakened gold's safe-haven appeal as investors awaited the Federal Reserve's June meeting notes and U.S. non-farm payrolls data for June later this week.

Beijing time 20:18, spot gold fell 0.35% to $1,912.22/ounce; COMEX gold futures main contract fell 0.49% to $1,920.0/ounce; the dollar index rose 0.21% to 103.132.

While U.S. consumer spending stalled in May, indicating that the Federal Reserve's move to raise interest rates to curb inflation is slowly taking effect, the core PCE price index, the Fed's preferred measure for tracking inflation, rose 4.6% year-on-year after rising 4.7% in April.

Is the Federal Reserve unwilling to meet market expectations?

Since the Federal Reserve's June meeting, to be announced on Wednesday (July 5), Federal Reserve Chairperson Jerome Powell has joined a number of Fed officials in supporting expectations for further rate hikes. In key comments, Powell claimed that the vast majority of Fed policymakers expect at least two more rate hikes before the end of the year. And it will take at least 2025 for US inflation to fall to the Fed's 2% target.

But according to the CME's "Fed Watch" tool, investors expect an 89.9% chance that the Fed will raise rates by 25 basis points in July, and then rates will remain in the 5.25% -5.5% range until the May 2024 rate cut.

Clearly, the market is not buying Fed officials' comments. While inflation remains well above the 2 per cent target, the FOMC paused interest rate hikes in June to observe the effects of a series of previous rate hikes, due to the lag in the effect of monetary policy.

Higher borrowing costs tend to depress spending and investment, eroding corporate profits and potentially triggering a recession that many experts have been predicting for 2023, though that has yet to materialize.

But forecasts for the US labour market and inflation in 2023 are generally less accurate, and are often offset by sudden shifts in the political and economic landscape. For example, Saudi Arabia, the world's largest oil exporter, announced on Monday that it would extend production cuts through August, a move that could push up energy prices and stoke inflation.

Carlo Alberto De Casa, external analyst at Kinesis Money, said that despite the prospect of interest rate hikes by the Federal Reserve, gold is still holding above the $1,900 mark, and investors await further news ahead of the release of the Fed's June meeting notes. Gold prices may trade in the range of $1,900 to $1,930.

June non-agricultural or still flexible

The still-strong job market driving wage growth and consumer spending will be seen as contributing to the persistence of high inflation and setting the stage for further rate hikes by the Federal Reserve. Fed officials are particularly focused on service sector inflation, and while they expect housing-related price pressures to begin to ease, they are concerned that labor cost-driven price pressures remain high and will only be eased by further rate hikes.

Economists predict that employers may have sharply reduced the number of new jobs created since May. However, despite the slowdown caused by the Federal Reserve's sharp interest rate hike, the labor market has remained largely resilient. Analysts are closely watching the June non-farm payroll data to be released on Friday (July 7) to determine whether the slowdown is a sign of trouble in the labor market.

A strong labor market has been the main driver of the economy. On current forecasts, non-farm payrolls rose by 225,000 in June, consistent with the resilience the economy has shown. Data released last week showed that the final annual rate of GDP in the first quarter of the United States rose sharply by 0.7 percentage points to 2.0%.

Han Tan, chief market analyst at Exinity, said it is too early to think that the Federal Reserve can already consider cutting interest rates. If the June U.S. jobs report continues to show resilience, it will pave the way for the Federal Reserve to continue its hawkish stance, and gold prices may fall below $1,900 again.

Spot gold short-term or steady at $1911

Looking at the daily line, the price of gold has started a downward C wave trend since 1968 dollars, and the support below is looking at the 61.8% target level of 1875 dollars. Looking at the hourly chart, if the price of gold can stand firm at 1911 dollars, the short-term is expected to touch 1922 dollars again. They are 23.6% Fibonacci retracement and 38.2% Fibonacci retracement in the downward range of 1968 dollars to 1893 dollars.