Gold hovers near record high ahead of Fed decision

Today’s headlines

What’s happening: Gold prices rose on Friday, remaining comfortably above the $3,670 resistance level.

What happened: Signs of weakness in the US labour market sparked speculations of the Federal Reserve announcing its first interest rate cut of the year.

Gold continued to climb last week despite having risen by around 40% year to date.

Why it matters: Data released by the US last week showed initial jobless claims rising to near four-year highs. Initial jobless claims rose 27,000 from the previous week to 263,000 in the first week of September, well above market estimates of 235,000. Data indicated that the US economy had added 911,000 fewer jobs than was expected in the 12 months to March this year.

Consumer prices recorded their biggest monthly rise in seven months in August, although producer prices unexpectedly declined.

Investors widely expect the Fed to cut interest rates by 25 basis points (bps) at its meeting later this week, while there are some speculations of a bigger of 50 bps. Meanwhile, US President Donald Trump is continuously pushing the Fed to announce rate cuts. Gold gets a boost with any decline in interest rates, as this reduces the opportunity cost of holding the yellow metal.

The demand for gold was also supported by uncertainties caused by Trump continuing to push its G7 allies to impose higher tariffs on India and China as these nations continue buying crude from Russia. Rising concerns in the Middle East lent further support to gold prices.

Some strength in the US dollar limited the overall gains for gold, as a higher greenback makes metals more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose around 0.1% to 97.62 on Friday.

US gold for December delivery gained 0.3% to close at $3,686.40 an ounce on Friday. The yellow metal added more than 1% last week, recording gains for the fourth straight week.

In other metals trading, silver rose to $42.830 per ounce, platinum to $1,411.7 and palladium to $1,250.70, with all three metals notching weekly gains.

What to watch: Investors await the Fed’s interest rate decision on Wednesday. The Fed has kept its interest rates unchanged at 4.25%–4.50% for five consecutive meetings.

Rising geopolitical concerns will also remain in focus.

The markets today

The Canadian dollar in focus today ahead of a basket of major economic reports

Context: The CAD/USD forex pair edged higher this morning as investors digested the latest economic data.

Details: Data released on Friday showed that Canada’s total value of building permits fell 0.1% to $11.9 billion in July, compared to a 9% decline in June. Canadian industrial capacity utilisation fell to 79.3% in the second quarter, from 79.9% in the previous quarter, but came in higher than market estimates of 78.8%.

Recent data signalled weakness in the domestic labour market, which raised speculations of the Bank of Canada beginning to cut interest rates soon. Canada shed around 65,500 jobs in August, while the unemployment rate rose to the highest level since 2016.

Higher prices of crude oil, one of Canada’s major exports, lent support to the loonie. WTI crude oil prices gained 0.5% to $62.99 a barrel this morning.

However, strength in the US dollar weighed on the CAD/USD forex pair. The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose to 97.65 this morning.

The CAD/USD pair edged higher to 1.3845 this morning, while the S&P/TSX Composite Index fell 0.42% to 29,283.82 on Friday.

What to watch: Data on Canada’s manufacturing sales (1630 UAE Time), new motor vehicle sales (1630 UAE Time) and wholesale sales (1630 UAE Time) will be released today. Analysts expect Canada’s manufacturing sales to rise 1.8% in July, following a 0.3% gain in the previous month.

Canada’s car registrations are projected to decline to 160,000 units in July, from 177,313 units in June. Wholesale sales are expected to rise by 1.3% in July, following a 0.7% gain in the previous month.

Other Markets: European indices closed mostly lower on Friday, with the FTSE 100, DAX 40 and STOXX Europe 600 Index down by 0.15%, 0.02% and 0.09%, respectively, and the CAC 40 up by 0.02%.

The news shaping the markets

Romania became the second NATO country after Poland to report that Russia’s drone had breached its airspace. The news sent the RUB/USD pair higher in forex trading this morning.

Fitch Ratings lowered France’s sovereign credit rating from AA- to A+, exerting pressure on the EUR/USD forex pair.

Poland’s trade deficit widened to €1.27 billion in July, from €1.17 billion in the year-ago period, which sent the PLN/USD pair lower in forex trading this morning.

India’s consumer price inflation rose to 2.07% in August, from 1.61% in the previous month, exerting pressure on the INR/USD forex pair.

New Zealand’s BusinessNZ Performance of Services Index fell to 47.5 in August, from 48.9 in the previous month. However, the NZD/USD pair rose in forex trading this morning.

What else to watch today

Italy’s balance of trade (1200 UAE Time), Eurozone’s balance of trade (1300 UAE Time), Germany’s 12-month Bubill auction (1330 UAE Time), India’s unemployment rate (1430 UAE Time), Brazil’s IBC-BR economic activity (1600 UAE Time), US NY Empire State manufacturing index (1630 UAE Time), 3-month Bill auction (1930 UAE Time), 6-month Bill auction (1930 UAE Time) and NOPA Crush report (2000 UAE Time), as well as France’s 12-month BTF auction (1700 UAE Time), 3-month BTF auction (1700 UAE Time) and 6-month BTF auction (1700 UAE Time).