GOLD: Gold Holds Below Key Tech Level

Following the announcements at the NPC focusing on technology in China, the market is buzzing with rumors that DeepSeek, the Chinese AI lab that shocked the world in 2025 by commoditizing high-end AI training, is preparing to launch a next-generation model (potentially V4 or R2) this week.  Investors are betting that China is closing the gap with Western AI. Stocks related to the "AI Plus" initiative and specialized industrial AI are seeing heavy inflows as a result with the Shanghai Comp and Shenzhen Comp up very modestly Monday whilst the rest of the region sees falls.

In Japan, the NIKKEI is down over -3% on higher oil and the BoJ released of its Summary of Opinions from the March 18–19 meeting this morning.  Policymakers signaled an urgent need to be proactive in raising interest rates to combat oil-led inflation.  This hawkish tone has hurt sentiment, as the market is now pricing in an aggressive hike as early as April or June, removing the cheap money floor that had supported the Nikkei's run to 58,000 earlier this year.

The KOSPI is down over -3% as investors continue to stop out of profitable AI trades and inflows into stocks crater.  Because Samsung and SK Hynix represent over 40% of the index, the KOSPI is essentially a leveraged play on global AI sentiment which whilst still up over +35% YTD, appears to be cooling off. 

The NIFTY 50 is down almost 200 points at the start of the day and is down just over 14% from the January high as equity outflows continue to be pressured.  

JGB futures have held a positive bias for the session, like elsewhere in the region. We were last 130.26, +.20 versus settlement levels. This follows Friday's sharp break lower, with some stability returning so far today. Recent lows rest near 129.80. Cash JGB yields are weaker at the front end to middle part of the curve, but 20-40yr tenors are higher in yield terms. The 2/30s curve is steeper to +241bps, fresh highs since late Jan. Growth concerns from the Iran conflict have been cited as supporting front dated bonds, with spill over evident to Japan, although last week's strong gains are only being unwound modestly. 

• The BoJ Summary Of Opinions noted upside inflation risks, with Middle East developments to be watched closely. The bias of the SOO is for higher rates, but timing wasn't given (as per usual). Governor Ueda, before parliament, stated: will conduct monetary policy appropriately while closely monitoring foreign-exchange developments and their impact on the economy and prices. He added that exchange-rate fluctuations are having a greater impact than before, as firms have become more active in setting prices.
• The FX Chief, also gave a strong warning on FX noting bold action may be needed. USD/JPY is down to 159.75, off earlier highs near 160.50.
• JGB yields for 2-10yr tenors are 2-3.5bps weaker. with the middle part of the curve leading the move. The 10yr is back to 2.37%. The 20yr is up 3bps, while the 30-40yr tenors are 5-6bps higher in yield terms.
• Tomorrow, we get Mar Tokyo CPI, along with Feb IP and jobless rate data. 

• Gold has traded in a range of US$4,517 - $4,420 Monday and is currently down -0.15% at US$4,488.
• Gold is currently trapped in a counter-intuitive cycle. Whilst the Middle East conflict usually drives gold higher, oil price gains are fueling massive inflation fears. This may force the Fed to pivot to a higher-for-longer stance, pushing Treasury yields up and making the non-yielding gold less attractive to investors.
• Investors are watching for further liquidity related selling. Institutional investors have sold gold (particularly ETFs) to raise cash to cover losses in other sectors. This week will see if that forced selling has finished or if more stop-losses drive gold below $4,400.
• The April 6 deadline for the re-opening of the Strait of Hormuz looms large with its continued closure having the potential for oil eye $130bbl, putting further pressure on yields and downward pressure on gold.  The insertion of Houthi rebels into the conflict raises the question of security in the Red Sea.  
• US economic data will show if high oil prices are beginning to impact the US economy and provide an insight into the likely direction for US rates. Markets are looking for signs that high fuel costs are stalling the 2026 industrial recovery via the ISM. If job growth (NFP) slows significantly while gas prices flirt with $4.00/gallon, the stagflation narrative will take over as traders fear a looming recession.