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What’s happening: Gold prices fell on Monday amid a broader selloff in the equity markets.
What happened: The yellow metal came under pressure despite weakness in the US dollar.
Although there are speculations of strong demand for the safe-haven bullion, market sentiment was hurt by concerns around a slowdown in the US economy.
Why it matters: Stock markets around the world declined on Monday amid global growth concerns, with Japanese equities surpassing their 1987 Black Monday selloff. US stock markets also recorded sharp losses, with the Dow Jones index shedding more than 1,000 points, as investors shorted risk assets.
Investors also assessed the nonfarm payrolls (NFP) data released on Friday, which showed the US economy added 114,000 jobs in July. The figure was lower than the 179,000 gain in June and missed market estimates of 175,000. The latest job adds were also well below the average of 215,000 over the last 12 months, signalling a cooling off in the US labour market.
The US unemployment rate rose to 4.3% in July, from 4.1% in the prior month, recording the highest level since October 2021. Average hourly earnings rose by 0.2% to $35.07 in July, lower than the 0.3% gain recorded in the previous month.
The data fuelled speculations of the US Federal Reserve cutting interest rates during its meeting in September by as much as 50 bps. Markets are also pricing in rate cuts of more than 100 bps by the end of the year.
Lower interest rates generally make gold more attractive, as it is a non-yielding asset.
Weakness in the US dollar limited the overall decline in gold prices. A lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.5% to 102.68.
Gold for December delivery declined $25.40 to close at $2,444.40 per ounce on Monday.
Prices of other metals also remained under pressure. Silver for September delivery declined $1.18 to settle at $27.21 per ounce, while September copper slipped 10 cents to $4 per pound.
Prices of both platinum and palladium, which are used in engine exhausts to lower emissions, also declined on Monday due to a general transition to net-zero emissions. Platinum shed more than 4% to $915.5, while palladium tumbled to its weakest level since August 2018.
What to watch: Investors will watch the monetary policy outlook of global central banks and geopolitical developments.
Context: The CAD/USD forex pair edged higher on Monday amid strength in crude oil prices.
Details: Investors continued assessing comments from the Bank of Canada about its monetary policy outlook. Markets widely expect the BoC to cut interest rates at each of its rate decision meetings for the rest of 2024.
Higher prices for crude oil, one of Canada’s major exports, lent support to the Canadian dollar on Tuesday. WTI crude oil futures gained 1.8% to trade at $74.24 per barrel this morning.
Some strength in the US dollar limited the overall gains for the CAD/USD pair. The US dollar index edged higher to 102.72 this morning.
The CAD/USD forex pair added around 0.1% to reach 1.3814 this morning. The S&P/TSX Composite Index had shed 2.18% to close at 22,227.63 on Friday, with markets remaining closed on Monday due to the Civic Holiday.
What to watch: Investors await the release of economic reports on Canada’s balance of trade, composite PMI and services PMI today. The S&P Global Canada composite PMI is expected to decline to 46.2 in July, from 47.5 in June, while the services PMI is projected to fall to 46.8 in July, from 47.1 in the prior month.
Canada had reported a trade deficit of C$1.93 billion in May, which is expected to widen to C$2.0 billion in June.
Other Markets: European indices closed lower on Monday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 2.04%, 1.82%, 1.42% and 2.17%, respectively.
Ukraine’s Air Force said it had shot down all 24 drones launched by Russia yesterday, especially targeting Kyiv. The news sent the RUB/USD lower in forex trading this morning.
Australia’s private house permits declined by 0.5% to 9,078 units in June, in-line with expectations, which lent support to the AUD/USD forex pair.
Philippines’ trade deficit widened to $4.3 billion in June, from $3.9 billion in the year-ago period, which sent the PHP/USD pair lower in forex trading this morning.
Japan’s household spending declined by 1.4% year-over-year in June, following a 1.8% downturn in the previous month. This came in worse than market expectations of a 0.9% decline, exerting pressure on the JPY/USD forex pair.
UK’s retail sales grew by 0.3% year-over-year in July, rebounding from a 0.5% decline in the prior month, which sent the GBP/USD pair higher in forex trading this morning.
Germany’s factory orders and construction PMI, France’s payroll employment in the private sector and construction PMI, Eurozone’s construction PMI and retail sales, Italy’s construction PMI, UK construction PMI, Mexico’s auto Exports and car output, US balance of trade, Redbook index, RealClearMarkets/TIPP economic optimism index, total consumer debt, Logistics Manager’s index and API crude oil stocks change, as well as Brazil’s car production, new vehicle sales and balance of trade.
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