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Britains 30-year government bond yield fell nearly 13 basis points to 5.327%, on track for its biggest one-day drop since December 2023.On January 15, U.S. Treasury yields and the dollar fell as the U.S. core CPI annual rate fell in December. The core CPI annual rate was 3.2%, while economists surveyed expected a repeat of the 3.3% growth rate in November. This result may ease concerns that the Federal Reserve may need to be more hawkish than the signal sent in December. U.S. Treasury yields have been on a downward trend and deepened their decline after the data was released. The 10-year yield was 4.692% and the two-year yield was 4.281%.Interest rate futures traders are betting on a June rate cut by the Fed and see about a 50-50 chance of a second cut by the end of 2025.UK two-year government bond yields fell to their lowest level since January 7.On January 15, the U.S. CPI rose slightly more than expected in December due to rising costs for energy products, indicating that inflation is still rising, which is consistent with the Feds expectations of a smaller rate cut this year. The overall U.S. CPI rose 0.4% month-on-month in December and 2.9% year-on-year; the core CPI rose 0.3% month-on-month for four consecutive months and 3.2% year-on-year. Efforts to bring inflation back to the Feds 2% target encountered obstacles in the second half of last year. A strong economy, threats of broad tariffs on imported goods, and large-scale deportations of undocumented immigrants have also prompted the Fed to expect smaller rate cuts this year. In addition, Trump has also promised tax cuts, which will stimulate the economy; consumers inflation expectations soared in January, and households are worried that tariffs will increase commodity prices. The Fed is not expected to cut interest rates in January.

Forecast for Gold Price: XAU/USD corrects to near $1,970 on UBS-Credit Suisse deal; Fed policy observed

Daniel Rogers

Mar 20, 2023 13:16

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After UBS announced Credit Suisse's rescue plan, the gold price (XAU / USD) corrected to near $1,970. The precious metal is estimating a cushion near the $1,970.00 support, but further correction appears likely.

 

Investors should be aware that market participants have been pouring funds into the yellow metal as a hedge against the volatility associated with a potential banking crisis. The UBS acquisition has mitigated concerns of a global banking crisis. The purchase agreement has signaled that central banks are willing to provide assistance to commercial banks in an effort to restore investor confidence.

 

The US Dollar Index (DXY) is fluctuating around 103.80 as the market anticipates the Federal Reserve's (Fed) interest rate decision on Wednesday. The analysts at Danske Bank anticipate that Federal Reserve Chair Jerome Powell will raise interest rates by 25 basis points (bps) despite the recent turmoil and banking sector concerns.

 

S&P500 futures have erased the majority of their morning gains, indicating that the UBS-Credit Suisse agreement is insufficient to calm global banking fears. As the banking debacle has yet to reveal its true colors, negative market sentiment would persist for some time. In the meantime, the UBS-Credit Suisse merger has reduced demand for US government bonds, which were previously regarded as safe-haven investments. This has increased 10-year US Treasury yields to 3.46 percent.


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