Although investors are not seldom focusing on the Russia-Ukraine war headlines, any negative development on geopolitical tensions will improve the appeal for the defensives.
On the oil front, West Texas Intermediate (WTI) prices are losing their steam as the OPEC cartel confirmed their devotion to fixing the imbalance in the demand-supply mechanism followed by the sanctions on Russian oil imports. Moreover, the Iran-nuclear deal is likely to get a green flag from the US as the world economy has to prepare alternatives from the Russian oil. The oil prices are likely to slip near the round level of $100.00.
Meanwhile, the US dollar index (DXY) is approaching 100.00 on intensifying fears of war escalation beyond Russia and Ukraine. Apart from that, the rising bets over a 50 basis point (bps) by the Federal Reserve (Fed) in monetary policy meeting on Wednesday is underpinning the greenback against the loonie. The 10-year US Treasury yields have jumped above 2% in hopes of an aggressive hawkish stance by the Fed.
In addition to the headlines from the Russia-Ukraine war and Fed’s interest rate decision, investors will also focus on Canada’s Consumer Price Index (CPI) numbers, which are due on Wednesday.
Gold (XAU/USD) pauses the early Asian selling around $1,975 ahead of Monday’s European trading session.
The yellow metal’s initial downside could be linked to the brighter progress on the Ukraine-Russia peace talks. However, weekend comments from Moscow and Kyiv do suggest that the policymakers are far from ready to step back. Also weighing on the market sentiment, as well as gold prices, could be the firmer US Treasury yields and pessimism surrounding China’s coronavirus conditions.
It’s worth noting that China is one of the world’s largest gold consumers and the fresh fears of covid, due to the highest daily infections in two years, negatively affects the gold prices. Though, chatters surrounding a halt in the gold production and India’s ramping gold demand, as well as inflation fears, keep the yellow metal on the bull’s radar.
That said, the record-high US inflation expectations, per the 10-year breakeven inflation rate per the St. Louis Federal Reserve (FRED) data, adds strength to the US Treasury yields as market players await this week’s key Fed minutes, which in turn weigh on the gold prices.
Amid these plays, S&P 500 Futures pare early Asian session gains while the US 10-year Treasury yields stay firmer around 2.04%. Further, the US 5-year T-bond yields refresh record top above 2.0%, marking high hopes of the Fed’s 0.50% rate-hike this week.
