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On May 27, it was reported that US President Donald Trump and Israeli Prime Minister Benjamin Netanyahu spoke by phone on May 26 local time. An informed source stated that the two sides discussed the situation amidst regional tensions and as US-Iran diplomatic negotiations entered a crucial phase.On May 27th, according to Nikkei, Federal Reserve Chairman Neel Kashkari stated that the Fed may take a "series" of interest rate hikes to address inflation caused by the Middle East situation. During the FOMC meeting in late April, the Fed kept interest rates unchanged. Kashkari and two other officials objected to the Feds decision to include language in its statement hinting at future monetary easing. In a written interview, Kashkari stated, "I think the next rate adjustment could be a rate cut, or it could be a rate hike," expressing his differing opinion. Kashkari said the outcome depends on the trend of inflation, which in turn depends on whether the Strait of Hormuz reopens soon or remains effectively closed due to further damage to the regions infrastructure, the latter exacerbating the global energy shortage. Kashkari expressed concern that long-term inflation expectations for businesses and households "could get out of control." He stated that the FOMC "will likely need to take strong measures," and that rate hikes, or even a series of rate hikes, may be necessary.Federal Reserves Kashkari: A protracted war with Iran could trigger a "series" of interest rate hikes in the United States.May 27th - As of 2:30 PM closing, the Shanghai Gold futures contract fell 1.15% to 988 yuan/gram, the Shanghai Silver futures contract fell 1.38% to 18,601 yuan/kilogram, and the SC Crude Oil futures contract rose 0.81% to 610 yuan/barrel.Micron Technology (MU.O) surged over 20%, marking its biggest single-day gain since 2011.

Gold Price Prediction: XAU/USD Holds Steady Near $1,960 Amid Weaker US Treasury Yields

Alina Haynes

Mar 28, 2023 14:55

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The XAU/USD pair rebounded after hitting a low of $1,944 on Monday, following a significant drop from $2,000 on Friday. As concerns about a banking crisis subsided on Monday, investors shifted away from safe-haven assets such as gold and into speculative assets such as equities and petroleum oil.

 

Monday's acquisition of Silicon Valley Bank (SVB) assets by a regional U.S. lender, First Citizens BancShares, led to the unwinding of Gold trades. First Citizens announced that it would expand its presence in California by assuming $110 billion in assets, $56 billion in deposits, and $72 billion in loans. The Federal Deposit Insurance Corporation (FDIC) holds approximately $90 billion in securities for sale.

 

In addition, Bloomberg reported that US regulators are contemplating expanding an emergency lending facility for banks so that First Republic Bank (FRC) has additional time to strengthen its balance sheet.

 

These banking sector developments have increased investors' risk appetite and instilled a sense of composure. Consequently, yields on U.S. Treasury bonds make sense during a relief rally. This new development encourages the Federal Reserve (Fed) to concentrate on the inflation outlook and contemplate rate increases if required.

 

Recent Fed commentary from members such as Kashkari (a voter), ultra-hawkish Bullard, and Fed Vice-Chair of Supervision Barr suggests that inflation is a higher priority than the banking crisis. Fed officials appear comparatively resilient in the face of banking stress, asserting that the US banking system's underlying fundamentals remain robust.

 

Monday's increase in U.S. Treasury bond yields can be attributed to a relief rally, but it is too soon to conclude that it represents a definitive yield shift. Any further deterioration of the banking liquidity crisis could cause yields to decline and gold to reclaim the $2,000 threshold. Personal Consumption Expenditures (PCE) data for the United States are scheduled for release later this week.

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