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On May 14th, ING analyst James Smith stated in a report that the UKs strong first-quarter economic growth data is unlikely to change the Bank of Englands policy expectations. He said, "We expect the Bank of England to raise interest rates in a one-off move in June." He noted that since 2022, UK economic growth has tended to be stronger at the beginning of the year, meaning that UK economic growth may slow in the coming quarters. However, robust retail spending and a strong contribution from the IT sector may indicate positive developments in artificial intelligence. Smith predicts that the UKs second-quarter economic growth rate may be around 0.2%-0.3%, but with declining real income and rising inflation, the third-quarter growth rate may turn negative.On May 14th, Barclays economists pointed out that the stance of members of the Bank of Japans (BOJ) Policy Board is showing signs of a hawkish shift; Yoichi Masaki, a member of the Board of Directors considered a centrist, expressed clearer support for an earlier rate hike in his speech on Thursday. At the BOJs policy meeting in April, three other members proposed raising the interest rate to 1.0%, although the proposal ultimately failed to pass due to a majority vote against it. "Given that the BOJ seems firmly committed to an earlier rate hike, we maintain our previous forecast of a June rate hike," the economists said. They added that the key now is whether Japanese Prime Minister Sanae Takaichi will tolerate the BOJ implementing a rate hike.According to Interfax news agency, Sergei Shoigu, Secretary of the Russian Security Council, stated that Russia is establishing comprehensive cooperative relations with the Taliban in the economic and trade fields.On May 14th, Turkish Central Bank Governor Callahan stated that the duration of regional tensions is crucial to the inflation outlook, and that the continued rise in oil prices is leading to increased transportation costs. Speaking at the release of the central banks quarterly inflation report in Istanbul, Callahan noted that Turkeys fuel pricing mechanism has, to some extent, mitigated the impact of rising energy prices. He added that food inflation has had some impact on overall inflation in recent months, but he expects the decline in vegetable prices in May to have a positive effect on the inflation situation.On May 14th, Japanese Parliamentary Vice-Minister for Defense Yohei Wakabayashi stated at the Cabinet Committee of the House of Councillors that a low-orbit military reconnaissance network, a "satellite constellation" composed of numerous small satellites, was activated in April of this year to ensure the effectiveness of long-range missiles as a means of "counterattack capability." Analysts point out that the completion of Japans version of "Starlink" will enable Japan to achieve a breakthrough in space-based warfare capabilities. By constructing a satellite network with a "space-based strike chain," the boundaries of Japans "exclusively defensive defense" principle are further blurred, accelerating the pace of Japans military deregulation. However, Japans accelerated development of space-based warfare capabilities may trigger a new round of arms race centered on space and missile technologies, posing a serious challenge to regional and even global strategic stability, and requiring high vigilance from the international community.

Gold Price Prediction: XAU/USD Holds Steady Near $1,960 Amid Weaker US Treasury Yields

Alina Haynes

Mar 28, 2023 14:55

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The XAU/USD pair rebounded after hitting a low of $1,944 on Monday, following a significant drop from $2,000 on Friday. As concerns about a banking crisis subsided on Monday, investors shifted away from safe-haven assets such as gold and into speculative assets such as equities and petroleum oil.

 

Monday's acquisition of Silicon Valley Bank (SVB) assets by a regional U.S. lender, First Citizens BancShares, led to the unwinding of Gold trades. First Citizens announced that it would expand its presence in California by assuming $110 billion in assets, $56 billion in deposits, and $72 billion in loans. The Federal Deposit Insurance Corporation (FDIC) holds approximately $90 billion in securities for sale.

 

In addition, Bloomberg reported that US regulators are contemplating expanding an emergency lending facility for banks so that First Republic Bank (FRC) has additional time to strengthen its balance sheet.

 

These banking sector developments have increased investors' risk appetite and instilled a sense of composure. Consequently, yields on U.S. Treasury bonds make sense during a relief rally. This new development encourages the Federal Reserve (Fed) to concentrate on the inflation outlook and contemplate rate increases if required.

 

Recent Fed commentary from members such as Kashkari (a voter), ultra-hawkish Bullard, and Fed Vice-Chair of Supervision Barr suggests that inflation is a higher priority than the banking crisis. Fed officials appear comparatively resilient in the face of banking stress, asserting that the US banking system's underlying fundamentals remain robust.

 

Monday's increase in U.S. Treasury bond yields can be attributed to a relief rally, but it is too soon to conclude that it represents a definitive yield shift. Any further deterioration of the banking liquidity crisis could cause yields to decline and gold to reclaim the $2,000 threshold. Personal Consumption Expenditures (PCE) data for the United States are scheduled for release later this week.

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