Gold Accelerates on U.S. Bonds

Bad economic news has once again become good news for the U.S. bond market. On Monday, the U.S. ISM Manufacturing Index for May was announced, falling more than expected to 48.5, a three-month low; among the sub-indices, the new orders index hit a one-year low and the largest quarter-on-quarter decline in two years, reflecting softening demand in the economy, the output index approached the boom-or-bust threshold of 50.0, close to expansion stagnation, and although the price paid index was at the second-highest level in about two years, it fell more than expected to 57.

Following last Friday's April PCE data that showed a cooling of inflation, the ISM data also strengthened the room for the Federal Reserve to cut interest rates this year. The market currently expects that the Federal Reserve's monetary policy meeting next week will continue to imply that there is no rush to cut interest rates, and swap contracts fully reflect only one interest rate cut in December this year. Investors will pay attention to the labor market data announced this week, including the key non-farm employment report on Friday, to find clues about the future of Federal Reserve policy.

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After the ISM data was announced, U.S. Treasury prices rose further, and the yield decline rapidly expanded, with the benchmark 10-year U.S. Treasury yield falling more than 10 basis points during the session, hitting a three-week low, and falling in tandem with crude oil; the U.S. dollar index accelerated its decline, erasing all gains since the March U.S. CPI was announced more than a month ago; gold gains expanded, hitting a daily high. However, the rise in the U.S. stock market did not last long, with all three major stock indices turning negative at one point during the session, and June almost started with a collective "black start," led by the energy sector and sectors such as industry that rely on economic growth.

Some tech giants like NVIDIA went higher, supporting the market. After CEO Huang Renxun outlined the blueprint for annual AI chip upgrades and was listed as a preferred stock by Bank of America's Monday report, implying a potential 36% increase, NVIDIA, which had been falling for several days, once rose more than 4% during the session. The chip index once fell more than 1% during the session, but managed to turn positive at the end, narrowly reversing a three-day losing streak. AMD announced a new AI chip on Monday and still fell more than 3% during the session. Three years ago, "Number One Bull" Keith Gill, who sparked a retail investor war on Wall Street, posted a screenshot showing that he might hold a large number of GameStop's common shares and call options, and GameStop, a stock favored by retail investors, once surged more than 70%.

In commodities, the weakening dollar did not support a collective rebound in London base metals, with copper bidding farewell to a three-week low, while tin and zinc continued to fall. Precious metals gold and silver were supported by expectations of interest rate cuts from central banks in Europe and the United States and rose. The OPEC+ meeting over the weekend decided to extend the collective production cut policy for another year until the end of next year, and the voluntary production cut period for eight countries including Saudi Arabia, the UAE, and Iraq was extended until the end of September this year, and such cuts can be gradually revoked from October. After the meeting, international crude oil fell further, and after the U.S. ISM manufacturing data was announced, concerns about the U.S. economy intensified, and the crude oil decline expanded to more than 3%, with Brent oil breaking below the $80 mark, and both falling to a four-month low, marking the worst single-day performance since Saudi Arabia unexpectedly lowered crude oil prices nearly five months ago.

Some analysts believe that given the current high interest rates and increased production by non-OPEC+ countries such as the United States, OPEC+'s decision is gradually bearish for crude oil. The gradual revocation of voluntary production cuts will increase oil market supply, particularly next year. It is expected that by next June, a total of 1.8 million barrels per day of production will return to the market, and countries eager to increase production such as Iraq, which are part of the OPEC+ agreement, will almost certainly cheat on production limits. Goldman Sachs analysts predict that Brent oil may fall below the $75 to $90 range, and this year's oil demand growth will be lower than OPEC+ expectations. They point out that if the market performs below OPEC's optimistic expectations, the unexpected cancellation of additional production cuts will make it more difficult for OPEC to maintain low production.

The three major U.S. stock indices all opened higher and fell together at noon. The Dow Jones Industrial Average turned negative at the beginning of the session and remained negative throughout. The S&P 500 turned negative less than an hour and a half after the opening, and the Nasdaq Composite Index, which had a slight gain of more than 1% at the beginning, turned negative at the beginning of the noon session. When the session refreshed the daily low at noon, the Dow fell nearly 440 points, or more than 1.1%, the S&P fell more than 0.8%, and the Nasdaq fell more than 0.5%. The Nasdaq then turned positive, and the S&P turned positive at the end of the session, with the Dow narrowing most of its losses.

In the end, only the Dow closed lower among the three major indices, falling 115.29 points, or 0.3%, to 38,571.03 points, falling back after stopping a two-day decline on Friday, as it rose more than 570 points on Friday and has not yet approached the closing low on Thursday, May 1. The S&P closed up 0.11%, at 5,283.40 points, rising for two consecutive days after refreshing the closing low on Thursday since May 13. The Nasdaq, which had fallen for three consecutive days and refreshed the low since May 23 for two days, closed up 0.56%, at 16,828.63 points.

The S&P and Dow-related ETFs SPDR S&P 500 ETF (SPY) and SPDR Dow Jones Industrial Average ETF (DIA) closed up 0.08% and down 0.33%, respectively.After ISM data, the 10-year U.S. Treasury yield fell by over 10 basis points to a near three-week low.

The U.S. Treasury Bond ETF, iShares U.S. Treasury Bond ETF (GOVT), closed up 0.51%, marking three consecutive days of gains to reach a high not seen since May 22.

The U.S. 10-year benchmark Treasury yield approached 4.50% in the Asian morning session to set a daily high, then generally declined. After the release of the U.S. ISM Manufacturing Index during the U.S. stock market morning session, the drop rapidly expanded. It once approached 4.39% in the afternoon, setting a low not seen since May 17, falling nearly 11 basis points from the daily high, and was around 4.39% at the end of the bond market, down nearly 11 basis points for the day, marking three consecutive days of decline.

The 2-year U.S. Treasury yield, which is more sensitive to interest rate prospects, once broke above 4.88% in the early European market session to set a daily high. After the release of the ISM Manufacturing data, it quickly fell below 4.82%. At the end of the U.S. stock market, it once approached 4.81%, setting a low not seen since May 21, and was around 4.81% at the end of the bond market, down about 6 basis points for the day, marking four consecutive days of decline.

After the ISM data, the U.S. Dollar Index hit a new low for over seven weeks, the Euro a new high for over two months, and Bitcoin once again surpassed $70,000.

The ICE U.S. Dollar Index (DXY), which tracks a basket of exchange rates against six major currencies including the Euro, turned positive in the early European market session and once broke above 104.70 to set a daily high, with a daily increase of less than 0.1%. After turning negative during the European stock market session, it maintained its downward trend. After the release of the U.S. ISM Manufacturing Index, the decline rapidly expanded, and it broke below 104.10 after the U.S. stock market closed, falling nearly 0.6% for the day, setting a low not seen since April 10 when the U.S. March CPI was announced.

By the end of the currency market on Monday, the U.S. Dollar Index was below 104.10, down nearly 0.6% for the day; the Bloomberg U.S. Dollar Spot Index, which tracks the exchange rate of the U.S. Dollar against ten other currencies, slightly rose for the day, and both the U.S. Dollar Index and the Bloomberg U.S. Dollar Spot Index stopped a two-day losing streak.

Non-U.S. currencies generally rose. The Japanese Yen, which fell last Friday, rebounded to a high not seen in nearly two weeks. The U.S. Dollar against the Japanese Yen once broke below 156.00 during the U.S. stock market session, setting a low not seen since May 21, down nearly 0.9% for the day. After the U.S. ISM data was announced, both the Euro against the U.S. Dollar and the British Pound against the U.S. Dollar accelerated their gains. The Euro touched 1.0900 at the end of the U.S. stock market, setting a high not seen since March 21, up more than 0.5% for the day. The British Pound broke through 1.2800 during the U.S. stock market lunch session, setting a high not seen since March 21, up about 0.5% for the day.

The offshore Chinese Yuan (CNH) against the U.S. Dollar once hit a daily low of 7.2642 in the Asian morning session when it turned short-term negative. It maintained its upward trend during the European and American trading sessions. After the U.S. ISM data, it accelerated its rise, once reaching 7.2511 during the U.S. stock market lunch session, up 119 points for the day, and did not continue to fall to the intraday low set since losing 7.27 last Wednesday. At 4:59 AM Beijing time on June 4, the offshore Chinese Yuan against the U.S. Dollar was reported at 7.2517, up 93 points compared to last Friday's New York close, rebounding after falling back on Friday.

Bitcoin (BTC) once broke above $70,200 during the U.S. stock market morning session, the first time it has surpassed $70,000 since the previous Monday on May 27. It quickly lost this level and gave back some of its gains, falling below $68,600 during the U.S. stock market morning session, and was hovering around $69,300 at the close of the U.S. stock market, up more than 2% in the last 24 hours. Ethereum (ETH), the second-largest cryptocurrency by market value after Bitcoin, once broke above $3,840 during the U.S. stock market morning session to set a daily high, then turned negative during the U.S. stock market session, and was below $3,780 at the close of the U.S. stock market, down at least more than 0.1% for the day.Crude oil fell by over 3%, marking the largest drop in nearly five months and a new low in nearly four months.

International crude oil futures continued to decline. During the Asian market session, when the prices hit a daily high, US WTI crude and Brent crude both rose by nearly 0.7%. After turning negative, they fluctuated slightly positive during the European stock market session. They turned negative again before the US stock market opened and maintained the downward trend. After the release of the US ISM manufacturing index, the decline accelerated. Brent crude broke below the $80 mark for the first time since early February, falling to $78.16 at one point. US crude, which fell below $74, also hit a low not seen since February 8, with both falling by more than 3.9% and 3.6% respectively during the day.

Ultimately, crude oil closed lower for four consecutive trading days, marking the largest daily drop since January 8th when Saudi Arabia unexpectedly reduced the official crude oil selling price to Asia. WTI crude oil futures for July fell by $2.77, nearly 3.60%, to close at $74.22 a barrel, hitting a closing low since February 7th; Brent crude oil futures for August fell by $2.75, 3.39%, to close at $78.36 a barrel, hitting a closing low since February 5th.

The US oil ETF, United States Oil Fund LP (USO), closed down by 4%, hitting a closing low since February 14th, while the Brent oil ETF, United Sttes Brent Oil Fund LP (BNO), closed down by 3.8%, hitting a closing low since February 7th, both falling for four consecutive days.

US gasoline and natural gas futures showed mixed results. NYMEX gasoline futures for July, which rebounded last Friday, closed down by about 3.4%, at $2.3356 a gallon, hitting a new low in over three months; NYMEX natural gas futures for July closed up by 6.53%, at $2.7560 per million British thermal units, rising for two consecutive days and recouping most of the losses from last week.

London base metal futures saw gains and losses on Monday. Leading the gains, London copper closed up by about 1%, rebounding after hitting a three-week low near the $10,000 mark on Friday, following three consecutive days of decline. London aluminum and lead, which had fallen to a one-week low after two days of decline, and London lead, which had fallen for four consecutive days and repeatedly hit a new low for over two weeks, also rebounded. However, London tin fell by over 2%, along with London zinc and London nickel, which fell by over 1%, all falling for three consecutive days, with the former two hitting a three-week low and London nickel hitting a near three-week low.

Gold prices expanded their gains after the release of the US ISM manufacturing index. During the US stock market's midday session, when New York gold futures hit a daily high, the August contract for gold futures rose by nearly 1.3%, while spot gold rose towards $2,355, up by nearly 1.2% during the day.

By the time of the US stock market's midday gold futures closing, COMEX gold futures for August closed up by 1%, at $2,369.3 per ounce, recouping the losses from last Friday's decline. SPDR Gold Trust (GLD) closed up by 0.89%, also rebounding after last Friday's decline. At the time of the US stock market's closing, spot gold was below $2,350, up by about 0.9% during the day.

New York silver futures hit a daily high close to $30.70 after the US ISM data, up by over 1.7% during the day. COMEX silver futures for July, which had fallen for two consecutive days to a low not seen since May 16th last Friday, closed up by 1.13%, at $30.784 per ounce. The iShares Silver Trust SLV, which had fallen for three consecutive days, closed up by 0.47%.