Stay in step with market opportunities and get insights, actionable trade ideas and dedicated support.
During today’s session, and despite the release of the Federal Reserve minutes, gold managed to hold above the $4,500 per ounce area and posted a gain of more than 1.3%. However, this recovery is still not strong enough to erase the selling bias that has been in place since previous sessions, when price started to pull back from the $4,700 area.
The US 30-year Treasury yield briefly climbed to 5.20% today, its highest level since 2007, before retreating modestly alongside softer oil prices. But the broader trend remains troubling. Before the escalation of the US-Iran war, markets had been moving steadily towards a softer inflation outlook, with markets pricing in further easing of US monetary policy. But roughly three months later, yields soared due to a substantial repricing and all to do with the closure of the Strait of Hormuz.
The trading week has not been entirely favorable for gold in the short term, as the metal closed the final session of the week with a decline of more than 2.5%. The price is now moving closer to the reference area of $4,500 per ounce, once again highlighting a relevant selling bias in the short term.
At the start of the week, EUR/USD has shown a significant decline, falling more than 1% in the short term, with price action clearly favoring the US dollar. The strong selling pressure emerging in the pair is mainly driven by the renewed escalation of geopolitical tensions in the Middle East.
While tech stocks soar, the bond market tells a different story. The US 30-year Treasury yield has risen above 5%, which, if sustained, could potentially trigger risk-off sentiment across markets.
With US yields lower and hinting at a swing high, the relationship between AUD/USD and the AU-US 2-year spread appear to be back on talking terms. And that could bode well for AUD/USD bulls if US yields continue to fall in line with my bias.
The combination of tariff fatigue, extended moves and a refreshing set of softer CPI figures helped appetite for risk peel itself from the ropes it had been pinned to in recent weeks. And that helped AUD/USD rise for a second day and USD/CAD fall below resistance, while EUR/USD bulls paused for breath around a key high.
It's not every day you see gold plunge alongside yields. But that is what Monday served on reports of a potential ceasefire in Gaza and Trump's picking a relatively 'safe pair of hands' for the US Treasury Secretary role. With a prominent swing high on gold, I suspect it could be headed much lower from here.
The expected 25 cut was delivered. But the Fed were understandably cautious regarding future cuts, given they don't know which or how many of Trump’s inflationary policies will see the day of light. And that means the current pullback on the USD and yields could be limited.
With Trump leading in some polls and Fed members continuing to push back against a faster pace of easing, bond traders were quick to send yields and therefor the USD higher. USD/JPY now has 152 within sight.
AUD/USD was sent lower for a fifth day while Wall Street indices fell and the VIX rose during a risk-off start to the week.
AUD/USD finds itself with a typical day's trade of 69c ahead of Australia's CPI report, while the USD index seriously considers a break of 100.
If the 2-year yield is right, it suggests the USD could be set to rise over the near term. And I suspect that PCE inflation could be the trigger. For now, risk off tones are in the air.
StoneX Europe Ltd may make third party material available on this website which may contain information included but not limited to the conditions of financial markets. The material is for information purposes only and does not contain, and should not be construed as containing, investment advice and/or investment recommendation and/or an investment research and/or an offer of or solicitation for any transactions in financial instruments; any decision to enter into a specific transaction shall be made by the client following an assessment by him/her of their situation.
StoneX Europe Ltd makes no representation or warranty and assumes no liability as to the accuracy or completeness of the information provided, nor any loss arising from any investment based on a recommendation, forecast or other information supplied. You should always seek independent advice as to your suitability to speculate in any related markets and your ability to assume the associated risks, if you are at all unsure. We are not under any obligation to update any such material. Any opinion made may be personal to the author and may not reflect the opinion of StoneX Europe Ltd.
