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What’s happening: Gold recorded gains on Friday, with prices settling the session near an all-time closing high.
What happened: The US Federal Reserve chief Jerome Powell signalled that the central bank may cut interest rates soon.
Concerns over economic growth and weakness in the US dollar also lent support to the yellow metal on Friday.
Why it matters: During his speech at Kansas City Fed’s 2024 Economic Policy Symposium in Jackson Hole, Jerome Powell expressed concerns around weakness in the labour market.
He added that the Fed is becoming more confident of inflation gradually returning to its 2% target and that the labour market needs to be closely monitored to ensure it doesn’t cool further.
Powell signalled that the central bank will soon begin lowering interest rates, without commenting on the timing or extent of the rate cuts.
Increased speculations of interest rate cuts lent support to gold, as lower rates make the non-yielding yellow metal more attractive. The benchmark 10-year Treasury yields declined to 3.815% on Friday, from 3.862% on Thursday.
Weakness in the US dollar also provided a boost to gold prices, as a lower greenback makes metals cheaper for foreign currency holders. The ICE US Dollar Index fell around 0.8% on Friday.
Gold for December delivery gained by $29.60, or 1.2%, to close at $2,546.30 an ounce on the Comex, close to the record settlement high of $2,550.60 on Tuesday. The yellow metal has surged around 23% year to date.
Gold jumped as high as $2,554.50 during Friday’s session, slightly below the intraday record high of $2,570.40 reached on Tuesday.
In other metals trading, silver closed sharply higher, with prices of the September silver contract gaining 2.7% to close at $29.82 an ounce. This marked the strongest settlement since July 18.
September copper gained 1.3% to close at $4.20 a pound on Friday. October platinum rose 1.3% to close at $966.10 an ounce, while September palladium added 2.4% to settle at $942.50 an ounce.
What to watch: With the Fed chief’s comments now out of the way, markets will turn their focus to corporate earnings, with Nvidia all set to report its quarterly results this week. Economic growth and inflation will also remain a major concern for investors.
Context: European equity markets closed higher on Friday, as investors monitored comments from Fed’s chief Jerome Powell.
Details: During his speech at Kansas City Fed’s 2024 Economic Policy Symposium in Jackson Hole, Jerome Powell said, “The time has come for policy to adjust…the timing and pace of rate cuts will depend on incoming data, the evolving outlook, and the balance of risks.”
Markets are now fully pricing in a rate cut by the Federal Reserve at its September meeting.
The Stoxx 600 index rose by 0.46% to close at 518.13 on Friday. The Eurozone’s Stoxx 50 recorded a 1.3% gain on the week, while the Stoxx 600 added 1.3% last week. Banks were among the top performers, with Santander’s stock rising around 2% and UniCredit’s shares adding more than 1%.
Shares of Nestle settled slightly higher on Friday, after falling around 4% on the news of CEO Mark Schneider being replaced by Laurent Freixe, following a lacklustre performance by the company.
The FTSE 100 gained 0.48% to settle at 8,327.78 on Friday. Germany’s DAX 40 climbed 0.76%, while France’s CAC 40 rose 0.70%. The EUR/USD forex pair also added around 0.7%.
What to watch: Investors await the release of economic data on Germany’s Ifo business climate index, Ifo current conditions index and Ifo expectations index today. The Ifo Business Climate indicator for Germany, which fell for a third straight month to 87 in July, is expected to decline further to 86.5 in August.
Analysts expect the Ifo current conditions index in Germany to decline to 86.5 in August, from 87.10 points in July, while Ifo expectations index is projected to fall to 86.5, from 86.90 points in the previous month.
Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.14%, 1.15% and 1.18%, respectively.
Ukraine’s President Volodymyr Zelenskyy said its military forces had advanced up to 3 kms into the Kursk region of Russia. The news sent the RUB/USD pair slightly lower in forex trading this morning.
Mexico’s current account surplus widened to $3,639 million in the second quarter, from $2,106 million in the year-ago period. However, the goods account gap shrinking to $4,345 million, from $7,184 million in the same quarter last year exerted pressure on the MXN/USD forex pair.
The People’s Bank of China held its interest rate at 2.30% after cutting it by 20bps in July, which sent the CNY/USD pair higher in forex trading this morning.
Canada’s retail sales grew by 0.6% in July, after a 0.3% decline in June, lending support to the CAD/USD forex pair.
US sales of new single-family houses jumped 10.6% to 739,000 units in July. The latest reading topping market expectations of a 1% gain sent the Dow Jones index higher by more than 1% on Friday.
Turkey’s business confidence and capacity utilization, Brazil’s FGV consumer confidence, current account, foreign direct investment and Central Bank of Brazil focus market readout, Canada’s wholesale sales, as well as US durable goods orders and Dallas Fed manufacturing index.
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