Solid Gains On Geopolitical Concerns

Gold is little changed in the Asia-Pac session, after closing +0.9% at $2023.34 on Thursday, unwinding a large part of yesterday’s second-half slide.

• The rally came despite net USD strength and higher US Treasury yields. Haven flows dominated due to geopolitical tensions including further US strikes on Houthi targets and Pakistan striking Iran in retaliation.
• US tsys twist-steepened, pivoting at the 5s, with yields 1bp lower to 5bps higher. US tsys reversed early gains after lower-than-expected Initial Jobless Claims and higher-than-expected Building Permits and Housing Starts. MNI’s Chicago Business Barometer was also revised up to 47.2 in December from 46.9.
• Fedspeak: Philly Fed Harker suggested a heightened chance of a soft landing, while Atlanta Fed Bostic repeated that he expected policymakers to begin cutting interest rates in the third quarter. He did however add that if there is a further accumulation of soft inflation data then cuts could begin sooner.
• From a technical standpoint, bullion’s recent clearance of support including the 50-day EMA has strengthened the bearish threat with $1973.2 (Dec 13 low) exposed, according to MNI’s technicals team.