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Hang Seng Index futures closed up 1.25% at 19,841 points in the night session, 257 points higher than the previous session.Congressional Budget Office (CBO): The cost of clean energy subsidies in the inflation-proof bill is now expected to be $825 billion between 2025 and 2035, compared with an estimated cost of $270 billion between 2022 and 2031.The Federal Reserve accepted a total of $118.327 billion from 32 counterparties in fixed-rate reverse repurchase operations.The Federal Aviation Administration (FAA) said it was working with SpaceX and relevant authorities to confirm reports of damage to public property in the Turks and Caicos Islands.Futures traders are adjusting their bets in the Treasury market after mild inflation data and dovish comments from a Federal Reserve official. Over the past two days, the volume of open interest has changed, consistent with traders exiting short positions in two-year Treasury bonds and establishing new long positions in longer-term Treasury contracts, especially in the five-year Treasury. The shift came after consumer price inflation data released on Wednesday and comments made by Federal Reserve Governor Christopher Waller the next day. Data released on Wednesday showed that core price increases in December were lower than economists expected; Waller said that if the trend continues, officials may cut interest rates again in the middle of the year. Morgan Stanleys interest rate strategists suggested late Thursday that long positions could be established in Treasury bonds of this term given expectations that the Federal Reserve will cut interest rates in March, but this is still a minority view. The swap market expects only a 6 basis point rate cut in March, which means there is about a 25% chance of a 25 basis point cut. “We haven’t ruled out a rate cut in March, but we do see it as more of a tail risk,” said Stephanie LaRosiliere, head of fixed income strategy at Invesco. “It doesn’t feel like the Fed needs to react so hastily.”

Gold Is at Risk As Treasury Rates Rise in Response to Powell's Efforts

Aria Thomas

Apr 02, 2022 09:52

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This environment may appear in two ways, both of which result in a lower gold price. Fixed interest assets' higher and growing nominal rates of return make them a more attractive alternative to non-yielding assets such as gold.


Second, if the Fed is regarded to be sincere in its efforts to lower gold price, market-priced inflation may decline. This results in an increase in the actual rate of return on debt investments. The real return is calculated by subtracting the nominal rate from the inflation rate over the same period.


As seen in the figure below, gold's recent gain corresponded with an increase in market-priced ten-year breakeven inflation. This resulted in a decline in ten-year real yields.


Following that gold high, the ten-year breakeven rate stayed reasonably stable, while nominal yields increased, raising real yields at the same time that gold plummeted.


If the Fed continues to see the necessity for rapid rate hikes, this might further damage gold.


The outlier to this view is the unknown effects of Russia's invasion of Ukraine, necessitating a deeper examination of the price action.


Gold, ten-year nominal US Treasury note, ten-year nominal US Treasury note inflation, and ten-year nominal US Treasury note real yield

Gold technical analysis

A double top and a head and shoulders configuration are also possible.


Gold reached an all-time high of 2,075.14 ounces in July 2020. Earlier this month, the price attempted but failed to reach it, instead reaching a height of 2,070.42, forming a double top. This inability to break higher may be seen as a negative indication.


A bearish head and shoulders pattern is developing, and a breach below the neckline might confirm it.


Risk management approaches are always critical and must be thoroughly examined.


This information was compiled by DailyFX, a Top 1 Markets partner site that provides premier currency news and analysis. This material is generic in nature and is not meant to influence anyone's investment or financial product choices.


The information on this website is not a record of trade prices, nor is it an offer or solicitation to buy or sell any financial instrument. Top 1 Markets disclaims all liability for any use of these remarks and any resulting consequences. This material is provided "as is" with no guarantee or assurance as to its accuracy or completeness. As a result, anybody acting on it does so at their own risk.

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