GOLD: Gold Set for Poor Week as Rate Cuts Melt Away.
Dec-20 03:22
- Gold tried to rally following its decline post Fed, but the rally ran out of steam into the US close and it has done very little in Asian trading today.
- Opening at US$2,585.35 Gold initially surged higher reaching $2,626.49 just prior to the release of a raft of US economic data but fell away into the close to finish at $2,594 and has done very little stable at $2,596.81.
- The move lower in recent days sees gold on track to decline -1.95% for the week.
- US overnight data was stronger than expected, bringing into question the rate cuts expectations built into the US market for 2025.
- Gold has posted strong returns this year on the back of expectations for rate cuts, safe haven demand and news that key Central Banks have started to purchase the precious commodity again.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
AUSSIE BONDS: AU-US 1Y3M Spread Drives 10Y Diff. Tighter
Nov-20 03:07
The AU-US 10-year cash yield differential is at +15bps today, roughly 15bps narrower than levels observed in the lead-up to the US presidential election. Prior to the election, the differential was near the upper end of the +/-30bps range that has largely prevailed since November 2022.
- A simple regression of the AU-US 10-year yield differential against the AU-US 1Y3M swap differential over the past year suggests that the current 10-year yield differential is close to fair value, estimated at +13bps.
- The 1Y3M differential serves as a proxy for the anticipated relative policy trajectory over the next 12 months.
- Since mid-September, the AU-US 1Y3M differential has narrowed by approximately 50bps.
Figure 1: AU-US Cash 10-Year Yield Differential (%)
Source: MNI – Market News / Bloomberg
GOLD: Geopolitical Tensions Extend The Rebound
Nov-20 03:02
Gold is 0.3% higher in today’s Asia-Pac session, after closing 0.8% higher at $2632.08 on Tuesday, amid the escalation in geopolitical tensions between Russia and the West.
- Heightened geopolitical tensions lent support to haven trades after Ukraine launched US made long range missiles into Russia. Despite President Putin's move to revise Russia's nuclear doctrine, however, US State Department Spokesperson Matthew Miller told reporters that the US has seen no reason to adjust its own nuclear posture.
- Short end rates then pushed higher in the second half of the NY session, as projected rate cut pricing into early 2025 was tempered. Lower rates are typically positive for gold, which doesn’t pay interest.
- KC Fed Schmid said "now is the time to dial back restrictiveness of policy". Schmid repeated "While now is the time to begin dialing back the restrictiveness of monetary policy, it remains to be seen how much further interest rates will decline or where they might eventually settle."
- According to MNI’s technicals team, the technicals for gold remain bullish, with eyes on the 20-day EMA at $2,651.1. A clear break above this average would highlight a possible reversal and signal the end of the recent bearish corrective cycle. This would open $2,710.4, the Nov 11 high.
CHINA: US Treasury Holdings Continue to Decline.
Nov-20 02:58
- China reduced its holdings of US Treasuries for a third straight month in September data shows.
- China’s US Treasury holdings fell by USD2.6bn to USD772bn.
- Only April and May this year saw marginal increases in China’s US Treasury Holdings with each of the other months in 2024 seeing a decrease.
- Japan, the world’s largest holders of US Treasuries also reduced their holdings in September.
