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Gold hits new high as investors monitor rate cuts

Tuesday, April 02, 2024

Today’s headlines

What’s happening: Gold prices surged to a new record high on Monday, as investors continued to monitor monetary policies from major central banks.

What happened: After spiking to an all-time high on Thursday last week, the yellow metal extended its gains during Monday’s session.

Data on the US Federal Reserve’s preferred inflation gauge, released on Friday, showed some acceleration in prices.

Why it matters: Gold prices recorded gains for last month and the quarter. The yellow metal gained 8.9% in March and added 8% in the first quarter of 2024. The safe-haven metal rose on Thursday to close at $2,238.40 an ounce, notching the strongest settlement on record.

Data released on Friday showed inflation in the US moderating in February, fuelling speculations of the Federal Reserve being on track to cutting interest rates in June. February’s core deflator fell to 0.3% on the month, compared to 0.5% in January. The headline annual inflation rate, as measured by personal consumption expenditures (PCE) accelerated to 2.5% in February, in-line with expectations, from 2.4% in the previous month, amid rising personal spending.

Fed chief Jerome Powell said the latest PCE report was “pretty much in line” with expectations.

Gold prices generally move higher amid low interest rates, as this reduces the opportunity cost of holding the non-yielding metal. Rising prospects of rate cuts, along with increased demand for safe-haven assets amid ongoing geopolitical concerns, have provided a boost to gold prices this year.

Major central banks of emerging market have been increasing their holdings of gold, raising the demand for the previous metal.

The US dollar surging to more than a four-month high limited the overall gains for the yellow metal. Strength in the US dollar makes metals, like gold, more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, settled at 105.02 on Monday.

Gold for June delivery gained $18.70 to close at $2,257.10 per ounce on Monday.

In other metals trading, silver for May delivery added 15 cents to $25.07 per ounce and May copper gained 4 cents to $4.05 per pound. Platinum settled at $911.4, while palladium closed at $1,004.00.

What to watch: Investors await the release of major economic reports, including the Eurozone inflation rate and US jobs data this week. The US economy, which added 275,000 jobs in February, is expected to add 200,000 jobs in March. Analysts expect the unemployment rate in the US to remain unchanged at 3.9% in March.

The markets today

US stocks will be in focus today ahead of a couple of major economic reports

Context: US stocks closed mostly lower on Monday, with the Dow Jones index shedding more than 200 points.

Details: The major US stock indices closed the first quarter with gains. The S&P 500 surged 10.2% to record its strongest first-quarter performance since 2019. The Dow Jones index added 5.6% during the quarter. Wall Street stocks also rose in March, notching gains for the fifth consecutive month.

However, the Dow Jones index started the second quarter on a negative note, with investors assessing the latest inflation data. Investors remain concerned about the pace of rate cuts by the Fed this year.

Data released on Monday showed the ISM manufacturing PMI increasing to a reading of 50.3 in March, from February’s level of 47.8. The figure also came in higher than market expectations of 48.4. Meanwhile, US construction spending declined by 0.3% in February.

The Dow Jones index fell 240.52 points, or 0.60%, to close at 39,566.85, while the S&P 500 lost 0.20% to settle at 5,243.77 on Monday. The Nasdaq 100 bucked the trend and added 0.21% to close at 18,293.20.

What to watch: Investors await the release of economic data on job openings and factory orders from the US today. The number of job openings, which fell by 26,000 from the prior month to 8.863 million in January, is expected to decline to 8.74 million in February.

Analysts expect new orders for US manufactured goods to grow by 1% in February, following a 3.6% decline in January.

Other Markets: European indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 0.26%, 0.08%, 0.01% and 0.18%, respectively.

The news shaping the markets

France announced plans to provide Ukraine hundreds of old armoured vehicles and new surface-to-air missiles. The news sent the RUB/USD pair lower in forex trading this morning.


Australia’s job advertisements fell by 1.0% in March, decelerating from a 2.1% decline a month ago, which lent support to the AUD/USD forex pair.


The Philippines said its producer prices fell 1.2% year-over-year in February, after a 1.1% decline in the prior month, sending the PHP/USD pair lower in forex trading this morning.


Ireland’s AIB manufacturing PMI fell to 49.6 in March, from 52.2 a month ago, exerting pressure on the EUR/USD forex pair.


South Korea’s annual inflation rate came in unchanged at 3.1% in March, in-line with market estimates, which sent the KRW/USD pair slightly higher in forex trading this morning.

What else to watch today

UK’s Nationwide house price index, consumer credit, net mortgage approvals, mortgage lending, manufacturing PMI, money supply M4 and net lending to individuals, Australia’s commodity prices and home prices, Spain’s tourist arrivals and manufacturing PMI, Italy’s manufacturing PMI, France’s manufacturing PMI, Germany’s manufacturing PMI and consumer price inflation, Eurozone’s manufacturing PMI and inflation expectations, Brazil’s value of outstanding loans, producer prices and Central Bank of Brazil focus market readout, Mexico’s business confidence indicator, US Redbook index, Logistics Manager’s index, total vehicle sales and American Petroleum Institute crude oil stocks, Argentina’s tax revenue, Turkey’s balance of trade, as well as South Africa’s total vehicle sales.


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