GOLD: Gold Holding Onto Losses, Remains Overbought
Gold prices are little changed ahead of Friday’s US September CPI data but they have held onto this week’s losses of around 3.7%. They fell to $4066.30/oz but have recovered to be down 0.2% to $4091.0. Bullion is being pressured by a stronger US dollar (BBDXY +0.2%) and the prospect of a US-China trade deal with Presidents Trump and Xi due to meet next week. Bloomberg is also reporting large ETF outflows.
- Gold should continue to receive medium-term support from central bank and ETF buying as well as concern over large G7 government deficits, global uncertainty especially around tariffs and their impact which could include monetary easing. Lower rates benefit non-yield bearing gold. Also there seems little progress towards ending the US government shutdown, anyway publicly.
- Silver is little changed at around $48.50 but still below the 20-day EMA at $49.053. It fell to $47.925 early in the session and then recovered to $48.715. It remains pressured by profit taking given it also continues to be overbought.
- Equities are mixed with the S&P e-mini up 0.1%, Hang Seng down 0.1% and Nikkei -1.4%. Oil prices are higher with WTI +3.0% to $60.24/bbl. Copper is up 0.2%.
- Later US September existing home sales and October Kansas Fed manufacturing print as well as August Canadian retail sales and euro area preliminary October consumer confidence. The Euro summit takes place and ECB’s Lane speaks.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
CHINA: Bond Futures Take Back Yesterday's Gains
- Bond Futures are lower in China today, wiping out the gains from yesterday.
- The 10-Yr is lower by -0.21 at 107.73 after yesterday's gains of +0.19. The 10-Yr remains below all major moving averages.
- The 2-Yr is lower by -0.04 at 102.35 to push further below all major moving averages. The 20-day EMA above is at 102.39.
- At 1.80%, the 10-YR CGB is at the top end of the 1.70-1.80% range it has traded in since early August.
JAPAN: Koziumi Still Seen As Favorite For LDP Leadership Race
Earlier headlines crossed from Japan LDP leadership candidates. Notably from Takaichi we got, via Rtrs, :"JAPANESE PM CONTENDER TAKAICHI: WILL USE TAX REVENUES TO FUND TAX CUT, SPENDING FOR STEPS TO COMBAT RISING PRICES BUT IF NECESSARY, SHOULD ISSUE BONDS.
- This fits with Takaichi's known fiscal expansion viewpoint. Still, she sits well down per Polymarket odds, last around 28, off recent highs.
- Koizumi continues to lead, last at highs of 70 (since the LDP election was called a few weeks ago), see the chart below (Koizumi odds are the white line, Takaichi the orange line). Still, Takaichi remains the top pick among onshore opinions.
- Koizumi noted earlier: KOIZUMI: MUST BE MINDFUL OF NEED FOR FISCAL DISCIPLINE, BUT ACHIEVING SOLID ECONOMIC GROWTH IS BASIS FOR GUIDING SOUND FISCAL POLICY - [RTRS]"
- His remarks are more in line with a status quo fiscal outcome, although changes can't be ruled out.
- The JGBs 2/30s curve has flattened of late, last +225bps, we were around +245bps in early September. Nevertheless, the 2/30 curve remains near its steepest since 2005.
- The LDP election is scheduled for Oct 4.
Fig 1: Koizumi Clear Front Runner For LDP Leadership Race - Per Polymarket
Source: Polymarket/Bloomberg Finance L.P./MNI
AUSSIE BONDS: AU-US 10Y Diff In Top Half Of Range
Cash ACGBs are 2bps cheaper today.
- The AU-US 10-year yield differential is currently around +12bps, placing it in the top half of the ±30bps range that has persisted since November 2022.
- A simple regression of the 10-year yield differential against the AU-US 1-year forward 3-month swap rate (1Y3M) differential over the past two years suggests that the current spread is close to fair value.
- The 1Y3M differential, a key measure of expected relative policy paths over the next 12 months, has increased by approximately 60bps since June, reaching a level similar to October 2024.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: Bloomberg Finance LP / MNI
