Gold, XAU/USD, Treasury Yields, KBW Bank Index, US Dollar, FOMC, Fed – Talking Points

  • The gold price broke recent range shackles as it launched toward new highs
  • Treasury yields dipped as risk appetite ran for the hills on regional banking woes
  • All eyes are on the Fed later today. If they hint at a more hawkish tilt, where will gold go?
  • Net short dollar position is expected to rise by end-May, according 20 of 39 FX strategists @DailyFXTeam
  •  MBA Mortgage Applications (APR/28) Actual: -1.2% Previous: 3.7% dailyfx.com/economic-calendar
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  • Gold Price Holds the High Ground as Treasury Yields Retreat. Where to for XAU/USD?
  • May 3, 2023 6:00 AM +04:00Daniel McCarthy, Strategist
  • Gold, XAU/USD, Treasury Yields, KBW Bank Index, US Dollar, FOMC, Fed – Talking Points
  • The gold price broke recent range shackles as it launched toward new highs
  • Treasury yields dipped as risk appetite ran for the hills on regional banking woes
  • All eyes are on the Fed later today. If they hint at a more hawkish tilt, where will gold go?
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  • Gold broke higher in the overnight session, racing above US$ 2,000 an ounce with risk sentiment sinking which saw Treasuries go higher on lower yields.
  • Wall Street finished down after regional banks faced scrutiny by the market despite the embattled First Republic Bank finding a home with JP Morgan at the start of the week. The KBW bank index which includes several leading regional banks, went 4.47% lower on Tuesday.
  • All the while the unresolved US debt ceiling issue continues to swirl and with these growing concerns for the macroeconomic environment, gold and Treasuries caught a bid.
  • Treasury yields were lower across the curve with the 2-year note slipping 18 basis points, trading back below 4%. At the New York close nominal 10-year Treasury yields were down 14 basis points, while real yields for the same tenor were down 11 bp.
  • The real yield is the nominal yield less the market-priced inflation rate derived from Treasury inflation- protected securities (TIPS).
  • The implication is that inflation expectations were little changed but the returns for supposed risk-free assets like US government debt were sort after. The perceived haven status of the yellow metal also appeared to benefit from the market’s mood.
  • The US Dollar has had a choppy week so far as traders weigh the potential impact of today’s Federal Open Market Committee (FOMC) meeting.
  • While the market is anticipating a 25 bp hike, the focus will be on the post-meeting presser for guidance on the Fed’s stance going forward.

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