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On September 2nd, Thorsten Slok, chief economist at Apollo Global Management, stated that US Treasury yields may rise further due to the Iran war and tariffs, but this upward pressure is largely unrelated to the US fiscal situation. Slok said, "In fact, the market is less concerned about US policymaking than it is about Japan and Germany." Global government borrowing costs continue to soar as investors demand greater compensation to entice them to hold longer-term bonds. Despite US Treasury Secretary Bessenters announcement of Treasury buybacks in an attempt to curb long-term yields, US Treasury yields have rebounded. The market currently expects a 69% probability of a rate hike at the Federal Reserves next policy meeting in mid-September. Economic pressures are also transmitting to the housing market and the auto industry, both highly sensitive to rising yields. Slok stated, "Interest rates are restrictive for the housing market, but not for artificial intelligence."U.S. Treasury Secretary Bessenter: The Canada trade agreement has had little impact on U.S. prices.U.S. Treasury Secretary Bessenter: Chevrons CEO has performed exceptionally well in managing assets in Venezuela.U.S. Energy Secretary Wright: More than 17 million barrels of oil passed through the Strait of Hormuz on Monday.September 2nd - British Prime Minister Andy Burnham pledged that his government would ensure fiscal stability but refused to rule out further borrowing. At the same time, he attempted to blame the UKs high national debt on the previous Conservative government. During his first Prime Ministers Questions since taking office on Wednesday, Burnham stated, "This is a government based on fiscal responsibility. We will abide by the fiscal rules." In response to Conservative opposition leader Kemi Badenochs questioning about soaring UK bond yields leading to higher government financing costs, he said, "The turmoil in global markets is due to the exposure they left behind. During her government, the debt-to-GDP ratio was consistently rising."

Gold Price Prediction: XAU/USD bears at $1,650 on Fed hawkishness and China news

Daniel Rogers

Sep 19, 2022 14:34

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During early Monday morning in Europe, the gold price (XAU/USD) maintains a position close to the intraday low at $1,670. In doing so, metal prices endure the weight of a stronger U.S. dollar amidst a sluggish session caused by Japanese and British vacations. The cause may be related to the Fed's hawkish bets and China-related news stories.

 

US Dollar Index (DXY) reverses a two-day slump while posting intraday gains of 0.18 percent at 109.85 as of press time. Indicators of the U.S. dollar's value versus the six major currencies have recently been buoyed by the University of Michigan's September consumer sentiment report and the market's positive expectations on the Fed's next move. Consequently, the probability of a 75-basis-point (bps) rate hike by the Federal Reserve increased to 80%, while the market's estimates of a one-percentage-point increase in the Fed rate rose to 20% at the latest.

 

US President Biden stated elsewhere, "I'm more positive than I've been in a long time." The national leader also claimed that inflation will be brought under control. On the same line are the covid updates from China, which have unlocked Dalian and Chengdu while observing zero coronavirus cases in Beijing and one, as opposed to zero the day before, outside of Shanghai's quarantine zone. However, US President Biden's willingness to support Taiwan in the event that China assaults Taiwan and hawkish expectations for the Federal Reserve appear to weigh on the steel price ahead of the major monetary policy pronouncements.

 

In addition, the People's Bank of China (PBOC) reduces the 14-day reverse repo rate by 10 basis points to 2.15 percent. "With no maturing reverse repos on Monday, the Chinese central bank injects 12 billion yuan," reports Reuters. The same might have indicated that the dragon nation is not in recovery mode and requires more rate cuts than rate raises, which could have caused the gold price to plummet. The cause is China's position as one of the world's largest gold consumers.

 

In light of this, the S&P 500 Futures post modest losses while mirroring Wall Street's Friday close. Notably, the selling in Japan curbs bond movements in Asia, but yields are robust near the multi-day high due to fears of a recession and hawkish Fed views.

 

Moving forward, a light economic calendar and important market holidays may limit intraday XAU/USD price fluctuations. However, bears are expected to maintain control because to aggressive Fed expectations, which, if dashed, might defy the bearish chart pattern and spark the long-awaited rally.

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