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On April 15th, Ernst & Young economist Bansie Madavani stated that the conflict in the Middle East and the resulting rise in energy prices have brought a stagflation shock to the UK economy. She predicted that the UKs overall inflation rate would rise by more than 3.0% year-on-year in the coming months, while the economic growth rate is expected to be below 1.0%. She also pointed out that the prolonged energy price shock would increase the likelihood of a recession. Therefore, the Bank of England is unlikely to raise interest rates due to the direct impact of rising energy prices, and will instead adopt a wait-and-see approach.The yield on Japans 20-year government bonds fell 3.5 basis points to 3.235%.On April 15th, former US Treasury Secretary Janet Yellen stated that she still believes a US interest rate cut is possible later this year, although oil price volatility triggered by the Iran war has cast a shadow over the outlook. Yellen said, "This is actually a broad supply shock, spreading from gasoline prices to liquefied natural gas, fertilizers, food, shipping costs, and semiconductors." Yellen noted that while she doesnt rule out the possibility of raising interest rates, stable long-term inflation expectations suggest that this is unlikely at present. "I think my guess is that there might be an interest rate cut by the end of the year. I think thats entirely possible, and the most likely scenario. However, many things can happen."On April 15th, former US Treasury Secretary Janet Yellen stated that Trumps hardline approach in pressuring the Federal Reserve to lower interest rates to reduce US debt costs was nothing short of the rhetoric of a "banana republic." Speaking at the HSBC Global Investment Summit, Yellen warned about the independence of monetary policy, saying she had "never seen such a threat posed to the Federal Reserve. Would a president of a developed country frequently advocate setting interest rates to lower debt servicing costs?" she asked. "Thats common in banana republics," she said, adding that managing interest rates for government budgetary reasons has led to "hyperinflation" in some countries.Former U.S. Treasury Secretary Janet Yellen said that Federal Reserve Chair nominee Kevin Warsh lacks "credibility" in advocating for interest rate cuts.

Gold Price Prediction: The XAU/USD pair will fall below $1870 as yields rise ahead of Fed Chair Powell's speech

Alina Haynes

Jan 10, 2023 14:55

截屏2023-01-09 下午5.31.06_1024x576.png

 

In the Tokyo session, the gold price (XAU/USD) has fallen below the immediate resistance of $1,870.00. The precious metal has broken through the consolidation formed in the band of $1,870.00-1,881.50 as demand for US government bonds deteriorates ahead of the speech by Federal Reserve (Fed) chairman Jerome Powell on Tuesday.

 

The 10-year US Treasury yields have risen beyond 3.54 percent, dampening risk appetite. Meanwhile, S&P500 futures have become volatile following a sell-off late in Monday's session, signaling caution in establishing positions in risky assets. The US Dollar Index (DXY) is anticipated to attempt a break above the immediate resistance of 103.00 into the auction area.

 

Investors anticipate Fed Powell's speech for fresh cues, as it will provide a head start for the entirety of CY2023. Despite a sharp reduction in December wage inflation, some Fed policymakers continue to endorse a terminal rate prediction of 5.00-5.25%.

 

Mary Daly, president of the San Francisco Fed Bank, argued that interest rates between 5% and 5.25 percent are fair. Also, the president of the Atlanta Federal Reserve bank, Raphael Bostic, anticipates an interest rate peak in the range of 5% to 5.25 percent and the continuation of higher interest rates through CY2023.

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