Spot Gold Sees Steepest Drop in Over a Decade

Yield curve flattens further as US-China tensions continue to calm. UST yields traded in a ~3 bp range today and closed nearly flat across the curve. Longer dated yields fell slightly as Trump said he expected to make a “good deal” with China, easing concerns over a full-blown trade war, despite also warning that his meeting with President Xi Jinping may fall through. The 10-year yield declined 2 bps to close at 3.96%, while the front-end of the curve ended flat, with the 2-year yield at 3.46%. Meanwhile, gold and silver sold off, with spot gold and silver declining as much as 6.3% and 8.7% today, respectively, in a reversal of last week’s strong rally.

White House announces purchase of 1 million barrels of crude oil. President Trump today announced a plan to purchase 1 million barrels of crude oil, in a move to replenish the US’s depleted emergency supply. American oil reserves are currently only about 60% full, or roughly 408 million barrels, and the Trump Administration described the announcement as an “important step in strengthening our energy security.” The purchase comes as oil prices traded at around $58 a barrel today, the lowest price since 2021 and down 30% since January. The oil will be bought using some of the $171 million allotted to crude oil spending under President Trump’s signature tax bill. Bids for the Energy Department’s 1-million-barrel order will be due by 11 am on October 28th, to be delivered in December and January.

Japan elects new prime minister, likely to build strong relationship with the US. Following a parliamentary vote today, Sanae Takaichi became Japan’s first female prime minister and the new leader of the Liberal Democratic Party. She faces a series of pressing challenges, starting next week with a meeting with US President Donald Trump, who plans to visit the nation as part of his tour through Asia. Building a strong relationship with Trump will be critical as Takaichi hopes to renegotiate parts of the current US–Japan trade deal. There are no immediate plans for renegotiation, and the current trade agreement that caps tariffs on most products at 15%.