By Barani Krishnan
Investing.com — Just a month ago, you could hear the whisper on every corner of Wall Street: Gold’s going to $2,000.
Now, few seem sure of holding onto the $1,800 level which has been the yellow metal’s support since Christmas, let alone recapturing the $1,900 perch it lost three weeks ago.
For a fourth week in a row, longs holding gold futures booked losses — if not real at least on paper — after aimless trades that barely went beyond the mid-$1,800 level.
Gold for on New York’s Comex settled Friday’s trading at $1,817.10 an ounce, down $9.70, or 0.5% on the day. For the week, the benchmark gold futures contract lost $23.30, or 1.3%.
The , more closely followed than futures by some traders, was at $1,811.45 by 14:25 ET (19:25 GMT), down $10.86, or 0.6% on the day.
At the heart of the gold trade is the sinking feeling that the metal might be consumed by the same inflation it is supposed to be a hedge against, as the Federal Reserve gears to ratchet up rate hikes again amid stickier-than-thought price growth.
The latest trouble to gold came in the form of the Fed’s preferred inflation indicator — the , or PCE, Index — which grew 5.4% in the year to January, beating forecasts for the month as well as its previous growth in December.
The hit a seven-week high against a basket of major currencies while the yields on the U.S. note hit their highest since 2007 amid a near reach of the 4% level for the benchmark note.
All these were on the back of expectations that the Fed will resort to more hawkish monetary action amid the “hotter inflation in the U.S.,” economist Greg Michalowski said in a post on the ForexLive forum.
U.S. , meanwhile, hit a 13-month high in February, according to a survey by the University of Michigan that showed Americans more optimistic about spending at a time the Fed actually needs them to show restraint.
“Hot PCE inflation and improving consumer sentiment just broke gold’s back,” said Ed Moya, analyst at online trading platform OANDA. “Gold is in the danger zone as Fed rate hike bets are getting ramped up and as rate cut calls get pushed deeper into next year.”
“Gold still has a bullish playbook for later this year, but the bearish momentum could be strong here if we see a break of the $1,800 level.”
Economists had expected the annualized January growth of the PCE to at least match December’s 5%, after aggressive rate hikes by the Fed for almost a year now.
Without volatile food and energy prices, the so-called was up 4.7% during the 12 months to January versus a forecast 4.3% and a previous growth of 4.4% in the year to December.
“The PCE report shows that the Fed needs to do a little more,” Loretta Mester, Fed president for the region of Cleveland, said in comments carried by Bloomberg. “It is gratifying that inflation declined from [its] peak, but more is needed.”
President Joe Biden, in a statement released by the White House, concurred. “Today’s report shows we have made progress on inflation, but we have more work to do.”
The , a broader gauge of inflation, stood at a four-decade high of 9.1% for the year to June. It has moderated since to an annualized growth of 6.4% in January. The Fed’s target for inflation is just 2% per year.
“Wage growth is still running too high to be consistent with timely, and a sustainable return to 2% inflation,” Philip Jefferson, a board member at the Fed, said.
To clamp down on runaway price growth, the Fed added 450 basis points to interest since March via eight hikes. Prior to that, rates stood at nearly zero after the global outbreak of the coronavirus in 2020.
The Fed’s first post-COVID hike was a 25-basis point increase in March last year. It then moved up with a 50-basis point increase in May. After that, it executed four back-to-back jumbo-sized hikes of 75 basis points from June through November. Since then, it has returned to a more modest 50-basis point increase in December and a 25-basis point hike in February.
for the Fed’s March 22 policy meeting, monitored by foreign exchange traders, remained at 25 basis points on Friday, though it could end up being twice as much amid increasing calls for tighter policing from the central bank’s hawks.
French climate investments to drive up national debt burden – think-tank
© Reuters. FILE PHOTO: French President Emmanuel Macron visits Institut Curie laboratory ahead of announcements on biomedical research in Saint-Cloud, France, May 16, 2023. REUTERS/Benoit Tessier/Pool
PARIS (Reuters) – Investments that France needs to finance its transition to a low-carbon economy are set to add 25 percentage points to its debt burden by 2040, a report from the government-funded France Strategie think-tank said on Monday.
France will need to make additional annual investments of about 67 billion euros ($74 billion) – more than 2% of economic output – by 2030 to meet its objectives for reducing its dependence on fossil fuels, France Strategie calculated.
The think-tank, which is part of the prime minister’s office, said the financial effort would weigh heavily on public finances partly because the investments imply lower potential growth, which would cut tax revenues.
As a result, the debt burden would rise by 10 percentage points by 2030 and 25 percentage points by 2040, which France Strategie suggested might need to be financed in part by a temporary tax on wealthy households.
President Emmanuel Macron’s government has hoped to chip away in the coming years at France’s national debt, which currently stands at slightly more that 111% of gross domestic product after surging during the COVID crisis.
The report said the financial burden of investing in Europe’s energy transition also posed a risk in terms of international economic competition, as other major economies such as the United States and China were less concerned about budgetary constraints.
About 100 experts in French and European research groups as well as public French institutions participated in the report, which was led by economist Jean Pisani-Ferry, who previously helped Macron draft his economic programme.
($1 = 0.9084 euros)
Crude oil largely flat; Caution ahead of debt ceiling meeting
Investing.com — Oil prices traded largely unchanged Monday, with traders cautious ahead of the resumption of U.S. debt ceiling negotiations while supply concerns add support.
By 09:30 ET (13:30 GMT), futures traded 0.1% lower at $71.59 a barrel, while the contract fell 0.1% to $75.52 a barrel.
U.S. President Joe Biden and Republican House Speaker Kevin McCarthy are set to meet later this session to try and agree on a deal to raise the more than $31 trillion debt ceiling.
Concerns that a failure to come up with an acceptable compromise have weighed heavily on the market over the recent weeks, as this would result in the U.S. defaulting on its debt obligations, likely plunging the global economy into recession.
The U.S. Treasury has warned that the government could run out of money to pay its bills as soon as June 1.
That said, both crude benchmarks managed to post gains last week, ending four straight weeks of heavy declines, helped by the U.S. starting to refill its Strategic Petroleum Reserve as well as the supply disruptions in Canada, due to early wildfires in the crude-rich Alberta province.
Additionally, the latest data from showed the U.S. oil rig count fell by 11 over the last week, to its lowest count since June 2022.
“A slowdown in U.S. drilling activity is a concern for the oil market, which is expected to see a sizable deficit over the second half of the year,” said analysts at ING, in a note.
“Producers appear to be responding to the weaker price environment, rather than expectations for a tighter market later in the year.”
This brings the Organization of Petroleum Exporting Countries and allies, known as OPEC+, firmly into focus, with its next meeting in early July.
The cartel surprised the market with an output cut at the last meeting, which came into effect at the start of this month. However, this has done little to support crude prices, implying the members may be looking at a further reduction in production.
The fact U.S. producers are not increasing in number will be good news for OPEC+, ING added, “as it suggests that they will be able to continue supporting prices without the risk of losing market share to U.S. producers.”
California grid operator signs off on $7.3 billion of power lines
© Reuters. FILE PHOTO: A woman jogs by power lines, as California’s grid operator urged the state’s 40 million people to ratchet down the use of electricity in homes and businesses as a wave of extreme heat settled over much of the state, in Mountain View, Californi
(Reuters) – California’s electric grid operator has approved a plan expected to cost $7.3 billion for 45 new power transmission projects over the next decade and made it easier for new power plants in high-priority areas to connect to the grid.
The projects will support the development of more than 40 gigawatts (GW) of new generation resources, the California Independent System Operator (CAISO) said on Thursday.
“With electrification increasing in other sectors of the economy, most notably transportation and the building industry, even more new power will be required in the years ahead,” the CAISO said.
The vast majority of the transmission projects will be built in California, with some in neighboring Arizona, it said.
The power lines recommended by CAISO’s 2022-2023 Transmission Plan will allow the state’s grid to add more than 17 GW of solar resources, 8 GW of wind generation, 1 GW of geothermal development, and battery storage projects.
CAISO will prioritize connecting power plants to the grid in specific geographical zones identified by its plan where developing new power lines and plants “make the most economic and operational sense.”
The grid operator also approved proposed reforms to account for “increasing levels of net load forecast uncertainty between day-ahead and real-time markets … as the generation fleet evolves towards a cleaner, but more variable, resource mix.”
It projected that its transmission plan next year could include the need to add 70 GW of new power to the grid by 2033, rising to 120 GW as the state seeks to meet its goal of a carbon-free power system by 2045.
Power supply in the U.S. West is vulnerable to extreme heat as it relies on regional energy transfers to meet demand at peak or when solar output is diminished, the North American Electric Reliability Corp (NERC) said in its summer outlook on Wednesday.
Forex News6 months ago
Dollar retreats as banking support prompts relief rally
Economy News5 months ago
Top 5 Investing Trends For 2023
Forex News6 months ago
Dollar retreats, euro gains after Credit Suisse boosts risk sentiment
Forex News6 months ago
Dollar slips after ECB rate decision, Fed hike seen
Forex News6 months ago
Asia FX rises, dollar dips amid easing bank crisis fears
Forex News6 months ago
Dollar slips as banking turmoil snares markets
Economy News6 months ago
Israel, UAE sign free trade pact into effect
Forex News6 months ago
Dollar edges lower; Chinese growth data boosts risk sentiment