This is far higher than the expected 8.3 %, raising concerns about wealth destruction due to stagflation. The market is doubting the role of gold in their portfolios as a result of the increase in real yields.
Treasury rates are soaring, building on the gains of June 11 in the Asian session for the week to start. The Federal Reserve has made a policy mistake, but there is a heightened realization that the central bank is losing its grip, and the discussion of a rate hike halt in September has faded.
More flares may be in store at the Federal Open Market Committee (FOMC) meeting on June 15. On June 11, the yields on 1- and 2-year Treasury notes rose by about 25 basis points (bps), and the 2-year note gained an additional 10 bps on June 13, whereas the 1-year is 5 bps greater at 2.58%.
As per data from the Commodity Futures Trading Commission (CFTC), US 2-year Treasury futures had the biggest short position in a year’s time. The US Dollar and the Swiss Franc have benefited the most from the chaos, whereas risk and growth currencies such as the AUD, CAD, and NZD have been battered.
Equities have joined bond markets in plummeting. The KOSDAQ index in Korea is currently down almost 4%, as the bearish sentiment in the markets becomes more evident. Crude oil is marginally down, but it is still trading at high levels, with the WTI futures contract around US$ 119 and merely over $120 for the Brent contract.
After achieving a high in March that was slightly underneath the August 2020 high of 2,075, gold is now in a declining trend channel. Prior highs of 1,910 and 1,920, as well as the falling trend line now at 1,895, could provide resistance. On the contrary, previous lows of 1,753, 1,779, 1,787, and/or 1,807, could provide support.