statement of events

Gold prices fell sharply last Friday after stronger-than-expected U.S. employment data for April dampened expectations for a rate cut by the Federal Reserve. U.S. bond yields rose sharply, putting gold prices under pressure. As of the close, gold fell 1.61% to $2016.37. But it rose 1.3% this week. The dollar gave up earlier gains against the euro on Friday but remained strong against the yen.

Spot gold fluctuated within a narrow range on Monday and is currently trading around $2017.46 per ounce. Market concerns about the U.S. debt ceiling crisis and banking crisis still provide support to gold prices, and some Federal Reserve officials have signaled a pause in interest rate increases in June. Survey It shows that most retail investors still tend to be bullish on the gold market outlook.

The pound against the U.S. dollar reached its highest level since April last year on Friday, once climbing above 1.26. The previous rebound was approaching its ninth week. However, the risks brought by the Bank of England interest rate decision on Thursday may have a negative impact on the pound against the U.S. dollar and the U.S. dollar. The British Pound is generally on the decline.

Analysis of causes of non-agricultural data events

U.S. job growth accelerated and the unemployment rate fell in April, announced last Friday, and wage growth was stronger than expected, which may force the Federal Reserve to keep interest rates high for longer. As a result, U.S. Treasury yields rose further on Friday, with the 10-year Treasury yield rising 9.8 basis points to 3.450%, while the two-year Treasury yield jumped 19.9 basis points to 3.926%. The 30-year Treasury bond yield rose 4.2 basis points last Friday to 3.764%.

Tai Wong, an independent metals trader, said, “The above data will not lead to the Federal Reserve raising interest rates in June, but it may serve as a reminder to those who fantasize about cutting interest rates,” which puts pressure on gold, which does not yield interest rates. Also weighing on gold, the yield on the 10-year U.S. Treasury note rose after the jobs data was released, dampening gold’s appeal. Markets are also focused on developments surrounding the U.S. banking sector and the federal debt ceiling.

The World Gold Council (WGC) said on Friday that global gold demand fell from January to March 2023, putting pressure on gold prices. Gold is seen as a safe asset, and investors tend to buy more gold during times of economic uncertainty. Central banks and Chinese consumers have been buying aggressively, but investor purchases have fallen even further. In its latest quarterly demand trend report, WGC said total demand was 1,081 tons, a 13% decrease from the first quarter of 2022. About half of gold demand comes from jewelers, with much of the remainder coming from investors and governments. U.S. buyers worried about banking and economic turmoil purchased 32 tons of gold bars and coins, the highest quarterly level since 2010. Investment demand has picked up in March as bank failures spread panic and analysts expect an end to U.S. interest rate hikes.

The WGC said investment demand is likely to grow this year and central bank purchases will remain strong, albeit below last year’s highs. However, WGC analyst Krishan Gopaul said that investors’ hoarding of gold may push up gold prices, which may weaken demand in countries such as India, where consumers are often deterred by high prices.

Forward analysis of Bank of England data

The Bank of England will release its latest forecast for the British economy on Thursday, and economists and financial markets expect the Bank of England to raise interest rates again. However, after the previous rise, GBP/USD faces the risk of a correction from highs. GBP/USD reached its highest level since April last year on Friday.

A recent research briefing from Goldman Sachs’ European Portfolio Strategy team showed that UK economic activity data unexpectedly rose, with economists expecting bank interest rates to peak at 5%. Expectations for better growth and higher interest rates have pushed the pound higher, which typically boosts UK domestic stocks, but earnings per share (EPS) expectations remain relatively low.

The Bank of England earlier raised the bank interest rate to 4.25% at the end of March, while making policy decisions in the coming months dependent on inflation and other economic outcomes. But the problem for the Bank of England and the British economy is that most of the recent changes from the United Kingdom The data led financial markets to expect further interest rate hikes. Inflation fell just 10.1% in March, compared with expectations for a fall back to single digits, while inflation-adjusted retail sales posted their first quarterly increase since the summer of 2021, and the overall economy appears to be recovering well into the new year. rebounded in months. Coupled with wages and salaries continuing to grow at a high single-digit rate, various data indicate that the Bank of England will most likely feel the need to further raise interest rates on Thursday, leaving it with no choice but to raise its forecast for the economy.