The current price of gold is fluctuating in the vicinity of US$ 1,980 on account of the market’s reassessment with respect to China’s efforts to stimulate economic growth and the upcoming Federal Reserve meeting next week.
According to reports, China is seeking to prompt its major domestic banks to decrease deposit rates for the second time within a year. This action is seemingly intended to stimulate consumer spending and foster growth within the nation’s economy.
The current concern in the market pertains to potential additional actions that Beijing may implement. Despite this, the Hang Seng Index (HSI) of Hong Kong has recorded further growth today, exceeding 19,400 for the first time in two weeks before experiencing a slight decline.
The Nikkei 225 index in Japan opened at a new high for the 23rd consecutive year but later experienced a decline due to traders capitalizing on gains and the strengthening of the Yen.
Despite the first quarter-on-quarter GDP for 1Q falling short of the projected 0.3% at 0.2%, the Australian Dollar is still aiming to reach 67 cents. This latest reading may have been balanced out by the revised previous print of 0.5%, which was adjusted to 0.6%.
The Securities Exchange Commission’s (SEC) recent announcement of a crackdown has caused significant upheaval in the world of cryptocurrency. Allegations of illegal exchange operations have been directed towards major players in the industry, namely Coinbase and Binance.
At present, the WTI futures contract is below USD 72 per barrel and the Brent contract is almost at USD 76 per barrel, as reported at the time of publication. There has been minimal activity in crude oil trading on Wednesday thus far.
The volatility of asset classes has persisted in its decline, which may reflect the current trading regime. As of today, the VIX index has fallen below 14%, marking the first time it has reached this level since February 2020. The VIX serves as a gauge for implied volatility across multiple maturities on the S&P 500.
The GVZ index, which utilizes a methodology comparable to that of the VIX index to determine anticipated volatility for gold over the next 30 days, has also declined, with gold volatility continuing to decrease and GVZ approaching 14%.
The US 10-year real yield and the DXY (USD) index have both remained stable in recent days, prompting speculation about the Federal Reserve’s actions at its upcoming Federal Open Market Committee (FOMC) meeting on June 14th. The RBA raised rates yesterday, and the Bank of Canada (BoC) is expected to announce its decision today. The interest market is uncertain about whether the BoC will increase rates by 25 basis points, with less than a 50% likelihood of such a move. If the BoC does choose to raise rates, it could spark a discussion about the potential trajectory of Fed interest rates. At present, the market has priced in a scenario where there will be no change in interest rates by this time next week.