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What’s happening: Gold prices recorded gains on Monday, surging to the strongest level since August 2.
What happened: Higher demand for safe-haven assets in investor portfolios provided a boost to gold prices during Monday’s session.
Investors continued monitoring geopolitical tensions, including an escalation in the ongoing Russia-Ukraine, which lent support to the yellow metal.
Why it matters: Ukrainian President Volodymyr Zelensky confirmed that the country’s military forces had crossed into Russia. Russian President Vladimir Putin vowed to get the “enemy” out of his country’s territory after Ukraine’s forces claimed to have taken control of dozens of villages.
Investors also closely monitored comments from the US Federal Reserve regarding its monetary policy ahead of the release of the much-awaited inflation data. Fed Governor Michelle Bowman issued dovish comments over the weekend, saying inflation in the US remains “uncomfortably” above the central bank’s 2% target, which saying there are upside risks.
Inflation data is expected to impact demand for the greenback and, in turn, influence gold prices. The upcoming inflation report will signal strength or weakness in the US economy, which is projected to impact the Fed’s rate decision in September.
Traders widely expect the US Federal Reserve to cut rates by as much as 50 basis points at its September meeting.
Gold is considered as a hedge against geopolitical and economic uncertainties, and generally moves higher in a low-rate environment.
Some weakness in US dollar lent further support to gold prices, as a lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, fell slightly on Monday.
Gold futures gained more than 1% to close at $2,504.00 on Monday.
In other metals trading, silver futures jumped around 1.5% to settle at $28.008. Copper climbed to settle at $4.0685, while platinum gained around 1.8% to close at $946.6 and palladium settled higher at $899.40.
What to watch: Investors await the release of producer prices and consumer prices, due to be announced on Tuesday and Wednesday, respectively. Factory gate prices in the US, which rose by 0.2% in June, are expected to rise by 0.1% in July. Analysts expect the annual inflation rate in the US to ease to 2.9% in July, from June’s reading of 3%.
Context: Equity markets in Europe closed mixed on Monday, following significant volatility last week.
Details: Global stock markets remained volatile last week, beginning the week with sharp losses and later recovering.
The STOXX Europe 600 Index slipped by 0.02% to close at 499.08 on Friday, with travel and leisure stocks among the worst performers. However, oil and gas stocks gained around 0.6% despite the OPEC+ (Organization of Petroleum Exporting Countries) lowering its global oil demand growth outlook for 2024.
Shares of BT Group jumped around 7% on Monday, after India’s Bharti Enterprises is looking to acquire a 24.5% stake in the company for about £3.2 billion.
Consumer cyclicals and staples stocks declined on Monday, with shares L’Oreal and BMW down by 1%. However, the pan-European Stoxx 600 index recorded a weekly gain of 0.27%.
London’s FTSE 100 gained 0.52% to settle at 8,210.25, while Germany’s DAX 40 rose 0.02% to close at 17,726.47. France’s CAC 40 declined 0.26% to settle at 7,250.67.
What to watch: Investors await the release of the ZEW Economic Sentiment Index from the Eurozone and Germany today. The ZEW Indicator of Economic Sentiment for the Eurozone, which declined by 7.6 points to 43.7 in July, is expected to fall further to 35.4 in August.
Analysts expect the ZEW Indicator of Economic Sentiment for Germany falling to 38 in August, from 41.8 in July.
Other Markets: US trading indices closed mixed on Monday, with the S&P 500 and Nasdaq 100 up by 0.01% and 0.16%, respectively, and the Dow Jones index down by 0.36%.
The US issued a warning to Iran against sending Fath-360 close-range ballistic missiles to Russia. The news sent the RUB/USD pair lower in forex trading this morning.
Australia’s wage price index rose by 4.1% year-over-year in the second quarter. This being unchanged from the previous quarter lent support to the AUD/USD forex pair.
Singapore’s current account surplus widened to S$34.57 billion in the second quarter, from S$32.75 billion in the year-ago period, sending the SGD/USD pair higher in forex trading this morning.
Japan’s producer prices rose by 3.0% year-over-year in July, following a 2.9% gain in the previous month. The region recording producer inflation for the 42nd straight month exerted pressure on the JPY/USD forex pair.
New Zealand’s number of visitor arrivals rose by 3.8% year-over-year to 185,300 in June, sending the NZD/USD pair higher in forex trading this morning.
Japan’s machine tool orders, UK’s unemployment rate, average weekly earnings, employment change, claimant count change and HMRC payrolls change, Spain’s inflation rate, Turkey’s current account, Germany’s ZEW current conditions index, South Africa’s gold production and mining production, US NFIB small business optimism index, Redbook index and API crude oil stocks change, as well as China’s new yuan loans, money supply M2, outstanding yuan loan growth, total social financing.
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