Gold steadied during the Asian session on Wednesday following a sell-off before the New York close. The stabilization in gold prices followed Fitch's downgrade of the US sovereign debt credit rating from AAA to AA+. Fitch cited expected fiscal deterioration over the next three years, a high and growing government debt burden, and governance erosion relative to peers with higher credit ratings.
Interestingly, during early trade, Treasuries rallied, and yields declined, driven by risk aversion outweighing concerns about US government borrowing costs. However, yields had seen notable gains during the US session, with the benchmark 10-year note reaching around 4.06% before dipping below 4% on the current day.
The announcement from Fitch occurred after the Wall Street cash session's close, but futures are moving lower in response, signaling a potentially soft day for APAC equities. If risk aversion continues, gold might experience increased volatility.
The GVZ index, measuring implied volatility for gold similar to the VIX index for the S&P 500, indicates that gold volatility has been low, potentially indicating uncertainty regarding price direction. Furthermore, fluctuations in the US dollar may also impact the gold price.
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