GOLD: Geopolitical Tensions Driving Safe-Haven Flows
Gold was boosted by the lower-than-expected US May CPI data which pushed the US dollar and yields down. It reached a high of $3360.77/oz but it then fell towards $3320 before recovering to finish up 1% at $3355.28. It has continued trending higher in Thursday’s APAC trading rising 0.4% to $3369.4 after reaching $3373.49 earlier boosted by growing geopolitical tensions with the US reducing embassy staff in Baghdad due to increased security worries around the reported failing of US-Iran talks and a possible Israeli military response.
- AFP writes that Iran has threatened to attack US bases if there is a regional conflict. President Trump told the New York Post that he’s “less confident” now about convincing Tehran to agree to contain its nuclear ambitions.
- The UK Navy made an unusual warning to shipping in the Middle East related to a rise in tensions.
- Bullion is also benefiting from uncertainty around tariffs with Trump saying that unilateral tariffs would be set within the next fortnight (per Bloomberg). An agreement to implement the Geneva framework just now needs approval from US and China presidents.
- Any short-term weakness in gold continues to seem corrective with medium-term signals bullish. Initial resistance is at $3403.5, 5 June high, with support at $3245.6, 50-day EMA.
- Unlike gold, silver fell 0.8% to $36.25 on Wednesday but is still up 9.9% this month. It has started today 0.3% higher at $36.36 approaching resistance at $36.89, 9 June high.
- The USD index fell 0.3%. Equities were weaker with the S&P down 0.3% and Euro stoxx -0.4%. The S&P e-mini is currently down 0.2%. Oil prices jumped over 5% on Wednesday but copper sank 1.9%.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE BONDS: Sharply Cheaper With US Tsys, Con & Bus Conf Due
ACGBs (YM -10.0 & XM -6.0) are sharply weaker after US tsys finished sharply cheaper. US tsys gapped lower in early London trade and stocks surged to the pre-Liberation Day levels (April 2) after the US and China agreed to pause their retaliatory reciprocal tariffs for 90 days.
- After a collective sigh of relief, US tsys traded sideways, near session lows for much of the session. The pop in risk appetite and the less dovish Fed outlook saw the 2-year bond cheapen 12bps to 4.01%, with the 10-year yield 9bps at 4.48%. Today’s focus is on April US CPI figures at 0830ET.
- Cash ACGBs are 6-9bps cheaper with the 3/10 curve flatter and the AU-US 10-year yield differential at -4bps.
- The bills strip has bear-steepened, with pricing -3 to -10.
- RBA-dated OIS pricing is 2-10bps firmer across meetings today. A 25bp rate cut in May is given a 96% probability, with a cumulative 82bps of easing priced by year-end (based on an effective cash rate of 4.09%).
- Today, the local calendar will see Westpac Consumer and NAB Business Confidence measures.
- AOFM plans to sell A$1200mn of the 3.50% 21 December 2034 bond on Wednesday and A$800mn of the 2.50% 21 May 2030 bond on Friday.
US TSYS: Cash Open
TYM5 is trading 110-04+, unchanged from its from its close.
- The US 2-year yield opens around 4.00%, down 0.01 from its close.
- The US 10-year yield opens around 4.463%, down 0.01 from its close
- Bloomberg - “ Investors are avoiding Treasury bills that mature in August due to Treasury Secretary Scott Bessent's warning that the US may run out of cash if the federal debt ceiling isn't raised or suspended by then.”
- “The Treasury's $76 billion auction of three-month bills that will mature in August received tepid investor demand, with a high rate of 4.30% and a small award to indirect bidders.”
- After a significant hawkish re-pricing on positive trade developments, Fed Funds futures imply a next Fed cut coming in July (two meetings away) is only a 50/50 call with it fully priced for September. - MNI US
- The 10-year Yield range seems to be 4.10% - 4.5%, price has bounced nicely off the 4.25/30 support, price is now testing the upper bound of the range around 4.45/50%. A sustained break above this level would see another round of selling targeting the 4.75% area.
- Data: US CPI
JPY: Little Change in USD/JPY Post BoJ Summary Of Opinions
USD/JPY was little changed post the release of the BoJ Summary Of Opinions (SOO) from the early May policy meeting. We were last near 148.20, down slightly from end NY levels on Monday.
- The SOO had a strong emphasis on high uncertainties facing the outlook, particularly in terms of US trade policy. Still there is scope to raise rates if the outlook is realized, but the discussion recognised upside and downside risks to the outlook. Also less certainty of achieving the outlook compared to earlier in the year, which saw the downward forecast revisions at the May 1 meeting outcome. All in all the central bank is wait and see mode for the near term.
