Spot gold was trading in a narrow range at the start of the Asian session on Thursday (Feb. 24) and is now trading near the 1910 mark, holding most of the overnight gains; gold prices rose sharply on Wednesday, approaching a more than one-year high near resistance near 1916 as U.S. President Joe Biden expanded sanctions against Russia; rising tensions in Ukraine continued to boost safe-haven demand for gold.
U.S. President Joe Biden on Wednesday announced an expansion of sanctions against Russia, with new punitive measures to hit builders and their management of the Nord Stream 2 project. Ukraine's foreign minister has asked Washington to rapidly increase sanctions against Russia.
In Kiev, the Ukrainian parliament approved the government's declaration of a national emergency. During the 30-day state of emergency, the Ukrainian government will have the right to impose restrictions on activities and the media. At the same time, Ukraine blames Russia for being behind cyberattacks on governments such as its cabinet, foreign ministry and parliament, as well as some banks.
Putin said he was open to a "diplomatic solution" as long as Russia's interests and security were guaranteed.
Intraday focus on the revised VALUE of the US GDP in the fourth quarter, the number of initial jobless claims in the US for the week ended February 19, the annualized total number of new home sales in the US after the seasonal adjustment in January, and the geopolitical situation in Russia and Ukraine.
Fundamentals are mainly bullish
[The "two countries" in Eastern Ukraine ask Putin to help resist Ukraine's "aggression"]
The Kremlin said the leaders of separatist forces in eastern Ukraine had made a request to Russian President Vladimir Putin to help resist Ukrainian government forces. This major development could open the way for Moscow to deploy troops.
Eu foreign policy chief Josep Borrell said on Twitter that the appeal of russia by two separatist republics in eastern Ukraine for help was a "nother dangerous step" against Ukrainian sovereignty that would put thousands of lives at risk.
He said the EU strongly urged Russia to "refrain from any further escalation actions".
[Ukraine asks UN Security Council to convene emergency meeting]
Ukrainian Foreign Minister Koureba said on Twitter that the request by the leaders of separatist forces in the two self-proclaimed republics in the eastern part of the country for military assistance from Russia constitutes a further escalation of the security situation.
[Biden extends sanctions against Russia to Nord Stream 2 Builders and their management]
U.S. President Joe Biden on Wednesday announced an expansion of sanctions against Russia, with new punitive measures to hit builders and their management of the Nord Stream 2 project.
The White House announced initial sanctions on Tuesday after Russian President Vladimir Putin recognized the areas occupied by Ukrainian separatist forces as independent states.
"These measures are another part of our initial sanctions against Russia for its actions in Ukraine," Biden said in a statement on Wednesday, "as I have made clear, we will not hesitate to take further measures if Russia continues to escalate the situation." ”
【Ukrainian Parliament approves declaration of state of emergency】
After hours of debate, Ukraine's Verkhovna Rada agreed to approve President Zelenskiy's request to declare a state of emergency for the country. The state of emergency went into effect at midnight on February 24 and lasted 30 days.
Parliament also approved an increase of $886 million in defense spending.
[British Prime Minister tells financial industry executives that more sanctions are expected to be imposed on Russia]
Johnson delivered the message to bank executives including Lloyds Bank, Barclays and Natwest Group Plc, as well as regulators and industry associations, at a roundtable in Downing Street on Wednesday. The statement said the purpose of the additional sanctions was to stop Putin's "destructive" actions.
【EU to hold emergency summit】
EU leaders will hold an emergency meeting in Brussels on Thursday to discuss the situation in Ukraine. European Council President Michel, who will preside over the meeting, said they would discuss the latest developments and how to hold Russia accountable.
In an invitation letter to the leaders of the 27 countries, Michel said that "the aggression of the Russian Federation violates international law and violates the territorial integrity and sovereignty of Ukraine".
[Russia will respond strongly to U.S. sanctions]
Daleep Singh, the U.S. president's deputy national security adviser for international economics, said more sanctions would be imposed on Russia.
Ukrainian President Zelenskiy said international sanctions against Russia were expected to intensify and praised Germany's decision to halt the Nord Stream 2 gas pipeline certification process.
Russia's Foreign Ministry said in a statement that the response to the new U.S. sanctions is not necessarily symmetrical, but it will be targeted and will make the United States feel the impact.
[Ministry of Foreign Affairs of Ukraine proposes to evacuate Citizens from Russia]
Ukraine's foreign ministry said in a statement that its citizens should leave Russia immediately and not travel to Russia because "Russia's aggression has intensified."
Bank of England officials in Moscow on Homeland Defenders Day on Feb. 23 warned of the risk of inflation triggered by the Ukraine crisis.
Jonathan Haskel, one of the Bank of England's policymakers, said in testimony to Parliament that geopolitical events could lead to upside risks to inflation forecasts" "If certain geopolitical events specifically affect commodity supply chains, they could lead to large price fluctuations," he wrote.
British Foreign Secretary Liz Truss told the general that the country's intelligence still showed putin could invade Ukraine, including an attack on the capital Kiev. She did not have the intelligence details to support that conclusion.
[The three major indexes continue to close sharply, and Ukraine's worries linger]
Major Wall Street indexes closed sharply lower on Wednesday, continuing their recent rout as Ukraine declared a state of emergency and the State Department said Russia could still invade Ukraine soon.
The Nasdaq led the decline, falling more than 2 percent, and the information technology sector fell 2.6 percent, the biggest drag on the S&P 500, which at one point hit an intraday low of 4,221.5 points in nearly eight months.
Michael James, head of equity trading at Wedbush Securities in Los Angeles, said, "President Putin's insistence on going his own way despite the increased sanctions has really heightened tensions about further aggressive actions and their impact on commodities and overall inflation." ”
The Dow Jones index was close to confirming a correction on Wednesday, while the S&P 500 was confirmed to enter a correction the previous day, when the index fell more than 10 percent from its record-high closing record on Jan. 3. (When an index closes 10% or more below its record closing level, a correction is confirmed.) ）
So far this year, the Nasdaq has plunged more than 16 percent.
As of the close, the Dow Jones Industrial Index fell 1.38% to 33131.76 points; the S&P 500 index fell 1.84% to 4,225.5 points; and the Nasdaq index fell 2.57% to 13037.49 points.
[Fed Daley: A March rate hike is appropriate, but it's too early to ask for a 50 basis point hike]
San Francisco Fed President Daley said Wednesday that it was "appropriate" for the Fed to start cutting easing next month because the U.S. economy and labor market were doing well but inflation was too high. A 25 basis point hike should have started in March, and it's too early to ask for a 50 basis point hike. Depending on the situation, it is necessary to decide whether a 50 basis point hike is necessary
In a speech prepared for the Los Angeles World Affairs Council & Town Hall, Daley said that after the first rate hike, "the timing and magnitude of future adjustments to the federal funds rate and balance sheet will depend on the evolution of the economy and data." ”
She said the data she observed included the transition from COVID-19 to endemic epidemics; how quickly broken supply chains recovered; how quickly workers who left jobs because of the pandemic returned to work; and how quickly the financial support to support the economy's recovery from the pandemic lockdown faded.
Daly said. "We will be closely monitoring all of these developments and letting the data determine the appropriate policy path,"
It is widely expected that the Fed will take a series of measures to raise interest rates and sharply reduce its balance sheet to curb the trend of inflation. As the Fed prepares for the move, Daley's remarks appear to be less hawkish than some of her colleagues.
Her speech on Wednesday provided a key reason: She believed the Fed had the ability to convey its intent to fight inflation, thereby shaping inflation expectations that would prevent expectations of price spirals from becoming as entrenched as they had in the 1970s.
At the time, she said, the more prices rose, the more people expected prices to continue to rise, and the Fed, as it has always done, offered little guidance on how it would respond. The Fed will hold a policy meeting, but will not even announce their decision after the meeting. The silence snowballed the situation: inflation continued to rise until the Fed took a series of sharp rate hikes that pulled inflation back down, but also plunged the economy into recession.
Since then, she said, things have changed, not only in the economy itself, but more importantly in the way the Fed communicates. The Fed now has a 2 percent inflation target and a clear framework of policy adjustments to get to its goal; it publishes forecasts from Fed policymakers who often go out and give speeches to articulate their views.
While real inflation is currently rising, she said, this transparency has locked in inflation expectations and may have reduced the need for the kind of aggressive action needed decades ago. "Greater transparency and a strong commitment to achieving our goals have convinced Americans that the period of high inflation and high unemployment will not last forever and that it is coming to an end."
Relatively speaking, Daly's speech was more neutral and not very supportive of the March monthly rate hike of 50 basis points, which also provided opportunities for gold bulls.
[The Us Treasury yield curve was already in danger zone before the Fed raised interest rates for the first time]
The 2s5s spread on U.S. Treasuries broke below 30 basis points in the overnight market, entering dangerous areas that could lead to an eventual inversion of the yield curve. This means that this is the flattest yield curve at the beginning of the Fed's interest rate hike, thus exacerbating the risk of credit and economic pressures.
Asked directly about the flat yield curve at the last FOMC press conference, Fed Chairman Jerome Powell said the Fed does think it is an important signal to assess overall financial conditions. But he also said he didn't "see it as some kind of iron law." This means that while a flattening of the U.S. Treasury yield curve may have some marginal impact on policy, we shouldn't expect it to stop the Fed from raising interest rates. And because policy action is lagging behind, the U.S. Treasury 2s5s curve could easily go from 30 basis points to zero before the Fed's policy moves were passed on to the financial system. That's why a yield curve so flat should be considered a danger zone.
In 2019, for example, despite Powell's dovish turn on interest rates, the yield curve briefly inverted. The fact that the Fed is now prepared to raise interest rates and shrink its balance sheet at the same time should increase the risk of an inversion later this year.
But at the end of the day, the inversion is just a signal, not the cause of the recession, because the major players in the U.S. financial sector don't get most of their profits from duration spreads and aren't as sensitive to duration spreads. Moreover, the signal effect of the curve invert may be weaker than in history. In addition, the probability model of a recession used by the New York Fed based on U.S. Treasury spreads shows that the probability of a U.S. recession remains fairly low.
However, the yield curve is now in danger zone. And the probability of recession implied by the New York Fed model is moving toward levels similar to those of credit stress in 1987, 1997 and 2018. If the Fed is forced to accelerate interest rate hikes, it will increase pressure on the fragile U.S. credit system.
The increased risk of recession will increase the safe-haven demand for gold, which is expected to provide support for gold prices in the medium to long term.
Fundamentals are mainly bearish
[Putin: Russia is still open to diplomatic settlement]
In a video address, Putin called the international situation "difficult." He highlighted NATO's military activities and said Russia's call for an "equal and indivisible security guarantee" system was ignored by the West.
Putin also said that "our country has always welcomed direct and frank dialogue to find diplomatic solutions to the most intractable problems". He has repeatedly said that a diplomatic solution to the crisis is still possible.
Relatively speaking, the possibility of further escalation of short-term military conflicts is unlikely, and the market has partially digested the safe-haven needs of the geopolitical situation, and if the geopolitical situation in Russia and Ukraine shows signs of relaxation, gold may usher in an opportunity to adjust.
【Expected 50-point rate hike in March heats up】
Looking at interest rate futures, the probability of a 50 basis point rate hike by the Fed in March rose to 31.9%, compared to less than 20% at the beginning of the week. In 2022, there will be at least 6 interest rate hikes, and the probability of 7 rate hikes is as high as 39.5%.
This makes gold bulls hesitant, and it also limits the upside of gold prices in the medium and long term.
Overall, the geopolitical situation dominates market sentiment, and gold prices still have the opportunity to shock higher, but given the strong resistance near the June 2021 high of 1916, the momentum of the gold price to effectively break is still slightly insufficient, and the dead fork will continue to pay attention to the further development of the geopolitical situation, and the short-term gold price is biased towards high volatility, or shock attack. Further resistance above is near the January 7, 2021 high of 1927.
It should be reminded that the market is currently optimistic about the number of jobless claims in the evening and the US fourth quarter GDP data, and if the data is in line with expectations or better than expected, you need to be wary of the risk of a correction in gold prices.
This article originated from Huitong Network