Gold rose to the highest in nine weeks as disappointing US factory data and a drop in consumer sentiment reinforced bets on the possibility of interest-rate cuts later this year. Signs of a softening economy solidified expectations that the Federal Reserve will need to lower borrowing costs to help shore up the economy. Higher rates are typically negative for non-yielding bullion. The precious metal has largely held above the key $2,000 level since mid-December on bets of the Fed’s pivot to monetary easing. That view hasn’t changed even though expectations of the timing and size of the central bank’s rate reduction varied against mixed US economic data recently.
One of the most popular trades in foreign-exchange markets is losing its luster as the Bank of Japan signals the end of its negative interest rate policy. The appeal of using borrowed yen to buy securities denominated in higher-yielding currencies, known as a carry trade, is in flux after remarks this week from the BOJ’s Hajime Takata hinted at a potential policy change. That’s giving pause to money managers, especially now that leveraged funds have boosted their bets against the yen to the most in more than six years. “The first move — and how they signal the pathway — is very important,” said Salman Ahmed, Fidelity International’s global head of macro and strategic asset allocation.
The move by major central banks to reduce their asset holdings, begun in 2022 as part of their inflation fight, has had only a modest impact on interest rates and negligible influence on a broad set of other financial indicators, according to new research analyzing the effort's impact. The direct effect of "quantitative tightening" efforts on government bond yields in the seven markets under study, including the U.S. and the euro area, was estimated overall at from 4 to 8 basis points for securities maturing a year or more in the future. In the U.S. it was "close to zero" because of the Federal Reserve's "drip feed" of information that allowed markets to adjust over time.
The debt load of the U.S. is growing at a quicker clip in recent months, increasing about $1 trillion nearly every 100 days. The nation’s debt permanently crossed over to $34 trillion on Jan. 4, after briefly crossing the mark on Dec. 29, according to data from the U.S. Department of the Treasury. It reached $33 trillion on Sept. 15, 2023, and $32 trillion on June 15, 2023, hitting this accelerated pace. Before that, the $1 trillion move higher from $31 trillion took about eight months. U.S. debt, which is the amount of money the federal government borrows to cover operating expenses, now stands at nearly $34.4 billion, as of Wednesday. Bank of America investment strategist Michael Hartnett believes the 100-day pattern will remain intact with the move from $34 trillion to $35 trillion.