It reached a three-month high of $1,176.20/oz on Wednesday, before hitting chart resistance at its 200-day moving average.
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On the data front US retail sales barely rose in September as cheaper gasoline weighed on service station receipts, while producer prices posted their biggest decline in 8 months.
Retail sales volumes surprised to the downside, leading economists like Barclays to trim their forecast for third quarter GDP by two tenths of a percentage point to an annualised pace of 1%.
Among the key worries have been the economic slowdown in China, the world’s second-largest economy, and its global ramifications. “It could be that investors have better foresight than economists”, Higgins mused, pausing ever so slightly before hedged words were placed in the report. It’s also driven 10-year treasury yields back under 2% while 2-year treasuries at 0.56% are only a point-and-a-half above their 4-month low. Deflation is the archenemy of raw commodity and stock market bulls.
Diam has held longer-term Treasury for several months, Nagata said, favoring the securities that will gain most if yields fall.
The 10-year yield has failed to be sustained below the 2% mark this year.
Rates futures on Wednesday suggested traders anticipate the first Fed rate increase since 2006 would occur at the Federal Open Market Committee meeting in March 2016.
Meanwhile, demand from foreign central banks has been dialed back as they were forced to sell Treasury debt and raise cash to prevent a sharp plunge in local currencies or to support local economic growth.
“Anything that the Fed says that could shed a few light on what they’re going to do with regards to interest rates and how it subsequently affects the dollar will be watched closely”, David Lennox, an analyst at Fat Prophets in Sydney, said by phone.
Few expect Treasury bond yields to rise significantly. When New York Federal Reserve staffers Tobias Adrian, Richard Crump and Emanuel Moench determined the 1.3 percent number by considering the implied risk-neutral Treasury yields, they significantly diverted from bond market opinion as expressed in the price discovery mechanism of markets.
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Investors are the most bullish on Treasuries in 18 months, according to the latest JPMorgan Treasury Client Survey.
