Storm clouds gather! Powell and Yellen are about to testify together, and financial markets are holding their breath.
On Monday, September 27, during the US trading session, financial markets were relatively calm. The US dollar index rose for the second consecutive trading day, but only traded slightly above the flat line. With the slight rise in the dollar, spot gold also rose slightly, hovering around $1750. The three major US stock indexes performed differently, with the S&P 500 and Nasdaq Composite slightly down, while the Dow Jones index rose by 150 points at one point. This week, the market will closely watch the testimony of Federal Reserve Chairman Powell and Treasury Secretary Yellen before Congress. In addition, the US Congress must pass a new budget by the end of September to avoid a government shutdown. Lawmakers must also find a way to raise or suspend the debt ceiling in October before the US experiences its first debt default.
Time:
2021-09-28 09:15
On Monday, September 27, during the US trading session, financial markets remained relatively calm. The US dollar index rose for the second consecutive trading day, but only traded slightly above the flat line; with the slight rise in the US dollar, spot gold also rose slightly, hovering around the $1750 mark; the three major US stock indexes performed differently, with the S&P 500 and Nasdaq Composite indices falling slightly, while the Dow Jones index rose by 150 points at one point. This week, the market will closely watch the testimony of Federal Reserve Chairman Powell and Treasury Secretary Yellen before Congress. In addition, the US Congress must pass a new budget by the end of September to avoid a government shutdown. Lawmakers must also find a way to raise or delay the debt ceiling in October before the US experiences its first debt default.
The US dollar rose for a second consecutive day on Monday, as several Federal Reserve officials are scheduled to speak this week, and their remarks could reinforce market expectations that the Fed will begin reducing its asset purchases before the end of the year.
Federal Reserve Chairman Powell will be the focus this week, and he and Treasury Secretary Yellen will testify before the Senate Banking Committee and the House Financial Services Committee on Tuesday and Thursday, respectively, on the Fed and Treasury's response to the coronavirus pandemic.
In addition, Powell will participate in a policy panel discussion at the European Central Bank forum on Wednesday.
On the economic data front, data showed that new orders and shipments of major capital goods in the US rose strongly in August due to strong demand for computers and electronic products, increasing by 0.5% in August, after which the US dollar also expanded its gains.
But the market is more focused on the US Treasury market. The US benchmark 10-year Treasury yield hit a three-month high of 1.516%.
US Treasury yields climbed to their highest level since the end of June, as the market anticipates tighter US monetary policy, after the Fed announced last week that it could begin tapering stimulus as early as November and hinted at a possible earlier-than-expected rate hike.
During the US trading session, the US dollar index, which measures the dollar against six major currencies, rose 0.05% to 93.33, earlier hitting a high of 93.49.
"Yields are rising because the market is more confident that the Fed will orchestrate a reduction in bond purchases before the end of the year," said Juan Perez, a foreign exchange strategist and trader at Tempus Inc.
"However, there are too many items at play to really have a clear understanding of anything. One thing is clear, the dollar is benefiting from the economic slowdown caused by the Delta variant, both physiologically and psychologically, undermining the excitement built up in the second quarter," he added.
Gold prices were sluggish on Monday, weighed down by rising US Treasury yields and a stronger dollar.
During the US trading session, spot gold traded near the flat line, now hovering around $1751.33.
“Gold seems to be in a prolonged period of weakness that it can’t seem to shake off, regardless, the strengthening 10-year Treasury yield and the stronger dollar are both headwinds,” said independent analyst Ross Norman.
Norman said that while central bank buying is “encouraging” for the market, gold bars lack “quality” institutional flows, especially from North America.
Holdings in the world’s largest gold-backed exchange-traded fund, the SPDR Gold Trust, rose slightly on Friday, after hitting a more than one-year low earlier last week.
US stocks showed mixed trends in early trading on Monday, as traders prepared for the final week of September’s volatility, with US Treasury yields rising.
The S&P 500 fell 0.1% and the Nasdaq Composite fell 0.5%, as technology stocks were weak in early trading. The Dow Jones index rose 150 points, with energy and banking stocks rising.
The divergence in major indexes came as US Treasury yields rose. Fueled by economic optimism and inflation concerns, the 10-year Treasury yield rose, exceeding 1.5% at one point on Monday. This is the highest level since June, up from 1.30% at the end of August.
“We believe these (bond market) moves are providing the impetus for another ‘value stripping’ across the equity market. We believe that the direction of long-term rates should remain the number one driver of market returns, sector rotations, and thematic performance in the coming weeks,” wrote Chris Senyek of Wolfe Research in a note to clients.
Another factor dampening market sentiment is the possibility of a US government shutdown at the end of this week.
House Speaker Pelosi said Sunday that the Senate will vote Thursday on the bipartisan infrastructure deal passed by the Senate last month. On the same day, lawmakers need to reach an agreement on government funding to avoid a partial shutdown, which will take effect at 12:01 AM ET Friday without congressional action.
The US Senate will vote on a bill on Monday that would extend government funding to early December while raising the debt ceiling to the end of next year. However, the bill is expected to be blocked by Republican senators, who are unwilling to tie the extension of government funding to raising the debt ceiling.
"House Speaker Pelosi and Senate Majority Leader Schumer have announced that they will push forward legislation that would tie an extension of government spending authorization to a suspension of the debt ceiling. Our political economists believe that the longer Democrats go down this road, the greater the likelihood of a government shutdown," wrote David Kostin, Goldman Sachs’ chief US equity strategist, in a note on Monday. "However, we find that the S&P 500’s reaction to government shutdowns has not been consistent since 1980."
Related News
Gold prices continue to fluctuate.
Gold prices have shown a volatile pattern in the short term, affected by the weakening of the US dollar and changes in sentiment due to easing geopolitical tensions.
Gold prices rise again! Multiple risks fuel safe-haven demand.
From the perspective of the international market, the tense situation in the Middle East, the escalation of the Russia-Ukraine conflict, and the continued high uncertainty surrounding the US Trump administration's tariff policies have driven up gold prices due to increased risk aversion in the market. Furthermore, a significant recent change in the gold market is that gold has become the second-largest reserve asset for central banks globally. How should the future trend of gold prices be viewed? Several analysts have indicated that in the short term, gold prices may fluctuate due to factors such as tariff easing and sudden changes in the geopolitical situation; in the medium to long term, gold prices are still in an upward channel.
As the Russia-Ukraine conflict enters its third year, global attention is once again focused on this geopolitical crisis. According to Dow Jones Newswires, US President Donald Trump made startling remarks at the White House on Thursday (June 5), stating that neither Russia nor Ukraine is prepared for peace, and that both sides may "continue fighting" until one side is willing to compromise. This statement not only signals the failure of his attempts to broker peace, but also introduces new uncertainty to the global geopolitical and economic markets.
Recently, good news came from the China Machinery Metallurgy and Building Materials Workers' Technical Association. In the 2025 National Machinery Metallurgy and Building Materials Industry Workers' Technological Innovation Achievement Award, Shandong Guoda Gold Co., Ltd.'s "Purification of Crude Arsenic Flue Dust to Produce Arsenic Trioxide Industrial Application" and "Key Technology Application for High-Value Utilization of Complex Copper-Gold Ore Resources" projects won the first prize and the second prize respectively. This honor is a high recognition of the workers' technological innovation ability and the effectiveness of achievement transformation, and also fully demonstrates the company's outstanding strength in the industry.
Gold prices return to $3300! Wall Street banks show significant divergence in long-term outlook
In fact, as gold prices fluctuate, Wall Street's major banks have recently shown a clear divergence in their views on gold prices. Unlike Goldman Sachs and Deutsche Bank, which are optimistic about gold's performance, Citigroup believes that the long-term outlook for gold prices is not optimistic.
Although gold prices rose this week, market volatility has clearly increased. While the US-UK agreement is symbolic, its content is limited and insufficient to alleviate concerns about a global economic slowdown. Therefore, gold prices will continue to fluctuate between safe havens and policy signals, closely monitoring the Federal Reserve's interest rate expectations and global trade sentiment.