Market Review

The U.S. dollar index fluctuated this week, with little overall change. Spot gold has been rising all the way, reaching as high as $2,236 per ounce, setting another record high. It continued the rise driven by expectations of a Federal Reserve interest rate cut and geopolitical tensions. In March, it rose by more than 9%, the highest since July 2020. Excellent monthly performance.

Due to geopolitical tensions and signs that OPEC+ will stick to the current production cut plan at next week's meeting, and Russia requires oil companies to reduce production, bullish sentiment in the oil market has increased, with WTI crude oil and Brent crude oil recording gains this week.

The U.S. dollar rose as high as 151.973 against the yen this week, just one step away from the 152 mark. Although the Japanese authorities verbally intervened, the yen still maintained its decline. Follow-up attention needs to be paid to whether the authorities take substantive intervention measures in addition to verbal intervention.

Bitcoin once again crossed the $70,000 mark this week, and an "epic short squeeze" occurred in the futures market, with hedge funds forced to close their short positions as they were unable to hold on to their positions after the price soared.

Markets in many places were closed on Friday due to public holidays, and gold, silver, oil and foreign exchange bonds were not traded.

Major events of the week

1. The core PCE "cooled" month-on-month. Is the interest rate cut in June stable?

The latest US PCE inflation data showed that the Fed's preferred inflation indicator has cooled down. PCE in February recorded 2.5% year-on-year and 0.3% month-on-month; core PCE recorded 2.8% year-on-year and 0.3% month-on-month. Traders currently see a roughly 64% chance of the Fed cutting interest rates in June.

This week, Governor Waller, who has been the benchmark for the Fed's recent policy, said there is currently no sign of an urgent need to cut interest rates and that it would be appropriate to reduce or delay interest rate cuts. He said he hoped to see "at least a few months of improvement in inflation data" before cutting interest rates. He pointed to a strong economy and employment as further reasons why the Fed has room to wait. Waller mentioned "no rush" four times in his speech, and it was even the title of his speech.

In addition, Atlanta Fed President Bostic turned "hawkish" this week, reiterating that he expects only one rate cut this year, and it may come later than he previously expected. He has previously said two rate cuts this year would be appropriate.

Fed Governor Cook noted that housing inflation will continue to decline, but still believes that caution is needed in cutting interest rates. Goolsbee, a "big dove", continues to stick to his expectation of three rate cuts in 2024.

Interestingly, the Fed's spending in 2023 was $114.3 billion higher than its revenue, its largest operating loss ever, and the Fed was forced to abandon sending money to the Treasury.

2. The Japanese yen continues to fall, and the authorities verbally intervene to "talk the talk"

The yen fell to a 34-year low this week, and the Japanese authorities once again initiated verbal intervention. The Bank of Japan, the Ministry of Finance and the Financial Services Agency held trilateral talks on Wednesday afternoon but did not make any actual intervention.

Japanese Finance Minister Shunichi Suzuki said that he is paying close attention to foreign exchange fluctuations with a high sense of urgency and does not rule out taking any measures to deal with chaotic foreign exchange fluctuations. Bank of Japan officials said that if foreign exchange market fluctuations affect the economy and price trends, the central bank will respond through monetary policy.

Bank of Japan Governor Naoki Tamura signaled on Wednesday that he wants to continue gradually raising interest rates, but also reiterated a line from the Bank of Japan's latest policy statement that financial conditions will remain accommodative for now given the inflation outlook. Governor Kazuo Ueda also reiterated in a speech to parliament that financial conditions are expected to remain accommodative given the Bank of Japan's inflation outlook.

According to the minutes of the Bank of Japan meeting released on Thursday, one member noted that in the case of ending the negative interest rate policy, the central bank needs to emphasize its cautious stance and there is no need to quickly raise the policy rate.

Moreover, a series of weak economic signs may also prompt the Bank of Japan to take a cautious approach when raising interest rates next time and provide investors with a reason to continue selling the yen, thereby putting pressure on Japanese authorities to intervene in the market to support the domestic currency.

3. Oil market dynamics: Russia will cut production, the United States will replenish SPR

Foreign media revealed this week that OPEC+ representatives believe there is no need to recommend changes to production reduction policies at next week’s review meeting because the production quotas set in the first half of the year have proven to be effective. Sources also said that OPEC+ is unlikely to change output policy before the June meeting.

Separately, Russia requires oil companies to cut production to 9 million barrels per day by the end of June to meet its commitments to OPEC. Russian Deputy Prime Minister Novak said that the country's oil producers will reduce oil production in the second quarter based on their share of production, but also said that if necessary, they will increase the supply of oil on the market.

Russia also plans to gradually relax export cuts: in April, it will cut production by another 350,000 barrels per day, and exports will reduce by 121,000 barrels per day. In May, additional production cuts will reach 400,000 barrels per day, and exports will decrease by 71,000 barrels per day. Through June, all additional cuts will come from oil production.

In the United States, the crude oil inventory report showed that U.S. crude oil inventories unexpectedly increased by about 9.34 million barrels last week, the largest increase in six weeks. Cushing crude oil inventories also increased significantly, while gasoline inventories fell for the eighth consecutive week as expected.

The U.S. Department of Energy announced this week that it had purchased 2.8 million barrels of crude oil to replenish previously released strategic petroleum reserves. Since last year, the agency has purchased a total of 32.3 million barrels of oil, paying an average price of less than $77 per barrel, lower than the average price of $95 per barrel when it sells in 2022.

4. Ceasefire negotiations have reached a deadlock and cracks have emerged in Israel-US relations.

According to reports, the Israeli government believes that the ceasefire negotiations in Doha have reached a "dead end" and has therefore recalled its negotiators. Hamas said it adheres to its original position of a comprehensive ceasefire, but is not optimistic about reaching a ceasefire agreement in the near future. Israeli Prime Minister Netanyahu said that the Israeli army is preparing to attack Rafah.

It was reported on Friday that Netanyahu had approved the next round of hostage negotiations in the coming days and had set out guidelines for the progress of hostage negotiations.

The United Nations Security Council this week voted to adopt a draft resolution calling for an immediate ceasefire in the Gaza Strip. The United States abstained from the vote, and Israel canceled its delegation to Washington. Israeli Prime Minister Benjamin Netanyahu said the decision not to send a delegation to the United States was a message to Hamas that international pressure on Israel would not be effective. Later, the White House said Israel agreed to reschedule the delegation's visit to the United States to discuss the Gaza issue.

5. Xiaomi SU7: The overall selling price is controlled within 300,000 yuan

On March 28, Xiaomi officially released SU7, with the standard version priced at 215,900 yuan, the Pro version priced at 245,900 yuan, and the Max version priced at 299,900 yuan, all priced within 300,000 yuan. That evening, Xiaomi Auto’s official Weibo account announced that the number of pre-orders for Xiaomi Auto exceeded 50,000 within 27 minutes of its launch. Within 24 hours of the launch of Xiaomi SU7, the number of pre-orders reached 88,898.

6. Illegal custody of gold disappeared

Media reports said that China Gold’s two franchise stores in Beijing and Jiaozuo, Henan were empty, and dozens of kilograms of gold deposited by consumers were missing. The amount involved was as high as tens of millions of yuan. China Gold executives said that the Beijing franchise store was operating illegally and the person in charge has been detained. It is reported that the case has entered judicial proceedings, but there has been no progress yet.

7. Beijing cancels divorce restrictions, Shenzhen cancels 7090 policy

Starting from March 27, Beijing will no longer implement the policy that "neither spouse of a divorced couple shall purchase a house in Beijing within 3 years", which means that the purchase of a house in Beijing after divorce will no longer be restricted by the number of years of divorce. On March 26, Shenzhen abolished the “7090 Policy” that had been in place since 2006, which means that there will be no restrictions on the size of large apartments in Shenzhen real estate in the future.

8. FTX founder sentenced to 25 years in prison and fined $11 billion

Sam Bankman-Fried, co-founder of U.S. cryptocurrency trading platform FTX, was sentenced to 25 years in prison and had more than $11 billion in property confiscated for stealing nearly $10 billion in customer funds. . Fried has expressed his intention to appeal the verdict. Prosecutors had asked for a 50-year prison sentence.

9. India’s gold imports fell sharply month-on-month in March

India's gold imports in March will fall by more than 90% from the previous month to the lowest level since the epidemic, as record gold prices hit demand and caused banks to cut imports. Mumbai-based traders at two major gold importing banks said they imported very little gold in March due to weak demand.

10. The real "crazy rise", the price of cocoa soared

Cocoa futures on the New York Mercantile Exchange have surpassed the $10,000 mark for the first time in history. Futures have more than doubled this year as the world faces a third straight year of cocoa shortages due to crop failures at major growers in West Africa. Rising cocoa prices will lead to higher chocolate prices throughout the year, which could lead to further increases in candy prices.

Article forwarded from: Golden Ten Data