Gold Falls With Focus on U.S. Monetary Policy — Market Talk
1039 ET - Gold prices fall despite lower oil prices, as a stronger dollar and rate-hike expectations weigh on the precious metal. In early U.S. trade, New York futures are down 0.3% to $4,385.60 a troy ounce, on track for a weekly loss of 0.5%. Goldman Sachs analysts, however, maintain their gold-price forecast to $5,400 an ounce by the end of next year. "While higher rates should continue to weigh on gold prices through ETF demand in the near term, our economists expect the Fed to deliver three cuts between September 2027 and March 2028, leaving the terminal forecast unchanged at 3.25%-3.5%," they say. "We therefore expect the impact of tighter monetary policy to be felt primarily through a slower near-term appreciation path rather than a lower terminal gold price." ([email protected])1030 ET - Bitcoin climbs over 5% to $80,410. "Bitcoin is benefiting from a broader risk-on move as oil and long-term Treasury yields ease, while roughly $154 million of daily U.S. spot ETF inflows and short-covering helped push it through," says Lacie Zhang of Bitget Wallet. The $80,000 mark is "psychologically important," Zhang says — and it comes after a lot of leverage has already left bitcoin in recent trading sessions. As a result, bitcoin is responding better to "renewed spot demand," Zhang says. Ethereum is up 4.5% to $2,562, XRP is up 5.6% to $1.37, and solana rises 7.8% to $109.08. ([email protected])1006 ET - Sterling could weaken against the euro as the Bank of England could keep interest rates unchanged this year while the European Central Bank raises rates further, Danske Bank's Kirstine Kundby-Nielsen says in a note. Danske expects the BOE to hold rates steady until next summer before cutting rates, while it sees the ECB delivering another two rate rises in October and December. The U.K. economy remains fragile and there is more scope for a significant repricing in BOE rate expectations compared to ECB, Kundby-Nielsen says. There are also fiscal risks ahead of the October U.K. budget, she says. The euro trades steady at 0.8589 pounds and Danske expects it to reach 0.88 in six months. ([email protected])1004 ET - The Norwegian krone could trade sideways near-term as the positive impact of elevated energy prices offset weaker risk sentiment and U.S. interest rate rise expectations, Danske Bank's Mohamad Al-Saraf says in a note. "We still see the global environment as the key near-term driver, with Federal Reserve expectations, risk sentiment and, not least, energy markets being the main factors to watch." Danske maintains a neutral krone stance for now. However, it expects the krone weaken further out due to Norway's high unit labor costs, declining interest rate differential compared to peers and expected easing of energy prices. The euro trades flat at 10.8070 krone and Danske expects it to reach 11.50 in 12 months. ([email protected])0956 ET - Michelle Bowman, Vice Chair for Supervision of the Fed's Board of Governors, announces the initial findings of the independent review of Silicon Valley Bank's collapse in 2023. "SVB failed as the result of a confluence of vulnerabilities including real but unrealized accounting losses on its securities portfolio that exceeded its capital," Bowman says when delivering remarks in London. Bowman also says the supervisory staff at the Fed knew, or should have known, about these vulnerabilities as early as March 2022. "Supervisory staff did not take prompt and decisive action to encourage or require SVB to reduce its interest rate risk or concentration of vulnerabilities," a published text of her remarks says. Bowman believes one significant factor contributing to supervisory inaction was a long-standing culture of risk aversion. ([email protected])0939 ET - The Bank of England on Thursday announced significant changes to its quantitative tightening program, or the process of shrinking its gilt holdings, a positive development for the gilt market, analysts at BNP Paribas say in a note. The pause of active gilt sales until April, reduces gilt supply, they say. The BOE's plan to sell 20 billion pounds in gilts to the Debt Management Office, annually until 2034, makes gilt supply more predictable and reduces uncertainty, the analysts say. Gilt yields fell after the BOE announcement, but they are up on Friday after stronger-than-expected retail sales data and in line with rising yields globally. Ten-year gilt yields climb 7.3 basis points to 5.291%, Tradeweb data show. ([email protected])0932 ET - ING now expects both the Federal Reserve and European Central Bank to hike interest rates once before the end of the year, a change from the holding path it previously forecast. "Wednesday's Fed meeting and last week's ECB meeting have shown us that both central banks are not likely to follow the very dovish path we anticipated," ING economists say in a note. Both central banks are facing a supply-side shock driven by surging energy prices that has so far produced only limited knock-on effects across the broader economy, set against still-fresh memories of the 2022 inflation surge and delayed monetary-policy responses, the economists say. They suspect both banks to increase rates in December. ([email protected])0931 ET - The Swedish krona's recent poor performance looks set to continue as the European Central Bank raises interest rates and the Riksbank holds rates steady, Danske Bank's Jesper Fjarstedt says in a note. The eurozone-Swedish policy rate gap stands at 75 basis points, the widest it has ever been, after the ECB raised rates by 25 basis points last week, he says. That spread could widen if the ECB lifts rates again in October and December while the Riksbank lingers until November and February, he says. The euro rises 0.3% to 11.2985 krona and Danske expects it to reach 11.50 in 12 months. ([email protected])0925 ET - The Bank of Japan answered U.S. Treasury Secretary Scott Bessent's call to raise rates, but the yen is still weaker, potentially creating a new concern for Bessent, who helped lead the first coordinated support for the yen since 1998 earlier this summer. "The result was that while the BoJ certainly did shift hawkish, it was not enough to meet market expectations ramped up by US Treasury Secretary Bessent who had talked up his 'asymmetric information' in his battle to strengthen the Yen," says Krishna Guha of Evercore ISI. "The BoJ's reticence to signal more aggressive policy will strain his efforts to strengthen the Japanese currency." The Japanese yen is off 1% against the U.S. Dollar at 157.73 JPY. ([email protected])0909 ET - Prime Minister Carney's inaugural Canada Investment Summit this week drew some of the world's biggest capital managers, where they were pitched investment opportunities in shovel-ready developments. Any push to boost an underwhelming record on foreign direct investment is welcome, though National Bank's economists note the summit wasn't needed to spur foreign portfolio investment. Non-resident investors remain enthusiastic buyers of Canadian securities this year, confirmed by recent international securities transactions data, they note. Non-residents through July picked up a record year-to-date C$179 billion in Canadian portfolio securities, spurring a big swing in capital flows as Canadians have been net buyers of foreign securities but at a slower pace. ([email protected]; @RobbMStewart)0905 ET - Treasury yields edge higher and the curve flattens as markets price in a more hawkish Fed. Wednesday's hike boosts confidence in the Fed's commitment to fighting inflation. That makes shorter-term yields rise faster than long-term ones. The 10-year yield is at 4.973% and the two-year at 4.722%, both slightly higher than yesterday but below highs set earlier this week. The spread between the two benchmarks is on pace to settle at the narrowest level since March 2025. ([email protected]; @ptrevisani)0854 ET - U.K. consumers continue to demonstrate a strong willingness to spend, helping the economy even with elevated energy prices and the prospect of higher interest rates, Pantheon Macroeconomics' Rob Wood and Elliott Jordan-Doak say in a note. Some of August's 0.5% rise in retail sales volumes was flattered by earlier-than-usual promotions in June weighing on July's sales figures. "But that misses the big picture that households' spending has been strong for months now, despite the barrage of headwinds," the economists say. The trend in retail sales volumes has risen 2.4% month-to-month annualized over the past six months, they note. However, consumer spending is set to slow with climbing energy costs and higher mortgage rates ahead, they add. ([email protected])