Gold price (XAU/USD) has dropped firmly to near $2,010.00 in the early European session. The precious metal is likely to attract more offers and may find a cushion near the psychological support of $2,000.00 ahead. The downside bias for the Gold price has stemmed from geopolitical tensions between the United States and China.
China seems uneasy about arms support to Taiwan from the United States. In retaliation, a Chinese Foreign Ministry spokesperson said China will take resolute and effective measures to safeguard national sovereignty, and territorial integrity. This has spooked the market sentiment and risk-sensitive assets have taken the bullet.
The US Dollar Index (DXY) is making efforts in keeping its business above 102.00. Meanwhile, the 10-year US Treasury yields have slipped below 3.3% again on expectations that the labor market is not extremely tight anymore.
Apart from the softening of the US labor market, the anticipation of a recession has strengthened further. Slowing economic activities due to higher interest rates by the Federal Reserve (Fed) are responsible for a recession in the US economy.
The street is expecting a neutral stance from Fed chair Jerome Powell for May’s monetary policy, however, Cleveland Fed Bank President Loretta Mester said policymakers should move their benchmark rate above 5% this year and hold it at restrictive levels for some time to quell inflation, as reported by Bloomberg.
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