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Gold records weekly loss amid higher US bond yields

 

Monday, February 12, 2024

Today’s headlines

What’s happening: Gold prices moved lower on Friday following a rise in US Treasury yields.

What happened: The safe-haven metal recorded a weekly loss as investors assessed monthly consumer price data from the US.

However, weakness in the US dollar limited the overall losses for the bullion on Friday.

Why it matters: US monthly consumer prices increased lower than earlier projected for December. The rise in the CPI (consumer price index) was revised to 0.2% in December, from 0.3% reported last month.

Investors await data on the US consumer price index for January, scheduled for release on Tuesday.

Traders widely expect the US Federal Reserve to maintain interest rates higher for longer, with various central bank policymakers, including Fed Chairman Jerome Powell, saying that inflation needs to ease a little more for them to begin rate cuts.

The benchmark 10-year US Treasury yields hit a two-week high on Friday, while the 2-year yields jumped to around two-month highs. This made non-yielding gold less attractive for traders and exerted pressure on demand.

Some weakness in the greenback, limited the losses in gold. The US dollar index, which measures the greenback’s performance versus a basket of major peers, slipped around 0.1% to 104.08 on Friday.

Gold for April delivery fell 0.5% to settle at $2,038.70 per ounce on Friday, recording a weekly decline of 0.9%.

In other metals trading, silver for March delivery lost 5 cents to reach $22.59 per ounce, copper fell 2 cents to $3.68, platinum declined to $878.2 and while palladium declined to $869.30 per ounce.

What to watch: Investors await the release of inflation data from the US to get some more insights into the Fed’s rate cut plans. The annual inflation rate in the US, which increased to 3.4% in December, is expected to ease to 3% in January. Analysts expect the annual core consumer price inflation rate to slow to 3.8% in January, from 3.9% in December.

Markets will continue monitoring geopolitical concerns, bond yields and the US dollar.

The markets today

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

Context: Shares of PepsiCo fell on Friday, after the company delivered a mixed performance for its latest quarter.

Details: PepsiCo recorded the first sales decline in 14 quarters, with several price hikes negatively impacting demand for its beverages and chips.

The soda and snacks giant said its overall quarterly sales fell 0.5% year-over-year to $27.85 billion, missing the consensus estimates of $28.40 billion. Adjusted earnings came in at $1.78 per share in the fourth quarter, topping Wall Street expectations of $1.72 per share.

Operating profits at Quaker Foods North America contracted by 79%, while PepsiCo Beverages North America’s operating profits declined 27%.

However, the company’s overall gross profits rose 1.2% year-over-year to $14.75 billion, while operating profits almost doubled to $1.68 billion.

PepsiCo announced a 7% hike in its annualised dividend to $5.42 per share, payable in June 2024.

Management guided to organic revenue growth of at least 4% for 2024, versus the 9.5% surge recorded in 2023. The company projected earnings of $8.15 per share for the year, slightly higher than the market estimates of $8.14 per share.

How shares responded: PepsiCo’s shares fell 3.6% to close at $167.67 on Friday. The stock has lost around 9% over the past six months.

What to watch: Investors will continue monitoring demand for its beverages and chips, which declined last quarter, as PepsiCo consistently increased its prices due to higher input costs.

Other Markets: European indices closed lower on Friday, with the FTSE 100, DAX 40, CAC40 and STOXX Europe 600 Index down by 0.30%, 0.22%, 0.24% and 0.09%, respectively.

The news shaping the markets

US Senate inched closer to passing an aid package of $61 billion for Ukraine, despite rising opposition from former President Donald Trump. The news sent the RUB/USD pair lower in forex trading this morning.


Ireland’s BNP Paribas real estate construction PMI rose to 45.9 in January, from 45.1 in the prior month, which lent support to the EUR/USD forex pair.


Saudi Arabia’s industrial production fell by 10.5% year-over-year in December. This being the eighth straight month of contraction sent the SAR/USD pair slightly lower in forex trading this morning.


Mexico’s industrial production came in flat year-over-year in December, following a 2.9% surge in the earlier month, which exerted pressure on the MXN/USD forex pair.


Canada’s unemployment rate fell to 5.7% in January, from a 22-month high of 5.8% in the prior month. However, the CAD/USD pair fell slightly in forex trading this morning.

What else to watch today

Turkey’s unemployment rate and labour force participation rate, India’s industrial production, inflation rate and manufacturing production, Russia’s balance of trade, US government budget statement and consumer inflation expectations for the year ahead, as well as Central Bank of Brazil’s focus market readout.


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