Home » Golden Week Review: U.S. Treasury yields soared, international relations “melted”, and bulls counterattack were suppressed. Provider FX678

Golden Week Review: U.S. Treasury yields soared, international relations “melted”, and bulls counterattack were suppressed. Provider FX678

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© Reuters. Golden Week Review: U.S. Treasury yields soared, international relations “melted”, bulls counterattack was suppressed

In the past week, the spot gold remained volatile as a whole. After the release of non-agricultural data, the price of gold briefly rose, but quickly fell back to close at $1,751.13 per ounce. The weekly level was flat, with a decrease of about 0.22%. On the whole, the market generally believes that the Fed will reduce debt purchases as scheduled in November, the yields of U.S. Treasuries have risen, the United States temporarily avoided debt defaults, the improvement of the international situation has suppressed market risk aversion, the online space for gold is restricted, and downside risks have increased.

U.S. bond yields hit a four-month high

U.S. Treasury bond yields rose sharply this week, with 10-year and 30-year Treasury bond yields hitting their highest levels since June, which increased the opportunity cost of holding gold and created Asia for gold prices. Although the number of new non-agricultural jobs in the United States was weaker than expected, and spot gold once rose to above 1,780, it quickly fell back because traders believed that the Fed’s downsizing time would not change.

The 10-year yield later rose by 4.2 basis points to 1.615%, the highest since June 7. The 30-year yield once touched 2.177%. Short-term bond yields rose slightly, and the yield curve became steeper.

(U.S. 10-year Treasury Bond Yield)

David Gagnon, managing director of U.S. Treasury securities trading at Academy Securities, said, “U.S. employment data seems to have reached the minimum threshold set by the Federal Reserve for the reduction in November. The unemployment rate has fallen, especially for minority ethnic groups. It can give Fed officials peace of mind because it shows that employment is moving in the right direction.”

The difference between the 5-year and 30-year yields reached 113.9 basis points, an intraday expansion of 3.6 basis points, close to the high end of the fluctuation range of the past month. The break-even inflation rate of inflation-protected government bonds is close to the 2021 high.

The August employment data was revised upwards, the unemployment rate unexpectedly dropped in September and wage growth accelerated. These factors support the market’s belief that the Fed will respond to inflationary pressures.

Analysts believe that Fed policymakers may not be too concerned about the weak non-agricultural employment data in September, and they are expected to take the first step to withdraw from the stimulus policy at the monetary policy meeting next month.

Rubeela Farooqi, chief U.S. economist at High Frequency Economics, said, “This will not change the Fed’s downsizing schedule. Inflation and labor market performance may have met the prerequisites for reducing debt purchases. But this has little to do with tightening monetary policy. The conditions for raising interest rates are much stricter, and the time is far from now.”

The Federal Open Market Committee (FOMC) maintained interest rates near zero at its September meeting and stated that if the economy continues to make progress, the reduction in the size of $120 billion in asset purchases per month “may soon become a reality.” . Chairman Powell told reporters that this process may be announced as early as at the November 2-3 policy meeting that the job market is close to reaching the “substantial further progress” standard set by the Federal Reserve.

The employment data released by the US Department of Labor on Friday (October 8) showed that the non-agricultural employment data in September increased by 194,000, the lowest since this year, but the August data was revised up to an increase of 366,000. The unemployment rate fell to 4.8% in September, partly reflecting the decline in the size of the labor force. At the same time, the average hourly wage has increased substantially.

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Bloomberg economist Anna Wong pointed out: “The September report is the only monthly employment data available to the FOMC before the November meeting. Although it cannot build confidence in a rebound in the labor market, we don’t think the Fed will care too much. The weakness of the data will be attributed to the epidemic-related factors, and the news of the reduction will be officially announced in November.”

Roberto Perli, a partner at Cornerstone Macro LLC, said that the Fed may believe that compared with non-agricultural employment, the data report is generally more positive, because the August data was revised upwards and the number of educators was also seasonally adjusted. Perli still believes that the code reduction will start in November.

also,Rising wages and falling unemployment may be seen as signs of improvement in the degree of idleness in the labor market.

Thomas Costerg, a senior American economist at Pictet Wealth Management, said, “The Fed’s hawks will emphasize that wages are growing quite fast. This is a sign of continued tightening of the labor market. With the arrow on the string, it is difficult to call a stop.”

Diane Swonk, chief economist at Grant Thornton LLP, said that the Fed believes that the report is “cautious and not catastrophic. Given the upward revision of the number of jobs in August, the Fed’s reduction plan should not change.”

Naeem Aslam, chief market analyst at Ava Trade, said in a report that non-agricultural employment data clearly shows that because the US labor market is “still very fragile”, there is no need to reduce stimulus at this time. “The data hit the dollar index hard and pushed up the price of gold.”

(Spot gold daily chart)

Kitco Metals senior analyst Jim Wyckoff said that the price of gold rose sharply due to the bleak data at first sight, but the content of the report “appears not to be that bad overall.” This makes the market expect that the Fed will “continue to accelerate, rather than delay, reduce the pace of monetary policy,” leading to a fall in gold prices, but if the employment report next month is still not good, it may change this expectation.

Standard Chartered Bank analyst Suki Cooper said that the current gold market seems to expect the Fed to announce a reduction in bond purchases sometime this year.

Relatively optimistic performance of other U.S. economic data

Other U.S. economic data released this week are relatively optimistic and better than market expectations. As a whole, they also support the Fed’s expectations of reducing the size of bond purchases, suppressing gold prices, and supporting higher U.S. bond yields.

in,September ISM non-manufacturing activity indexIt rose slightly to 61.9 from 61.7 in August. A reading above 50 indicates the expansion of the service industry, which accounts for more than two-thirds of US economic activity. Economists had previously predicted that the index would fall to 60 in September.

U.S. private employment growth in September exceeds expectations, As the new crown infection began to decline, restaurants and other high-touch companies increased hiring. The ADP National Employment Report shows that private employment increased by 568,000 last month, higher than the 428,000 expected by analysts.

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Last week, the number of initial jobless claims in the United States recorded the largest drop in three months, Which shows that as this wave of viral infections begins to fade, the labor market recovery is recovering momentum after the recent slowdown. In the week ending October 2, the number of initial jobless claims fell by 38,000 to 326,000 after seasonal adjustments, which was the largest drop since the end of June.

The U.S. Senate passes a bill to extend the debt ceiling until December 3

The U.S. Senate passed a bill on Thursday to raise the debt ceiling in the short term. The U.S. retreated from the brink of almost default in history, breaking the stalemate that has plagued the financial market for weeks, and suppressing the safe-haven buying demand for gold.

The result of the vote was 50 votes to 48. No Republicans supported the bill, but the bill only delayed the issue until less than two months before processing. The additional legal borrowings of US$480 billion will be used up around December 3.

Raising the debt ceiling still requires a vote by the House of Representatives, but the House of Representatives is still adjourning. The leader of the House of Representatives told members of Congress that they may be recalled to Washington within 72 hours. The House of Representatives is expected to pass the bill, and the White House said that President Biden looks forward to signing the bill into law.

Senate Majority Leader Schumer said after the bill cleared a procedural obstacle, “Republicans played a risky game with obvious party divisions. I am very happy that their fringe policy of risking up the situation did not work.”

Schumer and minority leader McConnell reached an agreement on the bill earlier Thursday. The news that the two parties reached an agreement previously triggered a rebound in the stock market. The Standard & Poor’s 500 Index rose 0.8% this week, suppressing the safe-haven demand for gold.

“Everyone, including me, breathed a sigh of relief because we were able to reach an agreement that would allow us to reach an agreement before December 3, but we do need to address this issue from a long-term perspective,” Yellen Zhou Said in an interview on four afternoons. “So we have more work to do to get through the difficulties smoothly after December 3.”

(S&P 500 index daily chart)

The international situation has improved, suppressing risk aversion

What has further suppressed the demand for safe-haven gold this week is the improvement in international relations.

On October 8, Foreign Ministry Spokesperson Zhao Lijian introduced that in accordance with the spirit of the call between the two heads of state on September 10, Yang Jiechi, member of the Political Bureau of the CPC Central Committee and Director of the Office of the Central Committee’s Foreign Affairs Commission, met with Sullivan, National Security Affairs Assistant to the President of the United States, in Zurich, Switzerland. . The two sides exchanged comprehensive, candid and in-depth views on Sino-US relations and international and regional issues of common concern. During the call, the two heads of state agreed to continue to maintain regular contact through various means. In order to implement the consensus of the two heads of state on the call, Yang Jiechi and Sullivan discussed holding a video meeting between the two heads of state before the end of the year.

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On the morning of October 9, Liu He, member of the Political Bureau of the CPC Central Committee, Vice Premier of the State Council, and the Chinese leader of the China-US Comprehensive Economic Dialogue, held a video call with Dai Qi, the US trade representative. The two sides conducted pragmatic, candid and constructive exchanges and discussed three aspects: First, Sino-US economic and trade relations are very important to both countries and the world, and bilateral economic and trade exchanges and cooperation should be strengthened. Second, the two sides exchanged views on the implementation of the China-US economic and trade agreement. Third, the two parties have expressed their core concerns and agreed to resolve each other’s reasonable concerns through consultation. The Chinese side negotiated the cancellation of tariffs and sanctions, and clarified its position on China’s economic development model and industrial policies. The two sides agreed to continue communication in an attitude of equality and mutual respect, so as to create good conditions for the healthy development of economic and trade relations between the two countries and the recovery of the world economy.

Outlook

The latest Kitco Golden Week survey shows that most Wall Street analysts and ordinary retail investors are bullish on the gold market outlook.

This week, 14 Wall Street analysts participated in Kitco’s gold survey. Among the respondents, 85 analysts (57%) are bullish on the gold market outlook. At the same time, five analysts (36%) are bearish on the gold market outlook; one analyst (7%) believes that the gold market outlook will fluctuate.

At the same time, online voting for ordinary investors received a total of 841 votes. Among these interviewees, 442 people (53%) are bullish on the gold market outlook, another 265 people (32%) are bearish on the gold market outlook, and 134 people (16%) believe that the gold price outlook will fluctuate.

Some analysts have said that although the Fed’s reduction in bond purchases is inevitable, weak labor market data may provide some short-term momentum for gold prices, because gold prices will rebound when the Fed finally reduces the scale of monthly bond purchases.

Adrian Day, President of Adrian Day Asset Management, said, “Once the Fed really starts to reduce the size of bond purchases-if it does-the market will find that it has done too little and too late, and just like when the Fed started tightening. It’s usually done—the price of gold will bottom and reverse. It did this in 2005, 2013, and 2015.”

Adam Button, chief foreign exchange strategist at Forexlive.com, said he is waiting for the price of gold to fall again before considering buying. It is not expected to buy gold before November, because the market will see strong seasonal factors before November. “Now, if you want to buy gold, you have to be patient. I hope to buy when there is a panic sell-off.”

In addition, from a fundamental and technical point of view, the short-term outlook for gold prices is slightly short-term, but there is still strong support in the 1700-1720 area.

In the next week, the United States will announce heavy economic data such as CPI, PPI, and retail sales in September. Several Fed vote committee and European Central Bank officials will speak. In addition, the Fed will also announce the minutes of the September monetary policy meeting. Investors need Focus.

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