USD Stretches the Comeback, As Risk Aversion Kicks In

Risk sentiment improved in recent weeks as the FED and other central banks continued to give dovish signals, while the tensions in the Middle East abated with the ceasefire in Gaza. But after tensions increased again during the weekend, Gold surged higher last ight during the Asian session after breaking the all-time high, reaching $2,148. But has been retreating since then, together with major currencies, while the USD is moving higher.

XAU and cryptocurrencies, in particular Bitcoin are the first assets to surge with the start of the new week. But the early surge was reversed all the gains and now Gold is lower on the day, heading for $2,020. We tried to buy Gold during the retrace lower, but it doesn’t seem to be stopping, so we’re staying out for now.

Meanwhile, Bitcoin continues to move higher after briefly breaking beyond $42,000 in European morning trade. In terms of overall market mood, the USD continues to remain in demand, while Treasury yields are 10 points higher, with 10-year notes testing 4.30% now, up from 4.20% earlier.  European indices were slightly off the pace to begin the week although not losing much, but the US stock markets opened with a considerable bearish gap and they continue to slip lower. Markets must now look beyond the substantial rate cuts that have already been priced in.

The US dollar is at its highest levels of the day, as S&P 500 futures drop 32 points, or 0.7%. As risk aversion bites harder, the US dollar soars to the best levels of the day. After a great November for stock markets, there’s a sense of profit-taking out there. “We have had such a huge rally, anybody who thinks we can continue this momentum has to take a pause,” Jim Cramer said today on CNBC. We have been selling USD/JPY as well today, booking profit on two signals, but for now, we’re staying out after a surge in the last hour.

Gold XAU Live Chart