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  • 2024-07-13

Multiple Factors Boost Gold to Record Highs

Driven by the resumption of energy subsidies, Japan's core inflation slowed down in September, and it remains uncertain whether the Bank of Japan can continue to raise interest rates in December. On the morning of October 18th, Friday, the Japanese government released data showing that Japan's core CPI (excluding fresh food) rose by 2.4% year-on-year in September, marking the first slowdown in five months, higher than the expected 2.3%, and lower than the previous value of 2.8%; the "core of the core" CPI (excluding fresh food and energy) rose by 2.1% year-on-year, higher than the expected and previous value of 2%. The "core of the core" inflation remains stable, therefore, some analysts believe that Japan's solid wage growth will support consumption and keep inflation around 2%, which allows the Bank of Japan to continue raising interest rates at the end of the year. Marcel Thieliant, Head of Asia-Pacific at Capital Economics, said: "We expect inflation excluding fresh food and energy to remain near 2% at the beginning of next year, and then gradually fall below 2%, so we still expect the Bank of Japan to continue raising interest rates before the end of the year."

Additionally, last Friday, Kazuo Ueda said at the Trust Association meeting that Japan's economy is recovering moderately, and the financial system remains stable overall. The underlying inflation rate may gradually accelerate towards the central bank's 2% target. However, he also warned that the uncertainty of Japan's recovery prospects is "still high," and the impact of market fluctuations on the economy needs to be closely monitored. "The outlook for overseas economies, including the United States, remains uncertain, and market trends continue to be unstable." Ueda pointed out that the impact of foreign exchange fluctuations on inflation has increased compared to the past, and it is necessary to closely monitor the dynamics of financial and foreign exchange markets and their impact on the economy and prices with high vigilance. If the inflation rate continues to maintain the expected level of 2%, the Bank of Japan will continue to raise interest rates. However, he also emphasized that the Bank of Japan will take time to assess how global economic uncertainties affect Japan's fragile recovery and guide policy appropriately from the perspective of achieving price targets sustainably and stably. At the same time, appropriate monetary policy will be adopted according to economic, inflation, and financial conditions to achieve a stable inflation target of 2%. The latest data from the Japanese Statistics Bureau shows that due to the introduction of energy subsidies, Japan's inflation slowed down in September.

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Today's data to watch include Germany's September PPI year-on-year rate and the United States' September Conference Board Leading Economic Index monthly rate.

Gold/USD

Last Friday, gold rose sharply, breaking through the 2700 mark and setting a new historical high, with the exchange rate now trading near 2725. In addition to the US dollar index falling and closing lower, providing strong support for gold, the lingering geopolitical tensions are also an important factor supporting the rise of safe-haven gold. Today, pay attention to the pressure near 2740, with support near 2710.

USD/JPY

Last Friday, the USD/JPY fluctuated downward, closing slightly lower on the daily chart, with the exchange rate now trading near 149.40. In addition to profit-taking putting some pressure on the exchange rate, the US dollar index also fell and closed lower under the pressure of multiple bearish factors, which also put some pressure on the exchange rate. Moreover, Japan's good CPI data announced during the session also put some pressure on the exchange rate. Today, pay attention to the pressure near 150.50, with support near 148.50.

AUD/USD

Last Friday, the Australian dollar fluctuated upward, closing slightly higher on the daily chart, with the exchange rate now trading near 0.6700. In addition to short covering providing some support for the exchange rate, the US dollar index also softened under the combined pressure of profit-taking, expectations of further rate cuts by the Federal Reserve this year, and weak economic data, which was an important factor supporting the rise of the Australian dollar. Moreover, China's good economic data announced during the session also provided some support for the exchange rate. Today, pay attention to the pressure near 0.6800, with support near 0.6600.