Spot gold prices were trading at 996.74 yuan per gram during Thursday's Asian session, up 4.19 yuan or 0.42% from the previous close. The market opened at 992.46 yuan, reaching a high of 998.10 yuan and a low of 990.44 yuan intraday.
The Federal Reserve's policy discussion has taken a dramatic turn, with officials reportedly moving past expectations of rate cuts and seriously considering the need to resume interest rate hikes.
According to the recently released minutes from the April meeting, a strong consensus emerged among officials: if inflation continues to exceed the 2% target, some degree of policy tightening will become necessary. The direct catalyst for this hawkish shift is the surge in energy prices triggered by geopolitical tensions, which has disrupted market stability and dashed hopes for a steady decline in inflation.
Futures markets are rapidly repricing expectations. Data from the CME shows the probability of at least a 25-basis-point rate hike by the Fed before year-end has climbed close to 50%. This significant shift in expectations has triggered a sell-off in the bond market, with the yield on the 10-year U.S. Treasury note soaring from around 4% in early March to approximately 4.6%, directly pushing up costs for mortgages and corporate borrowing.
Notably, the glow of the AI boom is also fading. The construction of data centers worth hundreds of billions of dollars and the wealth effect from soaring tech stocks are fueling demand. Rather than helping to suppress inflation as some had hoped, the tech dividend appears to be acting as a short-term accelerant for an overheating economy.
With the incoming Vice Chair for Supervision at the Federal Reserve, the institution faces a resilient economy and stubborn inflation. Its prior stance of "higher for longer" interest rates may no longer be sufficient. Global markets should be on high alert, as a potential liquidity storm triggered by renewed rate hike expectations may just be beginning.
Looking at gold's performance, it opened at 4483.3 in the previous session, initially rising to 4509.8 before a sharp pullback to a daily low of 4453. After consolidation, a strong rally occurred during the U.S. session, pushing the price to a daily high of 4553.4. It closed at 4543.5, forming a large bullish candlestick with a very long lower shadow. For the current session, key resistance levels to watch are 4520, 4532, 4543, and 4553. A break above these would shift focus to 4562, 4573, and 4580, with a crucial battle between bulls and bears expected around the 4588-4590 resistance zone.
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