Gold Slips Ahead of Fed Minutes — Market Talk
0803 GMT - Gold prices fall as investors await the release of the Federal Reserve's meeting minutes for more cues on this year's inflation and monetary policy outlook. According to the FedWatch tool, traders are pricing in less than a 22% chance of further hikes this month. In early European trading, gold futures are down 0.6% at $4,159.90 a troy ounce. "Tuesday's advance to $4,180 was met with fresh selling as oil prices rebounded and long-end bond yields remained near multiyear highs," analysts at Saxo Bank say. Meanwhile, the U.S. dollar index is up 0.3% at 102.19, making dollar-denominated commodities more expensive for overseas buyers. ([email protected])0727 GMT - The euro falls, albeit staying above recent lows, as oil prices increase and French government bond yields resume rising amid concerns about the country's indebtedness. In an interview with The Wall Street Journal, French Finance Minister Roland Lescure said the government was prepared to exercise special constitutional powers and circumvent parliament to pass billions in spending cuts if negotiations stall over next year's budget. French 10-year yields rise 6.4 basis points to 4.817%, having reached 4.993% Friday, the highest since 2002, LSEG data show. The euro drops 0.3% to $1.1227 after hitting $1.1160 Monday, the lowest in more than 16 months. ([email protected])0714 GMT - Yields on French government bonds rise in European opening trade and by more than their eurozone peers. French bonds remain in focus amid budget talks in which the government insists it will cap the deficit at 5% of GDP. Opposition far-right leader Marine Le Pen's fiscal plan "may briefly support OATs, but a lack of credibility and the election uncertainty ahead still point to spread widening risks," ING rates strategists Michiel Tukker and Benjamin Schroeder say in a note. Eurozone yields also track a rise in Treasury yields ahead of Federal Reserve minutes due later. The German 10-year Bund yield rises 2.2 basis points to 3.495%, while the 10-year French OAT yield increases 5.4 basis points to 4.806%, according to Tradeweb. ([email protected])0704 GMT - Bitcoin stays weaker after reaching a one-week low overnight as the dollar and Treasury yields rise along with oil prices due to the Middle East conflict. Meanwhile, the Federal Reserve's September meeting minutes are due at 1800 GMT. "A cautious tone on further tightening would reinforce the pause the market has priced [for October 28], while a firmer one would raise the odds of a hike sooner," Nexo's Iliya Kalchev says in a note. The minutes, bond yields and exchange traded fund flows will be key for bitcoin's direction, he says. Bitcoin falls 1.6% to $84,303 after reaching as low as $83,682 overnight, LSEG data show. ([email protected])0701 GMT - The Bank of Japan has a favorable window to hike rates through next spring, says Mitsubishi UFJ Morgan Stanley Securities strategist Naomi Muguruma. As the Federal Reserve and the European Central Bank have resumed rate hikes amid higher oil prices, it will likely be easier for markets to digest the BOJ's monetary tightening than when foreign central banks are cutting rates, she says. Consumer price growth is also expected to accelerate in the second half of the fiscal year ending March 2027, she adds. The Overnight Index Swaps market is pricing in more than an 80% chance of a December hike. ([email protected])0654 GMT - The dollar gains as the Middle East conflict pushes up oil prices and as Treasury yields rise. Investors are looking ahead to the minutes of the Federal Reserve's September meeting when the central bank unanimously voted to raise interest rates. However, the minutes at 1800 GMT are likely old news, Commerzbank's Antje Praefcke says in a note. The September inflation figures next week should provide the first truly directional clues for the Fed's October 28 meeting, she says. In the meantime, the dollar could remain in demand as the U.S. economy continues to show resilience, she says. The DXY dollar index rises 0.3% to 102.119. The 10-year Treasury yield rises 3.8 basis points to 5.309%, according to Tradeweb. ([email protected])0635 GMT - The RBI's shift in its policy stance to "calibrated" suggests today's rate hike isn't an open-ended monetary-tightening cycle, Samco Mutual Fund's Umeshkumar Mehta says in an email. The Indian central bank's monetary policy will probably remain data-dependent and measured, the CIO says. Its description of a "calibrated" tightening underscores a preference for a gradual approach, leaving the door open to further action if inflationary pressures prove more persistent than anticipated, Mehta adds. The dollar rises 0.3% to 96.6425 rupees, highest intraday level since late July, LSEG data show. ([email protected])0632 GMT - Higher policy rates won't derail a U.S. economy driven by a largely rate-insensitive artificial-intelligence capex cycle, says Sylvia Sheng, multi asset solutions lead portfolio manager at J.P. Morgan Asset Management. Financial conditions also remain supportive, with credit spreads still tight and corporate fundamentals remaining healthy, she adds. J.P. Morgan's constructive stance on equities is underpinned by solid nominal growth, low recession risk and a sustained AI capex earnings cycle, she adds. The U.S. remains the asset manager's core overweight as it offers the broadest and most durable exposure to the AI capex and adoption cycle, while earnings momentum has started to broaden beyond the initial AI beneficiaries, she says. J.P. Morgan continues to believe the AI capex build-out has ample room to run. ([email protected]; @ivy_jiahuihuang)0626 GMT - The Reserve Bank of India's pace of rate adjustments is likely to remain moderate and data-dependent, hinging on global oil prices, monsoon outcomes and market conditions, says Ajitabh Bharti at CapitalXB. The central bank's statement acknowledges that external shocks such as U.S.-Iran tensions and global rate increases could pressure the rupee and import costs, the executive director and co-founder says in an email. With nearly half of the inflation basket seeing price rises of 4% or more, and risks of inflation breaching the 6% tolerance band in the December quarter, Wednesday's pre-emptive tightening was prudent, he says. ([email protected])0621 GMT - India's central bank is likely to tighten its policy further, Abhijit Surya of Capital Economics writes in a note. CE expects two more 25bp rate hikes, in December and February. The Reserve Bank of India on Wednesday delivered its first rate hike in more than three years, with the governor saying that it will only consider rate hikes or pauses in the near term depending on the economic data, signaling a more hawkish tone, Surya says. The governor also expressed some concern about elevated inflation expectations, Surya adds. ([email protected])0547 GMT - U.S. Treasury yields rise in Asian trade, reversing Tuesday's falls, as investors await the release of the minutes of the Federal Reserve's September meeting later Wednesday. In particular, they look for any signal of what the Fed would do at the October meeting, as markets have recently significantly lowered expectations of an increase this month. "We expect a pause, but still believe further hikes will be on the cards in December and March," Danske Bank's Jens Peter Sorensen says. Money markets currently price in a 22% probability of an increase this month, according to LSEG. The 10-year Treasury yield rises 4.2 basis points to 5.312%, according to Tradeweb. ([email protected])0545 GMT - Danske Bank analysts see the risk of 10-year and 30-year U.S. Treasury yields hitting 6% as investors demand a higher premium for the long end, says chief analyst Jens Peter Sorensen in a note. "The pressure is on the long end of the U.S. Treasury curve given not only supply of Treasurys but also from the hyperscalers," he says. The 10- and 30-year U.S. Treasury yields have risen to multidecade highs in recent days and continue to hover near those levels. The 10-year Treasury yield is up 4.2 basis points to 5.312%, while the 30-year yield is 4.8 basis points higher at 5.688%, according to Tradeweb. ([email protected])