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What’s happening: Gold recorded sharp gains on Friday, with prices breaching the key $2,600 resistance level.
What happened: Prospect of further rate cuts by the US Federal Reserve increased purchases of the non-yielding gold.
Ongoing weakness in the US dollar and rising geopolitical tensions also supported the yellow metal on Friday.
Why it matters: The Federal Reserve started its easing cycle last week, announcing a bigger rate cut of 50 basis points (bps) than was widely expected. On Wednesday, the Fed lowered its benchmark interest rates for the first time in four years, amid a worsening labour market in the US.
Fed officials also indicated that there could be another 50bps reduction in interest rates by yearend, a cut of 100bps in 2025 and another of 50bps in 2026. Lower interest rates mean lower opportunity cost of holding non-yielding gold.
Continued weakness in the US dollar also provided support to gold. The US dollar index, which measures the greenback’s performance versus a basket of major peers, closed at 100.72 on Friday. A softer US dollar makes gold cheaper for foreign currency holders.
US gold futures jumped to a record high of $2,630.00 an ounce, breaching the important $2,600 resistance level for the first time. Gold prices have surged more than 26% year to date amid ongoing geopolitical concerns that raise safe-haven purchases.
Sharp rallies in gold prices in 2024 have weighed on retail demand from Asian nations. China did not purchase any gold from Switzerland in August, for the first month in more than three years. Dealers in India are providing steep discounts to customers to trigger sales.
In other metals trading, silver prices settled higher at $31.505, which palladium settled at $1,078.10 and platinum settled lower at $981.9 on Friday.
What to watch: Investors now await the release of economic reports on US manufacturing and services PMI today and data on PCE prices, personal income and personal spending due later in the week. The S&P Global manufacturing PMI, which was revised lower to 47.9 in August, is expected to increase to 48.5 in September. Analysts expect the S&P Global US services PMI to decline to 55.2 in September, from 55.7 in August.
Context: European stock markets settled lower on Friday, as investors assessed interest rate decisions by major central banks last week.
Details: The Bank of England and Norway’s Norges Bank kept their respective interest rates unchanged at their latest meeting, while the US Federal Reserve announced an outsized rate cut of 50 bps last week.
Meanwhile, the Eurozone’s consumer confidence indicator rose to -12.9 in September, from a reading of -13.40 points in August. The figure also came in slightly better than estimates of -13.
The STOXX Europe 600 Index shed 1.42% to close at 514.26 on Friday, after recording gains through Thursday’s session. Most sectors closed in the negative zone, with tech stocks shedding around 3% and mining stocks losing 2.6%.
Auto stocks also recorded sharp losses on Friday, after Mercedes lowered its projections for 2024 citing weaker demand from China.
London’s FTSE 100 fell 1.19% to settle at 8,229.99 on Friday. UK retail sales grew by 1% in August, compared to a 0.7% gain in July. The figure also topped market estimates of 0.4%. However, the GfK Consumer Confidence indicator declined to -20 in September, hitting the weakest level in six months.
Germany’s DAX 40 fell 1.49% to 18,720.01, while France’s CAC 40 lost 1.51% to settle at 7,500.26 on Friday.
What to watch: Investors await the release of economic data on composite PMI, services PMI and manufacturing PMI from the Eurozone today. The HCOB Eurozone composite PMI, which was revised down to 51 in August from a preliminary reading of 51.2, is expected to decline to 50.6 in September.
Analysts expect the manufacturing PMI to decline to 45.6 in September, from 45.8 in August, while the services PMI is projected to fall to 52.4 in September, from 52.9 in the previous month.
Other Markets: US trading indices closed mixed on Friday, with the S&P 500 and Nasdaq 100 down by 0.19% and 0.24%, respectively, and the Dow Jones index up by 0.09%.
Ukraine’s President Volodymyr Zelenskyy said the country’s allies had provided more military support during early September. The news sent the RUB/USD pair lower in forex trading this morning.
Australia’s Judo Bank Flash services PMI business activity index declined to 50.6 in September, from 52.5 in the previous month. The region’s serviced activity remaining in the expansion zone for the eighth straight month lent support to the AUD/USD forex pair.
Macau’s annual inflation rate eased to 0.74% in August, from 0.82% in July, sending the MOP/USD pair lower in forex trading this morning.
New Zealand reported a trade deficit of NZ$2.2 billion in August, versus a year-ago gap of NZ$2.42 billion. However, the trade deficit being the highest in 11 months exerted pressure on the NZD/USD forex pair.
Canada’s industrial producer prices declined by 0.8% in August, after a 0.1% decline in the previous month, which sent the CAD/USD pair higher in forex trading this morning.
France’s composite PMI, manufacturing PMI and services PMI, Germany’s composite PMI, manufacturing PMI and services PMI, UK’s CBI industrial trends orders, composite PMI, manufacturing PMI and services PMI, Mexico’s economic activity and retail sales, Canada’s new housing price index, US Chicago Fed National Activity Index, as well as Central Bank of Brazil’s focus market readout.
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