Gold market analysis: U.S. Treasury yields fall, gold rebounds sharply to regain lost ground

U.S. Treasury yields fell after the Fed’s decision to reduce bond purchases, thereby supporting safe-haven assets. Spot gold experienced a V-shaped reversal, regaining the previous plunge and closing at a high of $1791 per ounce.



At two o’clock in the morning Beijing time, the Federal Reserve announced the November Monetary Policy Committee’s decision that, while maintaining the target range of the federal funds rate unchanged between zero and 0.25%, the taper process will be officially launched as expected by the market. Reduce the scale of asset purchases by US$15 billion and adjust the speed of debt purchases as appropriate. After the announcement of the interest rate announcement, the 10-year U.S. Treasury interest rate and the U.S. dollar index rose, and U.S. stocks and gold fluctuated. After that, US stocks and gold both rose, and the 10-year US bond interest rate and the US dollar index fell. As expected by the market, the taper will be officially started this month, and the pace of reduction will be the same as before. It is expected to start to reduce at a rate of 15 billion US dollars per month, but the pace may be accelerated or slowed in the future according to economic conditions. In terms of inflation and employment, which the market is very concerned about, Powell admitted that he underestimated the impact of supply bottlenecks, and also admitted that employment structural problems may continue into the second half of next year. This also means that interest rate hikes on the condition of full employment will be at least the second half of next year. Will be turned on. In fact, the market’s expectations for interest rate hikes have been advanced to July next year, and there is a suspicion of over-expectations, but Powell has been downplaying interest rate hike expectations at this meeting, bringing the focus back to the Taper rhythm. In terms of market reaction, gold and silver had already begun to respond to a small dive before the meeting. After the announcement of the meeting, the 10-year U.S. Treasury yields went straight up. However, since the price had already digested Taper's expectations to a large extent before, gold and gold will have The rebound, out of the "V"-shaped reversal pattern. From a long-term perspective, "Since the beginning of the year, international gold prices have repeatedly reached the level of US$1,800 per ounce and have been sold down by more than 7%. The main obstacle to gold is the strength of global stock markets," some industry analysts said. In fact, just after the announcement of the Fed’s decision, the S&P and the Dow in the three major U.S. stock indexes turned up, thus depressing gold. In the medium and long term, the prospects for the global epidemic and economic recovery are still uncertain, and gold may continue to play a hedging role in the asset portfolio; while the probability of the Fed raising interest rates in mid-2022 is increasing, gold still faces Taper and Fed policies in the short and medium term Swing. At the present moment, gold still has a strong allocation value, with frequent global risk events and the risk of economic recession. Central banks of various countries, including the Federal Reserve, continue to release liquidity to maintain the economy. Short-term interest rate hikes are urgent. If the sex is not strong, the safe-haven value of gold may still be highlighted. However, we can see that since May of this year, on the one hand, inflation expectations caused by the instability of the global supply chain have remained high; on the other hand, the Fed is accelerating the management of expectations, the nominal interest rate of U.S. Treasury is also rising, and the actual interest rate is in the middle. , Prompting the price of gold to fluctuate in a relatively narrow range, and there is no definite direction.

Within the day, there will be US non-agricultural data, and the quality of the data will be closely related to the expectation of interest rate hikes. Because Powell has made it clear that the process of raising interest rates depends on whether the United States enters a state of full employment. Therefore, in the future, all data related to inflation and employment will disturb investors' strong expectations for changes in US dollar interest rates. Before the data is released, it is expected that the fluctuation range of gold can only be maintained in the recent range of 1750-1820.

Only personal views, not representative of the views of the organization

Source: Bank of China's official website, Bank of China Guangdong Branch Wang Gang, original title: "20211105-U.S. Treasury Yields Fall Back and Gold Recovers Lost Ground"