China GDP eyed as global cross currents swirl

Oct 18 – Asian financial markets brace for Chinese GDP figures on Wednesday, the key number in a batch of Chinese indicators to be released as investors also try to navigate a heavy flow of global economic, market and geopolitical cross currents.

Wall Street closed flat to slightly lower on Tuesday, after forecast-busting US retail sales data stoked expectations for another Fed rate hike by year-end and pushed Treasury bond yields sharply higher.

This was set against some upbeat Q3 results from Wall Street giants like Bank of America, although chipmakers fell after the US government said it planned to halt shipments of advanced artificial intelligence chips to China.

On top of that, the Middle East crisis appeared to deepen significantly after Palestinian health authorities said an Israeli air strike on a hospital in Gaza killed around 500 people. Israel has denied conducting the attack. This comes on the eve of President Joe Biden’s planned visit to Israel on Wednesday.

Short-dated US bond yields on Tuesday surged to new historic peaks – the two-year yield near 4.25% and the five-year yield nudging 4.90%, levels last seen in 2006 and 2007, respectively.

Blame bumper US retail sales, which also sparked a spree of upward revisions to US growth forecasts. The Atlanta Fed’s GDPNow model is now running at 5.4% annualized growth for Q3.

Compare that with China.

Annualized and year-on-year growth measures are different, but the general picture is still one of a booming US and sluggish China – figures on Wednesday are expected to show a 4.4% annual rate of growth in the July-September period.

That’s the median estimate in a Reuters poll of 60 economists, and would mark a notable slowdown from 6.3% in Q2. The poll’s range is 3.5% to 5.1%. Bear in mind that the government’s 2023 GDP goal is for growth of around 5%.

Staying in China, the country’s largest private property developer Country Garden is lurching toward defaulting on its offshore debt if it is deemed not to have made a USD 15 million coupon payment on Tuesday.

Non-payment of this tranche will trigger cross defaults in other bonds. With nearly USD 11 billion of offshore bonds and USD 6 billion of offshore loans, a Country Garden default would tee up one of China’s biggest corporate debt restructurings.

The property sector has been a major drag on growth, a driver of deflationary pressures, and a trigger for the huge outflows from China’s stocks, bonds, and currency this year.

The US dollar, meanwhile, is creeping higher against Asia’s two biggest currencies, pushing Japan’s yen and China’s yuan back down to key areas that their central banks are sure to be monitoring closely – 150.00 yen and September’s 16-year high above 7.34 yuan.

Here are key developments that could provide more direction to markets on Wednesday:

– China GDP (Q3)

– China retail sales, investment, unemployment, industrial production (September)

– US President Biden visit to Israel

(By Jamie McGeever; Editing by Josie Kao)

Nasdaq ends down on higher yields, chipmaker share declines

NEW YORK, Oct 17 – The Nasdaq ended lower while the Dow and S&P 500 were nearly flat on Tuesday as Treasury yields rose and shares of chipmakers fell after the Biden administration said it planned to halt shipments of advanced artificial intelligence chips to China.

The Philadelphia SE Semiconductor index was down 0.8%and shares of Nvidia (NVDA) fell 4.7%, even though the world’s most valuable chipmaker said it does not expect a near-term meaningful impact on financial results from the curbs.

US Treasury yields jumped on robust economic data. Higher yields dull the allure of stocks by offering investors comparatively high income on risk-free government bonds.

Helping to limit the declines, though, were upbeat earnings reports from companies including Bank of America (BAC), whose stock gained 2.3% following the bank’s quarterly results. The financial sector was up 0.6% and was among the biggest positives on the S&P 500.

“We had some pretty good earnings from most of the major companies reporting today… but the indices are running up a brick wall as yields go higher,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York.

The Dow Jones Industrial Average rose 13.11 points, or 0.04%, to 33,997.65, the S&P 500 lost 0.43 points, or 0.01%, to 4,373.2 and the Nasdaq Composite dropped 34.24 points, or 0.25%, to 13,533.75.

Data earlier showed US retail sales increased more than expected in September as households stepped up purchases of motor vehicles and spent more at restaurants and bars. A separate reading showed production at US factories increased more than expected in September.

“Good news could be bad news for the stock market because it implies that the (Federal Reserve) is going to leave interest rates higher for longer, and maybe it pushes out some of the expectations for rate cuts in 2024,” said Anthony Saglimbene, chief market strategist at Ameriprise Financial in Troy, Michigan.

The Fed has raised its benchmark overnight interest rate by 525 basis points since March 2022 in an effort to cool inflation.

Investors also are still anxiously watching news on the Middle East. About 500 Palestinians were killed in a blast at a Gaza hospital amid conflicting claims, while US President Joe Biden is set to visit Israel Wednesday to show support for the country in its war with Hamas, which rules the Gaza Strip.

In other earnings news, shares of Lockheed Martin (LMT) ended up 0.2% after the US defense contractor reported better-than-expected third-quarter revenue and profit.

Goldman Sachs’s (GS) third-quarter profit dropped less than expected, though its shares fell 1.6%.

The third-quarter US earnings season is just getting underway. Analysts expect a 2.2% year-over-year increase in overall S&P 500 company earnings for the quarter, according to LSEG data Friday.

Volume on US exchanges was 10.25 billion shares, compared with the 10.41 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 1.34-to-1 ratio; on the Nasdaq, a 1.35-to-1 ratio favored advancers.

The S&P 500 posted 17 new 52-week highs and six new lows; the Nasdaq Composite recorded 48 new highs and 151 new lows.

(Reporting by Caroline Valetkevitch; additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru and by Sinead Carew in New York; Editing by Vinay Dwivedi and Deepa Babington)

PRECIOUS-Gold firms as Middle East risks buoy safe-haven appeal

Fed Chair Powell expected to speak on Thursday

Biden to visit Israel as Gaza humanitarian crisis worsens

Updates prices as of 1814 GMT

By Ashitha Shivaprasad

Oct 17 (Reuters) – Safe-haven gold consolidated gains on Tuesday as traders kept a close eye on developments surrounding the Israel-Hamas conflict, while also positioning for cues on the U.S. rate hike path from Federal Reserve Chair Jerome Powell this week.

Spot gold XAU= was up 0.1% at $1,920.36 per ounce by 2:14 p.m. ET (1814 GMT), and U.S. gold futures GCcv1 settled 0.1% higher at $1,935.7.

U.S. President Joe Biden will make a high-stakes visit to Israel on Wednesday as Gaza’s humanitarian crisis worsens.

Until there is some type of ceasefire or de-escalation, gold is going to hover above the $1,900 range, said Everett Millman, chief market analyst at Gainesville Coins.

Gold, considered a hedge against political and financial uncertainty, has risen more than 4% so far in October.

But if there is no escalation, further upward potential in gold is likely to remain limited as U.S. interest rate cuts could come later than expected, Commerzbank said in a note, reiterating its $1,900 end-December, and $2,100 an ounce end-2024 forecasts.

Powell’s speech on Thursday could shine more light on the U.S. central bank’s monetary policy path after recent dovish rhetoric from several Fed officials.

If there is a hint that the Fed is reaching the end of this rate hike cycle, that would be good for gold, even if we do not get any rate cuts soon, Millman added.

Higher interest rates increase the opportunity cost of holding non-yielding gold.

Limiting gains for bullion prices, benchmark U.S. 10-year Treasury yield US10YT=RR hit a more than one-week high. US/

Silver XAG= firmed 1% to $22.81 per ounce, platinum XPT= rose 0.5% to $896.47. Palladium XPD= was down 0.6% at $1,136.13.

(Reporting by Ashitha Shivaprasad in Bengaluru, Additional Reporting by Daksh Grover; Editing by Nick Zieminski, Josie Kao and Shailesh Kuber)

((Ashitha.Shivaprasad@thomsonreuters.com;))

Major Gulf markets track Asian shares higher

Oct 17 – Major stock markets in the Gulf rose in early trade on Tuesday as Asian shares rebounded and oil prices steadied, although investors remain wary on tensions in the region.

US President Joe Biden will visit Israel on Wednesday as the country prepares to escalate an offensive against Hamas militants that has set off a humanitarian crisis in Gaza and raised fears of a broader conflict with Iran.

Saudi Arabia’s benchmark index gained 1.1%, with Al Rajhi Bank advancing 2.3% and oil giant Saudi Aramco adding 0.3%.

Oil prices – a catalyst for the Gulf’s financial markets – steadied after a more than $1 slide on Monday amid hopes the US would ease sanctions on producer Venezuela, and as Washington stepped up efforts to prevent an escalation of the war between Israel and Hamas.

Among other gainers, Savola Group, the kingdom’s largest food products company, jumped 5.8% after it hired Moelis & Co MC.N to advise on strategic options for its business.

That could potentially include a sale of a portion of its stake in the Middle East’s biggest dairy firm Almarai Company. Almarai shares were flat.

Separately, Saudi Arabia’s USD 778 billion sovereign wealth fund has mandated banks to arrange a bond sale, a document showed, the first high-profile debt issue from the region since last week’s Israel-Hamas conflict unsettled regional markets.

Dubai’s main share index rose 0.2%, on course to snap three sessions of losses, helped by a 1.3% rise in sharia-compliant lender Dubai Islamic Bank.

In Abu Dhabi, the index climbed 0.9%. The Qatari benchmark was also up 0.1%, led by a 0.5% rise in petrochemical maker Industries Qatar.

(Reporting by Ateeq Shariff in Bengaluru; Editing by Jan Harvey)

China tells banks to roll over local government debts – sources

BEIJING, Oct 17 – China has told state-owned banks to roll over existing local government debt with longer-term loans at lower interest rates, two sources with knowledge of the matter said, as part of Beijing’s efforts to reduce debt risks in a faltering economy.

Debt-laden municipalities represent a major risk to the world’s second-largest economy and possibly its financial stability, economists say, amid a deepening property crisis, years of over-investment in infrastructure and soaring costs to contain the COVID-19 pandemic.

Local government debt reached 92 trillion yuan (USD 12.58 trillion), or 76% of the country’s economic output in 2022, up from 62.2% in 2019.

Part of that is debt issued by local government financing vehicles (LGFVs), which cities use to raise money for infrastructure projects, often at the urging of the central government when it needs to boost economic growth. Dry coffers could make it harder for Beijing to kickstart a sputtering economic recovery.

The People’s Bank of China (PBOC) issued orders last week to major state lenders to extend terms, adjust repayment plans, and reduce interest rates of outstanding loans to LGFVs, according to the sources.

Loans that were originally due in 2024 or before will be categorized as “normal” instead of non-performing loans if overdue, and that won’t affect banks’ performance evaluations, one of the sources said. Reuters is reporting these measures for banks to defuse local debt risks for the first time.

To ensure banks do not incur heavy losses from the debt restructuring, interest rates on rolled over loans should not be below China’s Treasury bond rates, said one source, adding that loan terms should not exceed 10 years. China’s benchmark 10-year government bond is now yielding around 2.7%, while the benchmark one-year loan prime rate is 3.45%.

The two sources declined to be identified as the policies were confidential.

Despite the mounting local government fiscal mess, China’s central government has taken a cautious stance on resolving their debt issues to avoid risks of moral hazard: Investors could be encouraged to take even greater risks if they assume Beijing will always come to the rescue of local governments or state companies.

China’s deepening property crisis has added to the pressure on municipalities, with developers in no shape to buy new plots of land, traditionally a key source of local revenue. Since the sector’s debt crisis unfolded in mid-2021, companies accounting for 40% of Chinese home sales
have defaulted, most of them private developers.

The People’s Bank of China (PBOC) and the National Financial Regulatory Administration didn’t immediately reply to Reuters’ request for comments.

Major risks

China’s Politburo, a top decision-making body of the ruling Communist Party, said in late July said it would announce a basket of measures to reduce local government debt risks, but no detailed plans have been officially unveiled yet.

The central bank said it will prioritize resolving debt risks in 12 regions identified as “high risk”, including Tianjin City, Guizhou province and Guangxi province, with a focus on open market bonds and non-standard debt products due this year and next year, the sources said.

Banks are being encouraged to issue new loans to LGFVs to repay bonds and non-standard debt, the sources said.

Additionally, the PBOC will set up an emergency tool with banks to offer loans to LGFVs to solve any short-term liquidity stress, the two sources said. LGFVs will need to repay the loans within two years, a second source said.

Financial news outlet Caixin first reported the central bank’s emergency liquidity tool in August.

In the 12 high-risk regions, some local governments will need to pledge or transfer part of their stakes in local state-owned companies to banks in exchange for assistance from banks to roll over loans, the second source said.

Last year, a Chinese government financing unit in the southwestern Guizhou province extended loans worth $2.3 billion by 20 years, which adjusted interest rates to between 3% and 4.5% per year.

(Reporting by Beijing Newsroom; Editing by Simon Cameron-Moore and Kim Coghill)

UPDATE 9-Oil prices edge higher ahead of Biden Middle East trip

Biden travels to Middle East on Wednesday

US-Venezuela talks could see oil sanctions ease

API shows U.S. crude stockpiles fell last week – sources

Updates with API data on U.S. crude stocks, final two paragraphs

By Nicole Jao

NEW YORK, Oct 17 (Reuters) – Oil prices edged higher on Tuesday as investors wait to see if U.S. diplomatic efforts and a trip by President Joe Biden to Israel will prevent the conflict in the Middle East from widening.

Brent crude futures LCOc1 settled up 25 cents to $89.90 a barrel. U.S. West Texas Intermediate crude (WTI) CLc1 was unchanged at $86.66.

Oil prices fell earlier in the session when Richmond Federal Reserve Bank chief Thomas Barkin said that higher long-term U.S. borrowing costs are putting downward pressure on demand but it was unclear how that will affect the central bank’s rates decision in three weeks.

Interest rate hikes to curb inflation can slow economic growth and reduce oil demand.

Both oil benchmarks rallied last week on fears that the Israel-Hamas conflict could widen into the oil-producing region. Global benchmark Brent gained 7.5% in its largest weekly gain since February.

Biden’s visit to Israel on Wednesday will seek to balance showing support for Israel’s war on Hamas and trying to rally Arab states to help prevent a regional conflict, after OPEC-member Iran pledged “pre-emptive action” from the “resistance front” of its allies that include the Hezbollah movement in Lebanon.

“Oil prices are wavering as energy traders await to see if the U.S. diplomatic efforts will be successful in preventing the Israel-Hamas conflict from turning into a wider regional war,” said Edward Moya, senior market analyst at OANDA.

Providing some support to prices, U.S. retail sales increased more than expected in September as households stepped up purchases of motor vehicles and spent more at restaurants and bars.

Weighing on prices with the possibility of increased supply, Venezuela’s government and opposition are set to resume long-suspended talks on Tuesday, which could lead to Washington easing sanctions, multiple sources said.

Since 2019, the U.S. has imposed sanctions on oil exports from Venezuela, a member of the Organization of the Petroleum Exporting Countries (OPEC), to punish President Nicolas Maduro’s government following elections in 2018 that Washington considered a sham.

The U.S. government has been seeking ways to increase the flow of oil to world markets to alleviate high prices. But any real oil output increase by Venezuela will take time because of a lack of investment.

Saudi Aramco 2223.SE CEO Amin Nasser said the world’s biggest oil company could ramp up production within weeks if needed.

Nasser said global oil demand was set to rise to 103 million barrels per day (bpd) in the second half of this year while the company’s spare capacity is 3 million bpd.

“The market is really tight right now and that’s why we’re so nervous,” Phil Flynn, an analyst at Price Futures Group, said.

“Even if OPEC raised production, the most they could raise production is by 3 million barrels a day. That’s a scary number,” Flynn said.

OPEC+, which comprises OPEC countries and leading allies including Russia, has cut output since last year in what it says is pre-emptive action to maintain market stability.

On U.S. supply, industry data showed crude stocks fell by about 4.4 million barrels in the week ended Oct. 13, according to market sources citing American Petroleum Institute figures on Tuesday. API/S

Seven analysts polled by Reuters estimated on average that crude inventories fell by 300,000 barrels in the week to Oct. 13.

(Reporting by Nicole Jao in New York; Additional reporting by Paul Carsten in London and Sudarshan Varadhan in Singapore; Editing by Marguerita Choy, Barbara Lewis and David Gregorio)

((Nicole.Jao@thomsonreuters.com))

Stocks break higher, but for longer too?

Oct 17 – Asian markets are set to open higher on Tuesday as investors look through developments in the Middle East and rising geopolitical tensions, and take heart from an otherwise more benign US economic and corporate backdrop.

Wall Street’s performance on Monday – the three main indexes rose between 0.9% and 1.2% – will probably set the tone for Asia, where there are no major market-moving economic indicators scheduled for release.

That will change on Wednesday with a raft of Chinese data, including third-quarter GDP. Perhaps the most important event in Asia on Tuesday will be the release of the minutes of the Reserve Bank of Australia’s policy meeting this month.

The Aussie dollar is languishing near a one-year low against the US dollar, but snapped a three-day losing streak and rose 0.8% on Monday.

The greenback’s broad decline on Monday should also help lift risk appetite across Asia on Tuesday, and Wall Street’s rally will give investors food for thought too.

There are signs the positive correlation between US stocks and bonds might be weakening, but some context is required – it has been positive since early August, and only a couple of weeks ago was as strong as it has ever been.

A simple rolling 30-day correlation between the S&P 500 and the ICE BofA US Treasury bond index dipped to 0.88 on Monday, still an extremely high level but the lowest this month and down from 0.94 last week.

Monday’s equity rally and bond selloff suggest the correlation will weaken further. Could stocks – and global risk appetite, by extension – be gaining momentum of their own regardless of what the bond market does?

It’s a bold call. Or perhaps not, if you buy this scenario: the Fed is done raising rates, economic data points to a ‘soft landing’, the worst of the earnings slowdown is behind us and the 2024 outlook is indicating double-digit earnings growth.

Or does Wall Street’s resilience conduct investment flows into the US between now and the end of the year, and away from other regions like Asia and emerging markets?

The situation in the Middle East, meanwhile, doesn’t appear to be weighing too heavily on global risk appetite – implied stock market volatility, gold, the dollar, Treasuries and oil all fell on Monday.

Wall Street’s main indexes and the benchmark MSCI indexes for world, Asian, and emerging stocks are all higher since the Oct. 7 Hamas attack on Israel.

That said, investors in Asia should keep a close eye on the dollar, which is still trading up near 150.00 yen and over 7.30 yuan.

Here are key developments that could provide more direction to markets on Tuesday:

– Australia central bank October meeting minutes

– Fed’s Williams, Bowman, and Barkin all speak

– Russian President Putin visits Chinese President Xi in Beijing

(By Jamie McGeever; Editing by Josie Kao)

Wall Street ends up on earnings optimism; eyes remain on Middle East

NEW YORK, Oct 16 – Major US stock indexes ended sharply higher on Monday as investors were optimistic about the start of earnings season, while transportation and small-cap shares also jumped.

Market participants were monitoring the Israeli war in Gaza, but appeared to be taking more of a risk-on stance on Monday, with safe-haven gold prices down.

Israeli forces continued their bombardment of Gaza, which has killed thousands, including many women and children, after efforts to arrange a cease-fire stalled.

The Cboe Volatility index was lower, while the Dow registered its biggest daily percentage gain in about a month. Also, the economically sensitive Dow Jones transportation average jumped 1.9% in its biggest one-day percentage increase since late July, and the Russell 2000 small-cap index rose 1.6%.

Consumer discretionary led gains among S&P 500 sectors, although all of the sectors were higher on the day.

Charles Schwab shares jumped 4.7% as the brokerage posted a smaller-than-expected drop in quarterly profit.

Quarterly results from large banks Goldman Sachs, Bank of America, Morgan Stanley, pharmaceutical giant Johnson & Johnson, electric vehicle maker Tesla, and video-streaming pioneer Netflix are due this week.

Third-quarter earnings for S&P 500 companies are estimated to have increased 2.2% year-over-year, up from an estimated increase of 1.3% a week earlier, according to LSEG data Friday.

“At least for today, this is a market that sees a stronger earnings season, a stronger week in terms of earnings,” said Quincy Krosby, chief global strategist, LPL Financial in Charlotte, North Carolina.

At the same time, global leaders are trying to make sure that the Middle East conflict “remains contained,” she said.

The Dow Jones Industrial Average rose 314.25 points, or 0.93%, to 33,984.54, the S&P 500 gained 45.85 points, or 1.06%, to 4,373.63 and the Nasdaq Composite added 160.75 points, or 1.2%, to 13,567.98.

Data earlier showed that the New York Fed’s General Business Conditions index, otherwise known as “the Empire State index,” has gone back into negative territory.

Philadelphia Fed President Patrick Harker reiterated his view from Friday that the US central bank was likely done with its rate-hike cycle.

Lululemon Athletica shares rose to their highest level in almost two years as the Canadian sportswear apparel maker was set to join the S&P 500 index this week, replacing Activision Blizzard. Lululemon shares ended up 10.3%.

Volume on US exchanges was 9.60 billion shares, compared with the 10.38 billion average for the full session over the last 20 trading days.

Advancing issues outnumbered declining ones on the NYSE by a 2.59-to-1 ratio; on Nasdaq, a 1.91-to-1 ratio favored advancers.

The S&P 500 posted 11 new 52-week highs and 6 new lows; the Nasdaq Composite recorded 33 new highs and 206 new lows.

(Additional reporting by Ankika Biswas and Shashwat Chauhan in Bengaluru; Editing by Arun Koyyur, Vinay Dwivedi, and Aurora Ellis)

US yields rise amid increased Treasury supply, still-imminent Gaza attack

NEW YORK, Oct 16 – Treasury yields edged higher on Monday as investors grapple with how bonds should be priced in a changing market dynamic that includes increased US government debt issuance with an Israeli ground offensive in Gaza still imminent.

As investors keep an eye on the Middle East, they are trying to better gauge Federal Reserve efforts to curb high inflation with what should be the term premium for interest rates – what investors expect to be compensated for lending longer-term.

A significant increase in government and deficit spending that needs to be financed is part of a new environment that will not change in the foreseeable future, said Kevin Flanagan, head of fixed income strategy at WisdomTree in New York.

“Government spending is entrenched and baseline trillion-dollar deficits are now the norm for the next few years. So what got us here isn’t going to reverse I don’t think any time soon,” he said.

“When you put a lot of this together, it helps explain why Treasury yields almost all across the curve are at or could be soon approaching 5%.”

The yield on 10-year Treasury notes rose 7.7 basis points to 4.706%, while the two-year’s yield, which reflects interest rate expectations, was up 3.8 basis points at 5.092%.

The difference between yields on two- and 10-year Treasuries, seen as a recession harbinger when shorter-term notes yield more than those with longer-dated maturities in what is known as an inverted yield curve, was at -38.8 basis points.

Diplomatic efforts to arrange a ceasefire to let aid reach the besieged Gaza Strip failed on Monday, and Israel ordered the evacuation of villages in a strip of territory near its border with Lebanon, raising fears the war could spread to a new front.

Increased Treasury supply, the acknowledgment that the Fed will keep rates higher for longer and the fact the stock market is performing well are pushing yields higher, said Will Compernolle, macro strategist at FHN Financial in New York.

“Those risky assets are staying pretty steady even in the face of higher returns on bonds,” he said. “The idea of a 5% yield sounds really good but no one wants to add duration to their balance sheet even if a bank has cash to buy more bonds.”

The Treasury sold USD 75 billion in 13-week bills at a high rate of 5.34% and USD 68 billion in 26-week bills at a high rate of 5.335%. Another USD 75 billion in 42-day bills is scheduled to be sold on Tuesday.

The Treasury is slated to auction USD 13 billion in 20-year bonds on Wednesday and USD 22 billion in five-year Treasury Inflation-Protected Securities, or TIPS, on Thursday.

The yield on the 30-year Treasury bond rose 8.3 basis points at 4.862%.

The breakeven rate on five-year US TIPS was last at 2.309%.

The 10-year TIPS breakeven rate was last at 2.372%, indicating the market sees inflation averaging about 2.4% a year for the next decade.

Oct. 16 Monday 2:37 p.m. New York / 1837 GMT

	Price	Current Yield %	Net Change (bps)
Three-month bills	5.3375	5.4965	-0.001
Six-month bills	5.3325	5.5673	0.001
Two-year note	99-212/256	5.0921	0.038
Three-year note	99-86/256	4.8659	0.049
Five-year note	99-160/256	4.7102	0.066
Seven-year note	99-92/256	4.7338	0.074
10-year note	93-132/256	4.706	0.077
20-year bond	91-88/256	5.0718	0.088
30-year bond	88-116/256	4.862	0.083

(Reporting by Herbert Lash; Editing by Will Dunham)

Gold slips, but holds above USD 1,900 pivot on Israel-Hamas conflict

Oct 16 – Gold prices fell on Monday after solid gains in the previous session, but the safe-haven metal held firm above the key USD 1,900 per ounce level as escalating conflict in the Middle East kept investors on edge.

Spot gold was down 0.7% at USD 1,918.20 per ounce by 2:13 p.m. ET (1813 GMT), after hitting its highest since Sept. 20 in the previous session. US gold futures settled 0.4% lower at USD 1,934.3.

“We’re just seeing some healthy consolidation from the recent gains… just some normal profit taking by the short-term futures traders,” said Jim Wyckoff, senior analyst at Kitco Metals.

“We’ve got a serious geopolitical situation playing out in the Middle East, I think gold prices are going to track sideways to higher here in the next few weeks with USD 2,000 not out of the equation.”

Gold, used as a safe investment during times of political and financial uncertainty, has risen more than USD 100 since falling to a seven-month low on Oct. 6, owing to safe-haven inflows as the Israel-Hamas conflict enters its 10th day.

US officials warned that the war between Israel and militant group Hamas could escalate, as US warships headed to the area amid growing clashes on Israel’s northern border with Lebanon.

While investors wait for further updates on the Israel-Hamas war, Federal Reserve Chair Jerome Powell’s speech later this week will also be closely watched for more clarity on US interest rate path.

Markets are pricing in around a 90% chance that the Fed will leave interest rates unchanged at their policy meeting next month, according to the CME FedWatch tool.

Elsewhere, spot silver was down 0.4% to USD 22.6 per ounce.

“Silver investment demand is lackluster but could attract investor attention due to geopolitical tension. We see physical demand in China and India strengthening our bullish conviction,” ANZ analysts wrote in a note.

Platinum was up about 1.2% to USD 891.53 and palladium was unchanged at USD 1,147.62.

(Reporting by Harshit Verma in Bengaluru; Editing by Tomasz Janowski and Shailesh Kuber)

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