The global interest rate background has changed dramatically over the last few days with interest rate hikes being priced out by the hour. The collapse of SVB Bank and Signature Bank in the US has prompted markets to reduce rate hike expectations sharply, with one 25bp rate hike in the US seen as a coin toss at the March meeting, before rate cuts are seen from the end of Q2 onwards.
US Dollar Grips on as SVB Fallout Brings US CPI Into View Ahead of the Fed
US Treasury yields have fallen sharply in the last few days as rate expectations change. The US 2-year touched a high of 5.08% last Thursday before slumping to a multi-month low of 3.83% earlier in today’s session. The yield has reversed higher in Europe but still remains vulnerable to further losses.
US 2-Year Yield
Gold has benefitted not just from the global re-pricing of rate cuts but also from its haven status. The precious metal is part of a group of goto safe-haven assets that include US Treasuries, the Japanese Yen and the Swiss Franc. The precious metal broke above $1,900/oz. on Monday as traders sought safety from possible bank contagion. Gold remains above $1,900/oz. but is likely to test this new level of support, especially if the US inflation number comes in hot. Below here $1,878/oz. comes into view and this level may hold any short-term sell off unless the interest rate background turns hawkish again.
Gold Price Daily Chart – March 14, 2023
Chat now!
Add a Comment