Gold gives up record highs on profit-taking
Gold Price Movement
Gold prices fell in European trade on Tuesday for the first time in six days off record highs on active profit-taking.
Factors Affecting Prices
Prices are pressured by the dollar’s spike in recent days, in addition to gains by US treasury yields following strong US inflation data, which reduced the odds of a Fed interest rate cut in June.
Prices
- Gold prices fell 0.25% today to $2246 an ounce, with a session-high at $2259.
- Gold prices rose 0.8% on Monday, the fifth profit in a row, marking a fresh record high at $2265 an ounce on strong haven demand.
The Dollar's Impact
The dollar index rose 0.15% on Tuesday on track for the fifth profit in a row, hitting a five-month high at 105.10 against a basket of major rivals. A stronger dollar makes greenback-denominated gold futures costlier to holders of other currencies.
US Treasury Yields
US 10-year treasury yields rallied by 0.4% to a two-week high at 4.337%, underpinning the dollar further.
US Data Insights
The US manufacturing PMI tipped into growth in March at 50.3, the best reading since October 2022, and passing estimates of 48.5. The gains reflect increasing orders and improving growth inside the US during the first quarter of the year.
US Interest Rates
Following the data, the odds of a US interest rate cut at the June Federal Reserve meeting fell from 70% to 63%. Traders are still pricing in 75 basis points of expected US interest rate cuts this year.
Gold Performance Projections
JPMorgan's analysts foresee gold prices hitting $2500 an ounce this year. Goldman Sachs' analysts project a minimum price target of $2300 an ounce for this year, anticipating policy easing by the Federal Reserve.
The SPDR
Gold holdings at the SPDR Gold Trust fell 3.17 tonnes yesterday to a total of 826.98 tonnes, the lowest since March 13.
Stay informed about gold's performance with timely updates.
Euro sharpens decline to two-month trough on the interest rate gap
Euro Performance Declines
Euro declined in European trade on Tuesday against a basket of major rivals, sharpening losses for the second straight day against the dollar and plumbing a two-month trough on concerns about the US-Eurozone interest rate gap.
Market Sentiment
Markets are now convinced of the possibility that the European Central Bank will cut interest rates in June, with traders awaiting important European inflation data later today and tomorrow to have a better picture.
EUR/USD
- EUR/USD fell 0.2% to 1.0725, the lowest since February 14, with a session-high at 1.0744, after losing 0.4% on Monday, the fourth loss in five days following strong US manufacturing data.
Interest Rate Gap
The current US-Europe interest rate gap stands at 100 basis points, the lowest since May 2022, and is expected to expand to 125 basis points next June if the ECB went ahead with a rate cut while the Federal Reserve abstained.
European Rates
- Recent bearish remarks by several ECB policymakers bolstered the case for an early interest rate cut in June, with markets estimating a total of 90 basis points of rate cuts this year.
Inflation Data
Later today, consumer prices data for Germany and other European countries will be released, while tomorrow, data for the whole euro zone will be released.
Euro Performance Estimates
Credit Agricole’s forex analysts expect the dollar to outperform the euro relatively, as the euro is exposed to potential downward inflationary shocks this week.
For more insights and updates on the euro's performance, stay tuned.
Wall Street opens April lower
US Stock Market Analysis
- Most US stock indices opened lower on Monday, the first session of April, following strong quarterly profits.
- Investors are evaluating the Federal Reserve’s monetary policy amidst this scenario.
Federal Reserve's Monetary Policy
- Federal Reserve Chair Jerome Powell emphasized caution regarding rate cuts, citing inflation above the 2% target.
Trading Overview
- Dow Jones dropped 0.6%, or 232 points, as of 14:58 GMT to 39,574.
- S&P 500 declined 0.2%, or 12 points, to 5242.
- NASDAQ saw a decrease of 0.1%, or 4 points, to 16,375.
The US stock indices reflect cautious sentiment as investors monitor quarterly earnings and Federal Reserve announcements.
Copper futures rise after positve Chinese data
Copper Market Analysis
- Copper prices experienced a rise on Monday, driven by positive Chinese manufacturing data, indicating increased demand for the metal.
- However, gains were tempered by a surge in inventories.
Market Performance
- Copper May futures at the Shanghai Futures Exchange closed up 0.7% at 72,810 yuan per tonne, following a 5.4% surge in March.
- Trading at the London Metals Exchange is closed today due to the Easter holiday.
- The price surge followed a report showing growth in Chinese manufacturing for the first time in six months.
- Recent US inflation data suggests a potential Fed interest rate cut in June.
- However, high copper inventories, particularly monitored by the SHFE CU-STX-SGH, are restraining prices.
- Copper spot prices remained lower than futures last week.
Other Metal Prices
- Aluminum prices rose 0.3% to 19685 yuan per tonne.
- Zinc rose 0.1% to 20,985 yuan per tonne.
- Nickel lost 0.4% to 129,910 yuan per tonne.
- Lead fell 1.4% to 16,490 yuan per tonne.
- Tin fell 0.2% to 5,590 yuan per tonne.
The dollar index rose 0.4% to 104.9, with a session-high at 104.9 and a low at 104.4.
Copper futures due in May rose 1.4% to $4.06 a pound.