The current financial market has two main lines: First, inflation in the United States; Second, the risk aversion caused by the bankruptcy crisis of Silicon Valley banks.
Overnight,US CPI and core CPI slowed down as scheduled in February.Housing cost is the biggest single factor driving the rise of CPI in the United States, accounting for 70%. In February, the year-on-year growth of rent CPI still reached a new high in 40 years, with an increase of 8.7% over last year. With official rent data often lagging behind, industry data show that rent growth has slowed significantly.This means that the peak of rent inflation is coming soon.
Tonight, the unexpectedly sharp drop in PPI data in February in the United States encouraged market sentiment. The core PPI excluding food, energy and trade increased by 0% in February, lower than the expected 0.4%, and the previous value was 0.5%; Core CPPI increased by 4.4% year-on-year, expected to be 5.2%, and the previous value was 5.4%. The sharp slowdown suggests that inflationary pressures appear to be weakening amid heavy rate hike from the Federal Reserve. Considering that the PPI of intermediate products is ahead of the PPI of finished products,PPI will accelerate downward in the next 2 to 3 months.
I thinksObviously, from this main line of inflation, it does not support the Fed to continue to have a large radical rate hike, so it will obviously push the short-term price of gold to continue to hit new highs.
So, how to understand that while gold is rising, the US Dollar Index is also rising?Of course, we have to go back to the second main line.
The reason is simple. The bank risk aversion caused by the recent storm of Silicon Valley banks in the United States has come to an end, but the European side is beginning to worry about a chain reaction, most obviously Credit Suisse Group.
In 2021, Credit Suisse suffered billions of dollars in losses. After Archegos, a hedge fund managed by investor Bill Huang, broke its position, Credit Suisse lost about 4.7 billion US dollars (about 30.7 billion yuan), which led to the resignation of Laura Warner, chief risk and compliance officer of the group, and Brian Chen, head of investment banking. Subsequently, Credit Suisse released a report pointing out the procedural flaws that led to the disaster. Since then, Credit Suisse has also overhauled its top management and is in the midst of its second restructuring plan in years.
Saudi National Bank, Credit Suisse's largest shareholder, ruled out more assistance to Credit Suisse, raising fears that Credit Suisse's problems could worsen. Credit Suisse's one-year credit default swaps (CDS) are close to 1,000 basis points, which is 20 times that of UBS and 10 times that of Deutsche Bank. The higher the CDS number, the greater the probability of default. As shown in the above figure, Credit Suisse's share price once hit a high of US $77.4 before the subprime mortgage crisis in 2007, and once rebounded to US $15 before the thunder in 2022. Now its share price has even fallen below US $2, which makes people cry. Old America waved a sharp sickle and harvested this "ally" of Europe.
Therefore,US bond yields soared overnight as risk aversion subsided in the US (as the thunder crisis at Silicon Valley banks dissipated). Then today, the yield of US bonds fell sharply again, which shows that the market is buying a lot of US bonds to avoid risks. Who is paying the bill? Of course, it is Europe, because Europe is safe today, funds flee to the United States, the US dollar rises, and the US debt is bought. The price of US debt rises, so the yield dives, and gold also rises together.
Finally, let's return to the market expectation of Fed rate hike.
Just a week! Federal Reserve rate hike expects a "shocking reversal". The above pictures clearly show the expected changes in Fed rate hike before the thunder on March 8, the thunder of Silicon Valley banks on March 9, the bankruptcy and takeover on March 10, the emergency meeting on March 11, the joint statement of the Big Three and the launch of BTFP new tools on March 12, and the reopening of global financial markets on March 13.
From rate hike, which does not cut interest rates this year and needs to be radical to 5.65%, then moderate rate hike to 5.0%, then suspend rate hike, and finally cut interest rates as soon as July this year.
Well, you understand the rise of the US dollar, the diving of US bond yields, you also understand, and the rise of gold and silver, you must also understand.So, what about crude oil diving?
I has clearly told the students in the group in the afternoon. "Don't go in to bargain-hunting crude oil now. There will be an accident. I really can't help but want to do it.
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