Gold gains ground as Putin announces military mobilisation for Ukraine
Gold prices rose in European trade on haven demand amid mounting geopolitical tensions, with Russian president Vladimir Putin announcing a new military effort to control Ukraine.
Prices were also boosted by a spike in US 10-year treasury yields ahead of the Federal Reserve's policy decisions later today, expected to hike rates by 75 basis points to 3.25%.
Prices Today
Gold prices rose 0.7% to $1,676 an ounce, after losing 0.7% on Tuesday, as US treasury yields spike to fresh highs while demand swooned back then on gold futures.
Russian Military Mobilisation
Russian President Vladimir Putin announced a partial military mobilisation in the country , putting the economy in a constant war state amid the ongoing Ukrainian campaign.
Putin accused the west of waging war on Russia and asserted Russia will use every available tool to protest itself and its people against external threats.
The mobilisation means gathering upwards of 300 thousand reserve troops to serve in the military campaign in Ukraine.
US Yields
US 10-year treasury yields fell 1.4% on Wednesday off 11-year highs at 3.604%, on track for the first loss in three sessions.
The decline came after the Russian escalation and mobilisation as it rattled the market for a bit.
The Federal Reserve
Later today, the Federal Reserve will announce its policy decisions, expected fully to hike rates by 75 basis points to 3.25%, the third such increase in a row.
And there's a 19% chance the Fed might actually raise rates by 100 basis points, heading for 4.5% by March 2023.
Estimates
Analysts now expect gold prices to hover around $1,680 in the short term, and if the Fed took aggressive action today, prices might plummet to near $1,600.
The SPDR
Gold holdings at the SPDR Gold Trust fell 4.63 tones yesterday to a total of 953.32 tones, the lowest since March 2020.
Sterling sharpens decline to 37-year nadir
Sterling declined in European trade for the second straight session against dollar, hitting 37-year lows on economic recession concerns in the UK and doubts about the pace of policy tightening by the BoE this week.
The dollar hit fresh 20-year highs against a basket of major rivals ahead of the Federal Reserve's policy decisions, expected to hike interest rates by 75 basis points.
GBP/USD fell 0.6% on Wednesday to 1.1304, the lowest since 1985, after losing 0.4% yesterday, the third loss in a row as US treasury yields spiked to fresh highs.
Recession
Economists warned that the UK economy is already in a state of recession, after UK retail sales tumbled past estimates in August, an important indication for consumer health.
Additionally, such a spate of negative data are casting doubt on the Bank of England's policy decisions this month, and whether it'll hike rates by 50 or 75 basis points.
An aggressive move by the BoE would contradict a new budget by the UK government to support the economy and easy costs of living for citizens.
The Dollar
The dollar index rallied over 0.6% on Wednesday for the second straight session, hitting 20-year highs at 110.87 against a basket of major rivals.
Later today, the Federal Reserve will announce its policy decisions, expected fully to hike rates by 75 basis points to 3.25%, the third such increase in a row.
And there's a 19% chance the Fed might actually raise rates by 100 basis points, heading for 4.5% by March 2023.
Estimates
We expect the pound to keep weakening against the greenback, potentially giving up 1.13 for the first time since 1985 and heading for 1.12.
Wall Street extends losses, Dow Jones falls 400 points
US stock indices declined on Tuesday and extended the losses ahead of the Fed's policy decisions.
Later Today, the Federal Reserve will convene to discuss policies, and tomorrow, it's expected to decide on hiking interest rates by 75 basis points to 3.25%, the third such increase in a row.
Such a hike would come following recent US inflation data, with analysts now expecting a 100% chance of a 0.75% rate hike at least, and a 37% chance of a 1% rate hike.
US 10-year treasury yields surged 1.5% for another session to 11-year highs at 3.547%, bolstering dollar's standing against major rivals.
Dow Jones fell 1.3%, or 400 points to 30,620, while S&P 500 declined 1.3%, or 51 points to 3,849, as NASDAQ fell 1% to 11,418.
Dollar climbs as US yields spike ahead of Fed's meeting
Dollar gained ground in European trade against a basket of major rivals on track for the first profit in three days as US treasury yields spike to fresh highs ahead of the Federal Reserve's policy meeting.
The central bank is expected to raise interest rates by 75 basis points to 3.25%, the third such increase in a row in order to control runaway inflation.
The Index
The dollar index rose 0.3% to 109.90, after falling 0.1% yesterday, the second loss in a row amid calm trading in the forex market.
US Yields
US 10-year treasury yields surged 1.5% for another session to 11-year highs at 3.547%, bolstering dollar's standing against major rivals.
US 2-year treasury yields rose 1.3 on track for the ninth profit in a row, hitting two-year highs at October 2007, and almost passing 4% for the first time in 25 years.
Two-year treasury yields are the most sensitive to US monetary policy forecasts, and indicate a string of aggressive policy tightening by the Fed until March 2023.
The Federal Reserve
Later Today, the Federal Reserve will convene to discuss policies, and tomorrow, it's expected to decide on hiking interest rates by 75 basis points to 3.25%, the third such increase in a row.
Such a hike would come following recent US inflation data, with analysts now expecting a 100% chance of a 0.75% rate hike at least, and a 37% chance of a 1% rate hike.