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Gold records biggest weekly loss in 6 weeks

 

Monday, January 22, 2024

Today’s headlines

What’s happening: Gold prices moved higher on Friday, but recorded losses its biggest weekly decline in six weeks.

What happened: The yellow metal gained on Friday with remarks from Fed officials reducing speculations of an early cut in interest rates.

Rising geopolitical concerns also lent support to the safe-haven metal during Friday’s session.

Why it matters: Prices of the yellow metal rebounded to the $2,030 level on Friday, amid weakness in the US dollar, as traders continued to assess comments from Fed officials regarding their monetary policy.

Chicago Fed President Austan Goolsbee said that the US central bank needs more data on inflation before making any rate cuts.

The Federal Reserve is projected to hold interest rates in the range of 5.25%-5.50% for the fourth straight time at its policy meeting on January 31. There are lower speculations now of the Fed cutting rates in March. Lower rates reduces the opportunity cost of holding bullion.

There is uncertainty around the inflation outlook in the US as the growth in prices is gradually declining, while recent reports still signal strength in the economy, specially due to strong household spending.

Weakness in the US dollar lent support to gold prices on Friday. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell around 0.3% to 103.24. However, the index ended the week around 0.8% higher. A stronger greenback makes metals, including gold, more expensive for foreign currency holders.

Gold prices also received some support from geopolitical concerns last week, which resulted in higher flows towards safe-haven assets.

Gold futures gained 0.5%, or $10.20, to settle at $2,031.80 an ounce on Friday. The yellow metal lost over 1% last week.

In other metals trading, silver lost 0.25% to reach $22.75 an ounce, copper prices gained 1.2% to $3.7900, Platinum fell 0.33% to $909.0 and palladium gained 0.85% to $952.00.

What to watch: Investors will continue assessing geopolitical concerns after Pakistan carried out strikes inside Iran, following similar strikes by Iran inside Pakistani territory.

Comments from Fed speakers as well as US inflation data are also expected to significantly impact gold prices ahead.

The markets today

Schlumberger Limited will be in focus today after releasing results for its fourth quarter

Context: Shares of SLB gained on Friday following the company’s better-than-expected quarterly results.

Details: Schlumberger has been benefitting in recent years due to higher international oil production. The company posted upbeat quarterly results and projected strong growth in its international business during 2024.

Revenues from international operations climbed 18% to $7.29 billion during the latest quarter, while North America revenues came in flat.

Schlumberger said its overall fourth-quarter revenues grew by 14% year-over-year to $8.99 billion, topping the consensus estimates of $8.95 billion. Adjusted earnings rose 21% year-over-year to 86 cents per share, topping Wall Street expectations of 84 cents per share.

Revenues generated by its Digital & Integration division rose 4% year-over-year to $1.05 billion, while Reservoir Performance revenues jumped 12% to $1.735 billion. Revenues from Well Construction gained 6% to $3.43 billion, while Production Systems revenues jumped 33% to $2.94 billion during the quarter.

“Compared to the same quarter last year, international revenue outpaced North America, growing 18% while North America was relatively flat,” CEO Olivier Le Peuch. “Notably, we achieved our highest-ever revenue in the Middle East, led by impressive growth in Saudi Arabia, the United Arab Emirates, and Egypt & East Mediterranean GeoUnits,” he added.

The company’s board announced a 10% hike in quarterly cash dividends to 27.5 cents per share. SLB also plans to increase share repurchases in 2024.

How shares responded: SLB’s shares gained 2.2% to close at $49.64, following the release of quarterly results on Friday. The stock has lost more than 13% over the past six months.

What to watch: Investors will watch the performance of SLB’s international business, as further growth is expected to provide a significant boost to the company’s overall results.

Other Markets: European indices closed mostly lower on Friday, with the DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.07%, 0.40% and 0.26%, respectively, and the FTSE 100 up by 0.04%.

The news shaping the markets

North Korea’s Minister of Foreign Affairs, Choe Son Hui, said her country was ready to greet Russian President Vladimir Putin. The news sent the RUB/USD pair slightly higher in forex trading this morning.


Kuwait’s annual inflation rate eased to 3.4% year-over-year in December. Despite this being the lowest level since February, the KWD/USD forex pair traded almost flat this morning.


The People’s Bank of China held its lending rates at its January fixing, which sent the CNY/USD pair slightly lower in forex trading this morning.


Mexico’s retail sales grew by 2.7% year-over-year in November, missing market estimates of a 3.2% increase, which exerted pressure on the MXN/USD forex pair.


US University of Michigan’s consumer sentiment jumped to 78.8 in January, from 69.7 in December. This being the highest level since July 2021 sent the Dow Jones index higher by more than 1% on Friday.

What else to watch today

Turkey’s central government debt, US CB Leading Index, as well as Central Bank of Brazil’s focus market readout.


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