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February 25th - Traders in the US futures and options markets are increasingly betting that the Federal Reserve will continue to cut interest rates next year rather than raise them. The spread of the Covered Overnight Financing Rate (SOFR) futures, which is closely linked to Fed policy expectations, is inverting significantly – indicating that traders are beginning to anticipate a longer period of central bank easing. Previously, traders had been betting that the Fed would cut rates twice by 25 basis points before the end of this year and then resume rate hikes in 2027. However, the increasingly heated debate surrounding the impact of artificial intelligence on the labor market has prompted them to reassess this expectation. Jack McIntyre, portfolio manager at Brandywine Global, stated, "The question is how AI will cause inflation. The only aspect of AI that could potentially cause inflation is the construction of data centers and the associated energy demand." Meanwhile, in the spot market, traders lack confidence in how to allocate US Treasuries. JPMorgan Chases latest client survey (for the week ending February 23rd) shows that neutral positions have reached their highest level since the end of 2024.February 25th - New revisions to Japans corporate governance guidelines could release some of the $840 billion in cash held by listed companies and fuel a new wave of buying in the Japanese stock market. The Financial Services Agency (FSA) will submit draft rules to an expert panel on Thursday, requiring companies to verify the efficiency of their cash usage, with the aim of implementing this change this year. Despite significant improvements in corporate governance in recent years, Japanese companies still have a large amount of idle cash on their balance sheets. Investing these funds in higher-yielding projects could potentially enhance the attractiveness of the Japanese stock market to investors. Sho Nakazawa, equity strategist at Morgan Stanley Mitsubishi UFJ Securities, stated, "This revision will make it easier to anticipate increased allocations to growth sectors, as well as more stable growth in share buybacks and dividends," which in turn could lead to capital inflows from overseas investors. Analysts have long argued that excessive cash holdings by Japanese companies are one of the factors hindering improvements in return on equity (ROE), a key metric closely watched by stock investors, which has caused Japans ROE to lag behind its Western counterparts.February 25th - Rising tech stock prices boosted Wall Street, easing concerns about the potentially disruptive impact of artificial intelligence, and Asian stocks appeared poised to follow suit. Stock index futures signaled a strong open for Sydney, Tokyo, and Hong Kong markets. In the US, the Nasdaq 100 rose 1.1%, boosted by a rebound in software stocks, while the S&P 500 also climbed, supported by improved consumer confidence. Short-term bonds underperformed. Gold and crude oil prices fell. Traders are also closely watching Nvidias earnings report on Wednesday, expecting the chipmaker to significantly exceed expectations. Nvidias recent stock performance has been lackluster due to investor sell-offs of large-cap stocks. David Laut of Kerux Financial stated that this weeks earnings reports will either "ease" or "exacerbate" concerns about artificial intelligence. We wont get all the answers this week, but worried investors are eager for definitive information.Lucid Group (LCID.O): Capital expenditures are expected to be between $1.2 billion and $1.4 billion in 2026.1. All three major U.S. stock indexes closed higher. The Dow Jones Industrial Average rose 0.76% to 49,174.5 points, the S&P 500 rose 0.77% to 6,890.07 points, and the Nasdaq Composite rose 1.04% to 22,863.68 points. Salesforce rose over 4%, with IBM leading the gains at over 2%. The Wind U.S. Tech Big Seven Index rose 1.08%, with Tesla and Apple rising over 2%. Most chip stocks rose, with AMD rising over 8% and Intel rising over 5%. The Nasdaq China Golden Dragon Index rose 1.37%, with GDS Holdings and 21Vianet rising over 6%. 2. The three major European stock indexes closed mixed. The German DAX fell 0.02% to 24,986.25 points, the French CAC40 rose 0.26% to 8,519.21 points, and the UK FTSE 100 fell 0.04% to 10,680.59 points. 3. International precious metals futures closed mixed. COMEX gold futures fell 1.25% to $5160.50 per ounce, while COMEX silver futures rose 0.57% to $87.07 per ounce. 4. The WTI crude oil futures contract closed down 0.35% at $66.08 per barrel; the Brent crude oil futures contract fell 0.06% to $71.07 per barrel. 5. London base metals rose across the board. LME tin rose 5.41% to $50300.0 per tonne, LME nickel rose 3.66% to $17915.0 per tonne, LME copper rose 2.54% to $13195.0 per tonne, LME zinc rose 0.98% to $3387.5 per tonne, LME aluminum rose 0.68% to $3110.5 per tonne, and LME lead rose 0.44% to $1959.5 per tonne.

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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