Gold Plummets 1.93%! Where Did All the Safe-Haven Funds Go?
Gold took a big tumble today, with an intraday drop of up to 1.93%! The risk-averse sentiment suddenly vanished, and the market felt like it was soulless. But to be honest, gold just hit a historical high, so a dip is normal; there's no need to overreact.
In contrast, the U.S. Treasury market saw a surge in prices for 10-year and 30-year bonds, moving in the opposite direction of gold! The culprit is yesterday's inflation data — the core PCE quarterly rate for Q1, along with the March core PCE data, has fully inflated future high inflation expectations! To make matters worse, the sword of tariff policy still hangs overhead, leaving the market under a heavy burden!
Now the market is observing several odd phenomena:
Long bonds are being snatched up: The stronger the inflation, the more funds dive into long bonds, causing prices to rise while yields drop, yet the bond market remains relatively stable;
The dollar is stuck at the 100 mark: The dollar index saw a slight rebound, but it just can't break through the 100 barrier, and the bulls have clearly backed down;
The VIX index has cooled down: The S&P futures are rising happily, and VIX has dropped from its highs to 24. Although it's still hovering in the 'high volatility zone,' it’s not far from the 'calm zone' below 20.
Next, keep an eye on these two points:
Will gold test the bottom again? The risk-averse sentiment disappeared, but geopolitical risks remain, and if it drops too much, some might buy the dip;
Will inflation data explode again? If PCE data continues to exceed expectations, U.S. Treasury yields may need to change direction!
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