Gold trading reminder: U.S. bond yields continue to weaken, gold prices stick to the 10-day moving average, pay attention to initial data
During the Asian session on Thursday (December 8), spot gold fluctuated slightly and was currently trading around $1,782.51 an ounce. In the past two trading days, the market has no major economic data released, and there have been no major risk events. Fed officials have also entered a period of silence. The market is relatively wait-and-see. interest rate resolution.
As the market expects the Federal Reserve to slow down the pace of interest rate hikes, the U.S. 10-year Treasury yield continued to weaken. It fell below the 100-day moving average on Wednesday and hit a nearly three-month low of 3.402%, helping gold rebound from the 10-day moving average. The highest hit was 1790.43 US dollars per ounce, and it closed at 1785.88 US dollars per ounce.
“We’re seeing Treasury yields fall across the board … the dollar is a little weaker … gold just bounced off the lows,” said Bart Melek, head of commodity market strategy at TD Securities.
In addition, fears that rising interest rates might push the U.S. economy into recession and the easing of new crown restrictions in major Asian countries weighed on safe-haven demand for the dollar.A pullback from around the 200-day moving average on Wednesday also gave gold some upside momentum.
In terms of geopolitical situation,Putin said Russia might fight a long war in Ukraine and the risk of nuclear war has risen. This increased safe-haven demand for gold.
In the U.S. stock market,The S&P 500 index and the Nasdaq continued to decline. The S&P 500 index fell for five consecutive trading days, and the panic index rose to its highest level since November 18, providing safe-haven support for gold prices.
In terms of central bank policy,The Bank of Canada raised the benchmark interest rate by 50 basis points, but hinted that the rate hike may be coming to an end, which is bearish for gold prices in the short term, but bullish for gold prices in the medium and long term.
In terms of gold ETF holdings,Holdings of SPDR, the world’s largest gold ETF, increased by 2.03 tons on Wednesday, increasing for two consecutive trading days to 908.09 tons, suggesting that institutional investors and medium and long-term investors are temporarily optimistic regarding the gold market outlook.
Investors also need to pay attention to changes in the number of Americans filing for unemployment benefits this trading day.The U.S. non-farm labor productivity rebounded following falling for two consecutive quarters in the third quarter, and the initial data in the evening may still be slightly bullish for the dollar and bearish for gold prices. In addition, it is also necessary to pay attention to the market’s expectations for the U.S. November PPI data and consumer confidence index released on Friday.
Dollar eases on Wednesday following being pressured by 200-day moving average
The U.S. dollar index was suppressed by the dual resistance of the 10-day moving average and the 200-day moving average on Wednesday, closing down 0.35% at around 105.20. Some investors have been expecting the Fed to slow down the pace of rate hikes soon, which is still weighing on the dollar in the medium to long term.
Some U.S. bank executives are bracing for a worsening U.S. economy next year. Among them, BofA Chief Executive Brian Moynihan told investors at a Goldman Sachs financial conference that the bank’s research showed “negative growth” in the first half of 2023, but that the contraction would be “modest.”
“One view is that recession fears will prompt the Fed to pause and that’s why the dollar is falling,” said OANDA’s Edward Moya. “Rising interest rates have been the main driver of the dollar’s strength over the past year.”
However, recent data on U.S. employment, services and manufacturing have made investors more uncertain regarding the policy outlook. The Federal Reserve is expected to raise interest rates once more when it meets next week. Investors need to pay attention to changes in market expectations.
U.S. yields drop to three-month low as markets brace for slower Fed rate hikes
U.S. Treasury yields between five and 30 years hit three-month lows in choppy trade on Wednesday, with few market drivers this week as investors ramped up bets that interest rates may have peaked and inflation has slowed.
Ellis Phifer, general manager of fixed income research at Raymond James, said: “We have been in a strong rally and haven’t seen much opportunity for a pullback. The bond market believes that inflation is weakening; the Fed chairman also confirmed that the Fed is … …slowed the pace and the bond market is happier, more bullish on that view.”
That said, strong November U.S. jobs data and generally upbeat manufacturing and services reports suggest the Fed still has a long way to go in reining in inflationary pressures on consumers and wages.
Fed Chairman Jerome Powell said late last month the central bank might slow the pace of rate hikes “as soon as December,” but warned that the battle once morest inflation was far from over.
That has prompted market expectations that terminal rates will not be as high, the peak rate at which the Fed will stop raising rates. The fed funds futures market on Wednesday pegged the peak rate at 4.9 percent, up from 5.1 percent before Powell’s speech last week.
U.S. Treasury yields have also trended lower, with the U.S. benchmark 10-year Treasury yield down 38 basis points since Powell’s Nov. 30 speech. U.S. two-year Treasury yields, which typically reflect interest rate expectations, have fallen nearly 31 basis points since then.
“Shorting (U.S. Treasuries) was very heavy in the market heading into December and has eased a bit since the last CPI report,” said Gennadiy Goldberg, senior rates strategist at TD Securities.
The inversion of the spread between two-year and 10-year yields on the widely tracked U.S. Treasury yield curve deepened to minus 85.20 basis points, the worst inversion in two weeks. An inversion of this curve usually heralds a recession.
As of Wednesday’s close, the 10-year U.S. bond yield fell regarding 10 basis points to 3.408%. It fell as low as 3.402% earlier in the session, the lowest level since last September.
The U.S. 30-year Treasury yield slipped 10.1 basis points to 3.422%, having fallen to a three-month low of 3.412% during the session. The two-year U.S. Treasury yield fell 9.8 basis points to 4.262%.
The Fed is widely expected to raise interest rates by 50 basis points next week.
Raymond James’ Phifer said, “I think the Fed will raise interest rates by 50 basis points each in the next two meetings, and then may pause rate hikes and see what happens, as long as inflation does not move higher once more, the Fed may pause rate hikes and wait. Other data. This is the Fed’s best chance for a soft landing.”
Putin says Russia might fight long war in Ukraine, risk of nuclear war rises
Russian President Vladimir Putin said on Wednesday that Russian troops might be fighting in Ukraine for a long time, but he saw no point in a second mobilization following the call-up of 300,000 reservists in September and October.
Earlier, Russia’s ally Belarus said it was mobilizing troops and military equipment in response to what it described as a terrorist threat. There are signs that Moscow may be pressuring Minsk to open a new front in Ukraine as the war stalls.
Putin has said little regarding how long the war might last. And since July, Russia has been forced to make a series of major retreats as Ukraine launches a counteroffensive in the east and south with increasing amounts of Western weaponry.
“As for the duration of the special military operation, well, of course, it may be a long process, there is currently no reason for a second military mobilization following the mass conscription in autumn,” Putin said in a teleconference.
About 150,000 of the 300,000 reservists are deployed in Ukraine, including 77,000 in combat units, he said. The remaining 150,000 people are still in training centers.
Russians will “defend themselves with all means at their disposal,” he said, asserting that Russia is seen in the West as “a second-class state that has no right to exist.”
Putin further said the risk of nuclear war is rising but Russia will not recklessly threaten to use such weapons
Belarusian President Lukashenko has so far kept his country’s military out of the conflict, but signs of Moscow’s involvement in Belarus have grown in recent weeks. On Saturday, Russian Defense Minister Sergei Shoigu flew to Minsk unannounced. He and Belarusian Defense Minister Viktor Khrenin signed amendments to a security cooperation agreement between the two countries, but did not disclose new terms.
On Wednesday, the Belarusian state news agency BelTA quoted the country’s security committee as saying there would be a transfer of troops and equipment over the next two days, including replica weapons for training.
Ukraine says thousands of Russian troops have been deployed in Belarus since October, and Belarusian authorities have increasingly spoken of a “terrorist” threat from guerrillas across the border. Lukashenko has ordered his army to compile information on reservists by the end of the year.
S&P 500, Nasdaq extend losses as recession fears grow
The S&P 500 and Nasdaq ended lower in volatile trade on Wednesday, as investors struggled to find a clear direction as they weighed how the Federal Reserve’s monetary policy tightening might be transmitted to companies.
The S&P 500 fell for a fifth straight session, while the Nasdaq fell for a fourth straight session. The Dow Jones Industrial Average closed flat, snapping a two-session losing streak.
As of Wednesday’s close, the S&P 500 Index fell 7.34 points to close at 3933.92 points, a decrease of 0.19%. The Nasdaq fell 56.34 points, or 0.51%, to close at 10958.55. The Dow Jones Industrial Average was flat at 33,597.92.
Apple fell 1.4 percent following Morgan Stanley cut its iPhone shipment target. Tesla fell 3.2 percent, weighed down by concerns over lower production. Both weighed on the Nasdaq.
Markets were also rattled by negative comments from executives at Goldman Sachs, JPMorgan and Bank of America on Tuesday regarding the possibility of a milder to more pronounced recession ahead.
Craig Erlam, senior market analyst at OANDA, said: “It feels like we are in this very uncertain period, investors are trying to determine what is more important, policymakers are slowing down rate hikes, but the data is not strong. The market is Trying to balance push and drag, it created some confusion.”
The CBOE Volatility Index closed at 22.68, its highest close since Nov. 18.
Bank of Canada hikes key rate by 50 basis points, signaling hikes may be nearing completion
The Bank of Canada raised its benchmark overnight interest rate by 50 basis points on Wednesday to its highest level in nearly 15 years and signaled the end of its record tightening campaign was near.
The Bank of Canada raised interest rates by a record 400 basis points in nine months to 4.25%, a level last seen in January 2008, to combat inflation well above its target. The central bank cited still-strong growth and a tight labor market as reasons for its latest rate hike.
However, the Bank of Canada dropped the forward guidance it has used since it began raising rates in March, and dropped language that it had to raise rates further.
“While this tightening cycle may have peaked, we need to let the pain of rate hikes linger for a while to dampen growth and keep inflation in check,” said Avery Shenfeld, chief economist at CIBC Capital Markets. Cool down.”
Money markets had been betting on a 25 basis point hike, but just over half of economists expected a 50 basis point hike.
The Bank of Canada said GDP grew at a stronger-than-expected 2.9% annualized rate in the third quarter, said there was still “excess demand” in the economy, and the labor market remained tight. Overall, though, the data supported its forecast in October that growth would stall in the middle of next year.
“Looking ahead, the Governing Council will consider whether further increases in policy rates are required to bring supply and demand back into balance and push inflation back to target,” the central bank said.
The Bank of Canada said inflation at 6.9 percent in October was “still too high,” but the three-month rate of change in core inflation had fallen and suggested that “price pressures may be losing steam.”
“They remain concerned that inflation is becoming entrenched, which is (the real reason for) this hike,” Royce Mendes, head of macro strategy at Desjardins Group, said in a research note.
If the central bank’s tightening moves go too far, it might trigger a deeper-than-expected economic downturn, and that’s the risk signal the bond market is now sending.
U.S. non-farm labor productivity rebounded following two consecutive quarters of decline in the third quarter, and labor costs remained high
Labor productivity among U.S. workers rebounded faster than initially estimated in the third quarter, but the trend remained subdued, keeping labor costs stubbornly high.
Economists said the Labor Department data released on Wednesday suggested that inflation would remain high and that the Federal Reserve would continue to raise interest rates for some time. The Fed is currently in the midst of its fastest tightening cycle of monetary policy since the 1980s in an effort to bring inflation back to its 2% target.
“While not the most timely indicator, the recent strong rise in unit labor costs is consistent with the view that a tight labor market has been putting upward pressure on employment costs,” said Daniel Silver, an economist at JPMorgan in New York.
Non-farm labor productivity, which measures output per worker per hour, was revised up to a 0.8% annualized rate in the third quarter from an initial 0.3% reported last month, ending two straight quarters of decline.
Non-farm labor productivity fell at an annual rate of 4.1% in the second quarter. The upward revision to third-quarter data was due to upward revisions to output and hours worked.
Economists surveyed had expected non-farm labor productivity to grow by a revised 0.6% annual rate in the third quarter.
Productivity fell 1.3% year-on-year in the third quarter, compared with a 1.4% decline in the previous reading, marking the third consecutive quarter of year-on-year decline. The composition of the workforce has changed dramatically in the wake of COVID-19, making it harder to measure productivity.
But with productivity growth averaging 1.6 percent over the past five years, some economists believe the recent weakness is overstated 3.5%. Unit labor costs rose 5.3 percent in the third quarter from a year earlier, compared with a 6.1 percent rise in the previous reading.
“Unit labor costs are growing too fast to be consistent with the Fed’s inflation target, as are unit price increases, with the non-farm price deflator up 7.1% over the past four quarters,” said Conrad DeQuadros, senior economic advisor at Brean Capital. , “Data on productivity, costs and profit margins are critical to shaping the trajectory of inflation and the economy.”
On the whole, although the U.S. non-agricultural labor productivity rebounded following falling for two consecutive quarters in the third quarter, the bulls may still have some concerns before the release of the initial data. Below, focus on the support of the 1780 mark and the support near the 10-day moving average of 1772.12, but fundamental news The overall bias is bullish. Before falling below the 10-day moving average of 1772.12, we still need to beware of the possibility of gold prices fluctuating and resuming their gains. At the top, focus on the resistance near the 200-day moving average of 1792.90 and the resistance near the 1800 integer mark.
At 10:24 Beijing time, spot gold was at $1,782.86 an ounce.
