During the Asian session on Wednesday (December 28), spot gold fluctuated within a narrow range and is currently trading around $1,810.84 per ounce. The six-month high reached $1,833.18 an ounce, but rising U.S. Treasury yields limited gains.
“Gold is watching China’s decision to further ease COVID-19 restrictions,” said Bob Haberkorn, senior market strategist at RJO Futures, expecting higher demand in the region despite rising U.S. bond yields.
China on Monday (December 26) further relaxed the prevention and control measures of the new crown epidemic, awakening the tourism industry that has been dormant for nearly three years. Following the abolition of “arrival inspection” in various parts of the country, the abolition of nucleic acid testing and centralized isolation for inbound personnel will further clear away policy obstacles to the flow of people.
The holdings of gold ETFs have also increased. The holdings of the world‘s largest gold ETF, SPDR, increased by 5.5 tons on Tuesday, the largest one-day increase since May 20, to 918.51 tons, a new high in nearly two months, suggesting that institutional and professional Investors’ bullish sentiment has further heated up.
Gold prices have risen to record highs in Egypt, according to industry experts, as jittery savers seek a safe haven in a weakening currency and some companies export bullion for scarce dollars to meet imports.
On this trading day, pay attention to the monthly rate of the contracted sales index of existing homes after seasonal adjustment in November in the United States. Recent data show that the Fed’s continuous interest rate hikes have an increasing impact on the US real estate market. In addition, we need to pay attention to the further impact of China’s relaxation of epidemic prevention and control.
U.S. home prices’ two-year run of double-digit gains ends, with year-on-year gains dropping to single digits in October
Annual price gains in the increasingly fragile U.S. housing market slipped into single digits in October for the first time in about two years, two closely watched surveys showed on Tuesday, as mortgage rates soared above 7% for the month, further stifling demand.
The S&P CoreLogic Case Shiller National Home Price Index rose 9.2% in October, down from 10.7% in September and the first single-digit increase since November 2020. Meanwhile, the U.S. Federal Housing Finance Agency (FHFA), which oversees mortgage-financing entities Fannie Mae and Freddie Mac, said year-over-year home price growth slowed to 9.8% in October from 11.1% in September, marking the index’s biggest decline since September 2020. It was the first non-double-digit growth in months.
On a monthly basis, the S&P CoreLogic Case Shiller index fell for the fourth straight month, while the FHFA home price index was unchanged.
“As the Federal Reserve continues to raise interest rates, mortgage financing continues to be a headwind for home prices,” Craig Lazzara, managing director at S&P Dow Jones Indices, said in a statement.
The housing market has suffered most visibly from the Fed’s aggressive rate hikes, which are aimed at curbing high inflation by weakening demand in the economy. The Fed capped off the year with another 50 basis point rate hike this month, with its benchmark rate surging from near zero in March to between 4.25% and 4.5% now, the fastest increase since the early 1980s fast year. Fed officials expect rates to climb further in 2023, possibly above 5%
Unlike the rest of the economy — many of which have yet to see a significant impact from the Fed’s actions — the housing market’s reaction to the Fed-engineered jump in borrowing costs is almost instantaneous.
In October, the 30-year fixed mortgage rate topped 7% for the first time since 2002, more than doubling in nine months, fueling an otherwise red-hot home due to historically low borrowing costs and a flock to the suburbs during the pandemic. The housing market cooled down.
Data last week showed combined annual sales of new and existing homes through November had fallen 35% since January — the fastest decline on record. New single-family home starts and building permits also slipped to two-and-a-half-year lows last month.
While mortgage rates have eased since early November to about 6.3% this month, they are still nearly double their levels a year ago and will continue to weigh on the housing market, according to Freddie Mac and the Mortgage Bankers Association (MBA). .
Economists, however, don’t see a historical repeat of the housing price crash that occurred in the financial crisis, when home prices fell year-on-year for five full years from March 2007 to April 2012, as measured by the S&P CoreLogic Case Shiller index. Unlike then, the supply of homes on the market remains very limited, supporting prices.
The National Association of Realtors (NAR) projected earlier this month that prices for existing homes, which have so far dominated the market, should remain more or less flat in 2023.
“The housing market is likely to slow further over the coming year as the Federal Reserve tightens financial conditions,” said Jeffrey Roach, chief economist at LPL Financial. future impacts and to insulate the housing market from a resurgence of the Great Financial Crisis.”
Russia retaliates against western oil price cap, fighting erupts in eastern Ukraine
Russia retaliated against Western countries for imposing caps on Russian oil prices on Tuesday, as heavy fighting broke out between Russian troops around the eastern Ukrainian city of Bachmut.
Russian President Vladimir Putin has issued an order banning oil sales to countries that abide by a price cap imposed on Dec. 5.
The price caps, which were not enforced even during the Cold War between the West and the Soviet Union, were designed to weaken Moscow’s military operations in Ukraine — without disrupting the market by actually blocking Russian supplies.
Under the cap, oil traders would have to pledge not to pay more than $60 a barrel for Russian seaborne oil in order to secure Western financing for many key parts of global shipping, including insurance.
That’s close to the current price of Russian oil, but well below where it has been for most of the past year, with fat margins in energy helping Moscow offset the impact of financial sanctions.
The decree, published by Putin on government portals and the Kremlin website, is seen as a direct response to “unfriendly and violations of international law by the United States and foreign countries, as well as international organizations that are members of these countries.”
Under the Kremlin’s ban, Russia will stop selling crude oil to countries participating in the price cap from February 1 to July 1, 2023.A separate ban on refined products such as gasoline and diesel will come into force on a separate date set by the government.Putin will have the right to veto the measures in exceptional circumstances
Russia is the world‘s second-largest oil exporter after Saudi Arabia, and any disruption in actual sales would have a profound impact on global energy supplies.
In eastern and southern Ukraine, Russian forces again shelled and bombed towns and cities on Tuesday. After some significant advances were made in Ukraine in the fall, the war entered a slow attrition phase as the harsh winter set in.
The fiercest fighting took place in the eastern city of Bakhmut, which Russia has been trying to take for months at great cost in lives, while further north in the cities of Svatove and Kreminna, Ukraine is trying to break through Russia’s defenses.
“Russia continues to carry out frequent small-scale attacks in these areas (Bahmut and Svatov), although the areas of control remain unchanged,” the Ministry of Defense said in its latest report.
Kyiv says it is winning the war and will never agree to give up the territory. Ukrainian President Volodymyr Zelensky said in a late Tuesday night speech that the military command meeting had “established steps to be taken in the near future.”
U.S. Treasury yields climb to near 1-1/2-month highs
U.S. 10-year Treasury yields rose to near 1-1/2-month highs on Tuesday as investors tried to assess the Federal Reserve’s path to raising interest rates, while China made further adjustments to its anti-epidemic policies.
The 10-year U.S. Treasury yield hit a near three-month low on Dec. 7 and has climbed steadily since then, amid growing hopes that the Fed will signal an end to its rate-hike cycle. It posted its biggest weekly gain in eight-and-a-half months last week, following policy decisions from the Federal Reserve, Bank of England and European Central Bank.
Investors have been trying to determine how much more interest rates need to rise as the Federal Reserve continues to tighten policy to combat high inflation while trying to avoid a recession.
The 10-year U.S. Treasury yield climbed 10.4 basis points to close at 3.851% on Tuesday, having earlier touched 3.862%, its highest since Nov. 16.
John Luke Tyner, fixed income analyst at Aptus Capital Advisors, said: “Yields are likely to continue to climb as the market digests the large supply of Treasuries that is now being poured into the private sector. Long story short, in the short term, we will see long-term bond yields at the rate of economic recession. Trading on the theme, short-dated yields are largely driven by Fed expectations and until we see some new data, it will be difficult to break out of this range.”
The 30-year Treasury yield climbed 11.5 basis points to 3.937% on Tuesday. The two-year U.S. Treasury yield, which typically tracks interest rate expectations, rose 7.7 basis points to close at 4.400% on Tuesday.
Analysts also cautioned that it was difficult to extrapolate any specific direction given the limited trading activity around the holidays.
Analysts are leaning bullish on gold
Analysts at Sevens Report said on Tuesday: “Gold remains below multi-month highs, and if the contrarian idea of a weaker dollar in 2023 materializes (and there is reason to believe it will), then gold will be in the red as we start the new year. There will be a positive catalyst.”
Gold futures bulls have the overall short-term technical advantage, said Kitco Metals senior analyst Jim Wyckoff.
“Prices are in a seven-week-old uptrend on the daily histogram. Bulls’ next upside price objective is pushing February futures above solid resistance at $1,900.00 on the close. The first Resistance is seen at $1,825.00, then last week’s high of $1,833.80.”
Peter Schiff, a well-known gold bull and chairman of precious metals trader SchiffGold, recently appeared on Kitco News and gave his outlook for inflation, stocks and gold through 2023. Schiff said we’d better be prepared for an inflationary depression. He also stressed that he is very bullish on gold in the year ahead.
“Obviously, I’ve been bullish on it for a while. But based on what’s going on, I’m even more bullish on the possibility now.”
Schiff said he expects “significant gains” in gold and silver prices over the coming year,That would also push gold mining stocks higher. He emphasized that gold mining stocks are currently extremely cheap and under-positioned.
On the whole, although the prospect of further interest rate hikes by the Federal Reserve and the expectation of maintaining high interest rates for a long time have helped the U.S. bond yields rise, which has made gold bulls apprehensive; The pace of interest rate hikes is slowing down, and interest rates are even expected to be cut in 2023. The U.S. dollar index is expected to peak in the medium and long term, and the short-term U.S. dollar is also tending to be weak.
At 10:18 Beijing time, the spot price of the Chemical Industry Bureau is 1810.84 US dollars per ounce.