Gold struggles for traction on doubts about Fed pause

July 17 (Reuters) – Gold prices were little changed on Monday, with bullion traders still doubtful about whether the Federal Reserve may soon signal an end to its monetary tightening path.

Spot gold was steady at USD 1,953.91 per ounce at 1:42 p.m. EDT (1742 GMT). US gold futures settled 0.4% lower at USD 1,956.40.

The dollar hovered near a more than one-year low, making gold less expensive for other currency holders.

“(Gold) investors at this point are quite reluctant to go fully bullish despite last week’s inflation data,” said Bart Melek, head of commodity strategies at TD Securities.

Bullion posted its biggest weekly gain since April last week on bets that the Fed could pause rate hikes after July after US data hinted at a disinflationary trend as consumer prices grew at their slowest pace in over two years.

Traders largely expect the central bank to hike rates in its July 25-26 meeting.

“Gold is likely to be under pressure as the US economy continues to be quite firm, particularly on the employment front. In my view it is very unlikely that the Fed is going to commit to a tilt towards a more dovish policy stance,” Melek added.

Higher interest rates dull gold’s allure as they increase the opportunity cost of holding the non-yielding asset.

Investors also took stock of data from China that showed the top bullion consumer’s economy grew at a frail pace in the second quarter.

Silver fell 0.5% to USD 24.82 per ounce.

“While sentiment may be good towards silver investment, industrial applications retain the majority of market share,” Heraeus analysts wrote in a note.

“An improvement in activity in China and Europe may be needed to see the (silver) price rise much further in the second half of 2023.”

Platinum rose 0.6% to USD 977.42 and palladium gained 1.2% to USD 1,286.13.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by David Holmes and Andrea Ricci)

Tepid China data, Richemont pull down European shares

European shares fell on Monday as China’s lackluster economic data knocked down commodity-linked stocks, while luxury group Richemont slumped on weaker-than-expected organic sales growth.

The pan-European STOXX 600 index was down 0.5% by 0706 GMT. The benchmark index posted gains of nearly 3% in the previous week, driven by hopes that the US Federal Reserve could wind up its interest rate hikes soon.

Data on Monday signaled China’s economy grew at a frail pace in the second quarter on weaker demand, leading to a fall in commodity prices, which dragged miners and energy firms down 1.6% and 0.8%, respectively.

Shares of Richemont dropped nearly 7% after the world’s second-biggest luxury firm reported a 19% rise in its quarterly organic sales, but fell short of analysts’ estimates.

Shares of other China-exposed luxury firms such as LVMH, Hermes, and Kering slumped between 2% and 2.7%.

(Reporting by Amruta Khandekar; Editing by Sherry Jacob-Phillips)

UK’s FTSE 100 falls at open as mining stocks slip on weak Chinese economic data

UK’s FTSE 100 slipped at the open on Monday, with mining stocks leading declines on lower metal prices after data showed weak growth in world’s second-largest economy China.

By 0705 GMT, the blue-chip FTSE 100 lost 0.3%, while the more domestically-focussed FTSE 250 midcap index fell 0.4%.

China’s economy grew at a frail pace in the second quarter, with the post-COVID momentum faltering rapidly and raising pressure on policymakers to deliver more stimulus to shore up activity.

Industrial metal miners dipped 1.8% as prices of most base metals came under pressure.

Global miners Rio Tinto and Glencore lost 1.6% and 1.8%, respectively.

Heavyweight energy stocks also fell 0.8% on lower oil prices.

Meanwhile, Gresham House soared 56.6% after US-based investment firm Searchlight Capital Partners said it will buy the alternative asset manager for 469.8 million pounds (USD 614.9 million).

(Reporting by Shashwat Chauhan in Bengaluru; Editing by Varun H K)

Gold prices edge lower as dollar uptick dampens appeal

Gold prices edged lower on Monday as a steady dollar make bullion more expensive for holders of other currencies, although investors largely bet on the US Federal Reserve hitting the brakes soon on its rate-hike trajectory.

Spot gold edged 0.1% lower to USD 1,952.35 per ounce by 0658 GMT. US gold futures were down 0.4% to USD 1,956.20.

The dollar edges up from its April 2022 lows, as traders waited on economic data and policy decisions before selling it down any further.

“Gold’s post-CPI rally has paused for breath, and that leaves the potential for a technically-driven retracement to the USD 1,940–USD 1,950 region,” said Matt Simpson, a senior market analyst at City Index.

Last week’s U.S. data hinted at a disinflationary trend as consumer prices grew at their slowest pace in more than two years.

“If peak cycles are close, it is another supportive feature for gold, alongside central bank buying,” Simpson added.

Hikes are expected from the Fed and European Central Bank next week, and markets see the U.S. central bank likely stop before cuts next year, while in Europe another hike is expected.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion.

Only a break above USD 1,961 could confirm a continuation of the uptrend towards the range of USD 1,971 to USD 1,977, according to Reuters technical analyst Wang Tao.

Top gold consumer China’s economy grew at a frail pace in the second quarter.

In the wider market, prices of base metals fell despite support from the recent weakness in the dollar as tepid economic data fanned demand concerns.

With hopes of stimulus measures in July or August, riskier assets such as base metals and equities would be bought more, which could dent gold’s demand, said Vandana Bharti, assistant vice-president of commodity research at SMC Global Securities.

“Otherwise, we are expecting a range-movement in gold with a bias to the upside.”

Spot silver fell 0.7% to USD 24.76 per ounce, platinum was down 0.6% to USD 965.39 while palladium XPD= dipped 0.8% to USD 1,261.47.

(Reporting by Seher Dareen in Bengaluru; Editing by Rashmi Aich, Eileen Soreng and Sherry Jacob-Phillips)

Funds cashing in on large short dollar position: McGeever

ORLANDO, Florida, July 16 (Reuters) – Hedge funds have been positioned for a weaker dollar all year and those bets are paying off handsomely, especially against the Mexican peso, Brazilian real and sterling.

The latest Commodity Futures Trading Commission data for the week to July 11 show speculators held their largest net long sterling position since 2007, and their biggest bullish bet on the Mexican peso and Brazilian real in three years.

Overall, the funds’ net short dollar position against a range of currencies was worth some USD 13.17 billion, down slightly from USD 13.58 billion the week before.

It is still a substantial overall bet on the dollar falling, however, and marks the 36th week in a row funds have been net short. It is comprised of a near USD 10 billion aggregate bet versus G10 currencies and USD 3.5 billion versus emerging currencies, namely the peso and real.

To be ‘long’ an asset is essentially a bet that it will rise in value, while to be ‘short’ is effectively a bet that it will depreciate. Investors often use futures contracts to hedge positions, but the CFTC data are often a pretty good guide to hedge funds’ directional view on a given asset.

Funds’ net long peso position crept up to 96,000 contracts in the week to July 11, nudging the post-pandemic high of around 100,000 contracts from late last month, and bullish momentum in the Brazilian real is the strongest since April.

Both currencies have been stellar performers lately – the real has only registered three weekly declines against the dollar in the last 17 weeks, and the peso has fallen five.

The peso’s performance has been especially impressive – it closed on Friday at its strongest level since 2015 and is up 16% against the dollar year to date, powering toward its biggest annual gain on record.

The question now is how much more juice is in the bearish dollar trade given how gloomy the consensus view now seems.

Disinflationary forces are gathering momentum, and traders are betting heavily that the Federal Reserve will deliver its final interest rate hike later this month and then cut rates aggressively next year.

“Signs of further improvement in the global growth-inflation mix and a US soft landing sow the seeds for dollar weakness ahead,” HSBC analysts wrote last week in a global outlook.

The dollar index, a broad measure of the greenback’s value against a basket of major currencies, slumped 2.4% last week, its biggest fall since November. JP Morgan’s emerging market currency index jumped 1.6%, its biggest rise in six months.

In terms of CFTC funds’ positioning in the major currencies, the most significant shift was in sterling. Funds extended their net long sterling position by around 5,000 contracts to over 58,000, the biggest net long since 2007.

That’s a USD 4.7 billion bet on a stronger pound centering on sticky UK inflation versus US disinflation. While more than 100 basis points of US rate cuts are priced into the 2024 curve, traders are expecting some 100 bps of UK rate increases over the next 12 months.

Sterling traded above USD 1.31 last week for the first time in over a year and is up 8% against the dollar so far this year.

(By Jamie McGeever; Editing by Himani Sarkar; The opinions expressed here are those of the author, a columnist for Reuters.)

Investors brace for earnings from ‘Magnificent Seven’ US growth giants

NEW YORK, July 14 (Reuters) – A handful of massive growth and technology names that have dominated the US stock market in 2023 are set to report earnings in the coming weeks, potentially determining the path for this year’s equity rally.

Lately dubbed the “Magnificent Seven” by investors, shares of the US companies with the biggest market values soared between 40% and over 200% so far this year. Those moves have accounted for a lion’s share of the S&P 500’s 17% year-to-date rise and propelled the index to its highest level since April 2022.

The outsized gains have come with big earnings expectations for the seven companies: Apple (AAPL), Microsoft (MSFT), Alphabet (GOOGL), Amazon (AMZN), Nvidia (NVDA), Tesla (TSLA) and Meta Platforms (META). BofA Global Research projects they will increase earnings by an average of 19% over the next 12 months, more than double the 8% estimated rise for the rest of the S&P 500.

They will need strong results to justify premium valuations. Those companies trade at an overall trailing price-to-earnings ratio of about 40 times, versus 15 times for the S&P 500 excluding those companies, according to BofA.

Their results may be crucial to the market as a whole. Fueled by their recent gains, megacap stocks have climbed to dominate benchmark indexes, causing headaches for some managers of active funds. In the S&P 500, the seven stocks comprise 27.9% of the index’s weight.

Investors will look beyond second-quarter results, said Bill Callahan, an investment strategist at Schroders.

“It’s also how do these big companies, which are carrying the market … guide for the rest of the year and into 2024,” he said.

Overall, the seven companies account for 14.3% of overall S&P 500 estimated earnings for the second quarter, and 9.3% of estimated revenue, according to Tajinder Dhillon, senior research analyst at Refinitiv.

Among the reports in the previous quarter, Nvidia was one of the standouts. The semiconductor company’s revenue forecast blew past estimates as it said it was boosting supply to meet surging demand for its artificial intelligence chips, further fanning the market’s excitement over AI. Nvidia shares are up well over 200% this year

Tesla is the first of the growth giants to report, with earnings expected on Wednesday. The Elon Musk-led company this month said it delivered a record number of vehicles in the second quarter.

Microsoft and Meta are among the companies due to report the following week, and investors are expected to focus on how companies are seeking to harness AI.

While AI benefits may not immediately materialize for every company, investors are eager to learn “more about how they are going to convert that into money, essentially,” said Thomas Martin, senior portfolio manager at Globalt Investments.

“It’s going to take some time for that to work its way through and to show up,” said Martin, who is overweight some of the megacap stocks. “Along the way, people are going to want to see some sort of progress.”

There are signs market gains are broadening beyond the megacaps. The equal-weight S&P 500, a proxy for the average stock, is modestly beating the S&P 500 over the past month — up 3.6% versus about 3% for its counterpart. The equal-weight version trailed badly for most of 2023.

Strong US data have driven confidence the economy can avoid a long-feared recession. A so-called “soft-landing” could lift cyclical stocks such as industrials and small-caps that are trading at cheaper valuations.

But many investors say the corporate giants are nevertheless here to stay as critical holdings.

Yung-Yu Ma, chief investment officer at BMO Wealth Management said that while “there is a lot priced in” to megacaps’ valuations, that did not mean they are overvalued.

“If you think about the megacaps broadly … they have gone from a core holding of a portfolio to an almost absolute necessary major component of the portfolio once you factor in trends such as AI,” he said.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and David Gregorio)

Gold poised for best week in 3 months on Fed pause bets

July 14 (Reuters) – Gold prices eased on Friday but were on track for their biggest weekly gain since April, after signs of slowing US inflation raised expectations of a pause in Federal Reserve’s interest rate hikes after this month.

Spot gold fell 0.1% to USD 1,959.27 per ounce by 01:45 p.m. EDT (1745 GMT), but has gained about 1.8% so far this week. US gold futures settled little changed at USD 1,964.40.

Bullion hit its highest since June 16 earlier this week after data showed US consumer prices in June registered their smallest annual increase in over two years, prompting bets the Federal Reserve could soon end its rate-hike cycle.

“With inflation backing off, the anticipation of further rate hikes has slightly declined, helping gold this week. But prices are lower today as yields are ticking up,” said Daniel Pavilonis, senior market strategist at RJO Futures.

“Prices are going to be range-bound near term. If the Fed begins to say we don’t need to raise rates any further, we can see gold rise further.”

Benchmark US yields edged up, making non-yielding bullion less attractive to investors.

But cushioning the fall in gold prices, the dollar was on track for its biggest weekly decline since November.

On Thursday, Fed Governor Christopher Waller said he was not ready to call an all-clear on inflation and favors rate hikes this year – the sentiment reflected in June’s FOMC minutes.

Higher interest rates increase the opportunity cost of holding zero-yield gold.

On the physical front, Indian dealers offered discounts on physical gold purchases for a third straight week as high domestic prices dented retail demand.

The United Arab Emirates removed refinery Emirates Gold from its “good delivery” list certification scheme, the government website showed.

Silver rose 0.4% to USD 24.95 per ounce, headed for its best week since mid-March.

Platinum was up 0.1% at USD 974.03 and palladium dropped 1.4% to USD 1,277.18, but both were poised for a second consecutive weekly rise.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Shilpi Majumdar, Barbara Lewis and Shweta Agarwal)

Global bond funds draw third weekly inflow on ebbing inflation fears

July 14 (Reuters) – Global bond funds posted their third weekly inflow in the week to July 12 thanks to receding fears over higher inflation levels and bets grew that the US Federal Reserve was near the end of its rate-hiking cycle.

Global bond funds received USD 8.5 billion worth of money during the week, with about half of the money flowing into safer government bond funds.

Among equity funds, European funds had the bulk of outflows amounting to USD 6.6 billion, while Asian and US funds received USD 1.9 billion and USD 120 million respectively in inflows.

The MSCI All Country World index jumped to a 15-month high on Wednesday, following the report showing US consumer prices rising modestly in June.

Among sector funds, tech, and consumer staples funds drew USD 1.4 billion and USD 287 million respectively.

On the other hand, global money market funds faced USD 29.56 billion worth of outflows, compared with about USD 55 billion in net purchases in the previous week.

Among commodity funds, investors disposed of USD 511 million worth of precious metal funds, marking a seventh successive week of withdrawal. Energy funds also had outflows, worth about USD 152 million.

Meanwhile, data for 24,119 emerging market funds showed equity funds obtained USD 854 million after a week of net outflows, while bond funds drew a second weekly inflow, amounting to USD 552 million.

(Reporting by Gaurav Dogra and Patturaja Murugaboopathy in Bengaluru; Editing by Peter Graff)

Oil prices fall on profit-taking, still record weekly gain

BENGALURU, July 14 (Reuters) – Oil prices fell more than a dollar a barrel on Friday as the dollar strengthened and oil traders booked profits from a strong rally, with crude benchmarks recording their third-straight weekly gain.

Brent crude futures settled at USD 79.87 per barrel, down USD 1.49, or 1.8%, while the US West Texas Intermediate crude futures fell USD 1.47, or 1.9%, to settle at USD 75.42 a barrel.

“It just appears to be some profit taking, with some demand concerns coming back to the front and center as the dollar rebounds,” said John Kilduff, partner at Again Capital.

The US dollar index edged higher after hitting a 15-month low during the session, as investors consolidated ahead of the weekend. A stronger greenback reduces oil demand, making crude more expensive for investors holding other currencies.

Next week, however, the rally could resume as easing inflation, plans to refill the US strategic reserve, supply cuts and disruptions could support the market, said Rob Haworth, senior investment strategist at US Bank Wealth Management.

“While oil prices are likely slightly overbought in the very near term, touching the highest levels since early May, the bias appears to be for a grind higher,” Haworth said.

Oil prices gained nearly 2% on a weekly basis, after supply disruptions in Libya and Nigeria heightened concerns that the markets will tighten in coming months.

Several oilfields in Libya were shut down on Thursday because of a local tribe’s protest against the kidnapping of a former minister. Separately, Shell suspended loadings of Nigeria’s Forcados crude oil owing to a potential leak at a terminal.

The Libya disruption is halting an estimated 370,000 barrels per day (bpd) while the loss from the Nigerian outage is pegged at 225,000 bpd, said PVM analyst John Evans.

Russian oil exports have also decreased significantly and, if this trend continues next week, it would probably drive prices up further since Russian oil exports are set to be reduced by 500,000 bpd in August, added Commerzbank analysts.

(Reporting by Shariq Khan in Bengaluru; Additional reporting by Natalie Grover in London, Sudarshan Varadhan in Singapore, and Katya Golubkova in Tokyo; Editing by Louise Heavens, David Gregorio, Mark Potter, and Deepa Babington)

Relief over US inflation keeps Asia upbeat

Thursday’s Goldilocks blend of cooling US inflation and a still toasty jobs market continues to cast a glow across markets, with stocks in Asia extending a rally while lower global yields spur a further unwinding of yen carry trades.

MSCI’s broadest index of ex-Japan Asia-Pacific shares was on course for its best week of 2023 and the yen was set to rack up its biggest weekly gain versus the dollar since January.

Indeed, Friday’s rise in the yen put it within striking distance of its converging 100-day and 200-day moving averages near 137.00 to the dollar.

Unusually, interest rate differentials are working in favor of the Japanese currency, with 10-year US Treasury yields mired near Thursday’s one-month low, while benchmark Japanese government bond yields hit a four-month high of 0.485%, inching closer to the Bank of Japan’s implicit 0.50% ceiling.

The dollar remains on the back foot as a result, including against Asia’s other troubled currency, the Chinese yuan, which drew some rousing commentary from the People’s Bank of China.

The Reserve Bank of Australia was also in the spotlight in Asia, with the much-anticipated announcement of its next governor. While the appointment of Deputy Governor Michele Bullock as the central bank’s new chief grabbed plenty of headlines, the Australian dollar and bond yields barely reacted to what was widely viewed as a sign of evolution, not revolution, for policymaking.

The rest of the day is light on economic data with euro zone May trade, US export and import prices and University of Michigan consumer sentiment the main releases.

But it’s a bumper day for bank earnings as JPMorgan Chase, Citigroup, Wells Fargo and BlackRock are all due to report second-quarter results.

Another event that’s sure to attract much broader interest will be a widely expected strike by Hollywood actors, joining film and television writers, in what could make for a lean fall viewing season.

(Sonali Desai)

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