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Gold sparkles on Fed rate decision

Friday, November 03, 2023

Today’s headlines

What’s happening: Gold prices edged higher on Thursday, as investors assessed the Federal Reserve’s latest interest rate decision.

What happened: Rising geopolitical unrest has provided a boost to the safe-haven yellow metal over the past couple of weeks.

Apart from the Federal Reserve’s interest rate decision, weakness in the US dollar and Treasury yields provided support to gold prices on Thursday.

Why it matters: On Wednesday, the US Federal Reserve policymakers decided to keep the key interest rate unchanged at a 22-year high range of 5.25% to 5.5%. However, the central bank added that a wide array of economic data would be taken into consideration to decide on the future course of rate hikes for bringing the inflation rate back to the 2% target.

The Fed’s decision to hold rates exerted pressure on the US dollar and Treasury yields. A decline in the greenback generally makes gold cheaper for foreign currency holders, while lower Treasury yields increase the attractiveness of the yellow metal versus government bonds.

The yield on the 10-year Treasury fell to 4.695% on Thursday, compared to 4.790% on Wednesday. The US Dollar index, which measures the greenback’s performance versus a basket of major peers, declined by around 0.7% to 106.12.

Strong purchases of gold by the emerging market central banks have also lent support to the yellow metal. Gold purchases by global central banks surged to a record high of 800,000 metric tons during the first nine months of the year, the World Gold Council said.

Gold for December delivery gained 0.3% to close at $1,993.50 an ounce on Thursday, while silver for December delivery added 6 cents to settle at $22.85 per ounce. December copper gained 2 cents to $3.67 per.

What to watch: Investors await the release of the US jobs report today, which is expected to significantly impact gold prices ahead. The US economy is expected to add 180,000 nonfarm payrolls in October, down sharply from a gain of 336,000 jobs in September. Analysts expect the US unemployment rate to remain unchanged at 3.8% in September.

Markets will also watch the US dollar and Treasury yields, as well as gold purchases by global central banks.

The markets today

Apple Inc. will be in focus today following the release of its fourth-quarter results

Context: Shares of Apple fell in after-hours trading on Thursday, despite the company reporting better-than-expected fourth-quarter results.

Details: Apple reported upbeat fourth-quarter results, driven by higher-than-expected services revenue. Its services revenue surged to a record high, while iPhone revenues came in slightly short of expectations.

iPhone revenues rose 2.8% year-on-year to $43.805 billion but missed market estimates of $44 billion. Mac sales plummeted 33.9% to $7.61 billion, falling short of expectations of $11.5 billion, while iPad sales fell 10.2% to $6.44 billion, below estimates of $7.1 billion.

Revenues from the company’s key services business jumped 16.3% to $22.31 billion, topping market estimates of $21.35 billion.

The Cupertino, California-based company’s overall revenues contracted to $89.5 billion, from $90.15 billion a year ago, but came in higher than Wall Street expectations of $89.28 billion.
The company reported quarterly earnings of $1.46 per share, beating the consensus estimates of $1.39 per share and coming in higher than $1.29 per share in the year-ago period.

Its gross margins widened to 45.17% in the fourth quarter, from 44.52% in the third quarter.

Apple declared a cash dividend of 24 cents per share and returned more than $25 billion to shareholders.

The tech giant said it expects sales in the current quarter to grow at a similar pace as the previous year, signalling revenue growth rate of about 5%, a figure that fell short of market estimates.

“We now have our strongest lineup of products ever heading into the holiday season, including the iPhone 15 lineup and our first carbon neutral Apple Watch models, a major milestone in our efforts to make all Apple products carbon neutral by 2030,” CEO Tim Cook said during the earnings call.

How shares responded: Apple’s shares fell 3.4% to $171.55 in the extended trading session, following the release of quarterly results on Thursday. The stock has jumped around 42% year to date.

What to watch: Investors will watch the sales of the company’s latest iPhone 15 series and carbon neutral Apple Watch models during the holiday season.

Other Markets: European indices closed higher on Thursday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index up by 1.42%, 1.48%, 1.85% and 1.58%, respectively.

The news shaping the markets

Ukraine accused Nestle of being an “international sponsor of war” as the Swiss giant continued to operate in Russia and expanded its production base. Despite the ongoing tensions, the safe-haven US dollar index declined slightly this morning.


China’s Caixin general service PMI edged higher to 50.4 in October, from the nine-month low recorded last month, lending support to the CNY/USD forex pair.


The Philippines said the S&P Global manufacturing PMI climbed to 52.4 in October, from 50.6 in the prior month. This signalling an improvement in manufacturing activity for the second consecutive month sent the PHP/USD pair higher in forex trading this morning.


Singapore’s S&P Global PMI fell to 53.7 in October, from September’s reading of 54.2. However, the latest reading signalled expansion in private sector activity for the eighth straight month and lent support to the SGD/USD forex pair.


Australia’s Judo Bank services PMI fell to 47.9 in October, from 51.8 in the prior month, which sent the AUD/USD pair lower in forex trading this morning.

What else to watch today

Russia’s composite PMI and services PMI, Germany’s balance of trade and new passenger car registrations, Turkey’s inflation rate, producer price inflation, total vehicle sales and balance of trade, South Africa’s S&P Global PMI, France’s industrial production and payroll employment in private sector, Brazil’s IPC-Fipe inflation, Spain’s unemployment change, Italy’s jobless rate, UK services PMI and composite PMI, Eurozone’s unemployment rate, India’s bank loan growth, value of deposits and foreign exchange reserves, Mexico’s gross fixed investment, Canada’s unemployment rate, employment change and S&P Global services PMI, US composite PMI, services PMI, ISM services PMI and Baker Hughes crude oil rigs, as well as China’s current account.


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