TREX Global:Gold prices keep rising, still suppressed by U.S. bond yields

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U.S. home prices' two-year run of double-digit gains ends, with year-on-year gains dropping to single digits in October

Annual price gains in the increasingly fragile U.S. housing market slipped into single digits in October for the first time in about two years, two closely watched surveys showed on Tuesday, as mortgage rates soared above 7% for the month, further stifling demand.
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The S&P CoreLogic Case Shiller National Home Price Index rose 9.2% in October, down from 10.7% in September and the first single-digit increase since November 2020. Meanwhile, the U.S. Federal Housing Finance Agency (FHFA), which oversees mortgage-financing entities Fannie Mae and Freddie Mac, said year-over-year home price growth slowed to 9.8% in October from 11.1% in September, marking the index's biggest decline since September 2020. It was the first non-double-digit growth in months.

On a monthly basis, the S&P CoreLogic Case Shiller index fell for the fourth straight month, while the FHFA home price index was unchanged.

"As the Federal Reserve continues to raise interest rates, mortgage financing continues to be a headwind for home prices," Craig Lazzara, managing director at S&P Dow Jones Indices, said in a statement.

The housing market has suffered most visibly from the Fed's aggressive rate hikes, which are aimed at curbing high inflation by weakening demand in the economy. The Fed capped off the year with another 50 basis point rate hike this month, with its benchmark rate surging from near zero in March to between 4.25% and 4.5% now, the fastest increase since the early 1980s fast year. Fed officials expect rates to climb further in 2023, possibly above 5%

U.S. Treasury yields climb to near 1-1/2-month highs

U.S. 10-year Treasury yields rose to near 1-1/2-month highs on Tuesday as investors tried to assess the Federal Reserve's path to raising interest rates, while China made further adjustments to its anti-epidemic policies.

The 10-year U.S. Treasury yield hit a near three-month low on Dec. 7 and has climbed steadily since then, amid growing hopes that the Fed will signal an end to its rate-hike cycle. It posted its biggest weekly gain in eight-and-a-half months last week, following policy decisions from the Federal Reserve, Bank of England and European Central Bank.

Investors have been trying to determine how much more interest rates need to rise as the Federal Reserve continues to tighten policy to combat high inflation while trying to avoid a recession.

The 10-year U.S. Treasury yield climbed 10.4 basis points to close at 3.851% on Tuesday, having earlier touched 3.862%, its highest since Nov. 16.

Analysts are leaning bullish on gold

Analysts at Sevens Report said on Tuesday: "Gold remains below multi-month highs, and if the contrarian idea of a weaker dollar in 2023 materializes (and there is reason to believe it will), then gold will be in the red as we start the new year. There will be a positive catalyst."

Gold futures bulls have the overall short-term technical advantage, said Kitco Metals senior analyst Jim Wyckoff.

"Prices are in a seven-week-old uptrend on the daily histogram. Bulls' next upside price objective is pushing February futures above solid resistance at $1,900.00 on the close. The first Resistance is seen at $1,825.00, then last week's high of $1,833.80."

Peter Schiff, a well-known gold bull and chairman of precious metals trader SchiffGold, recently appeared on Kitco News and gave his outlook for inflation, stocks and gold through 2023. Schiff said we'd better be prepared for an inflationary depression. He also stressed that he is very bullish on gold in the year ahead.

TREX Global’s view:Although the prospect of further interest rate hikes by the Federal Reserve and the expectation of maintaining high interest rates for a long time have helped the U.S. bond yields rise, which has made gold bulls apprehensive; The pace of interest rate hikes is slowing down, and interest rates are even expected to be cut in 2023. The U.S. dollar index is expected to peak in the medium and long term, and the short-term U.S. dollar is also tending to be weak.

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