US small-cap stocks break out, but for how long?

NEW YORK – Long-lagging US small-cap stocks are having a moment in the sun, but the interest rate outlook, the strength of their earnings, and the health of the economy will help determine whether they are experiencing a new dawn or another false start.

The small-cap Russell 2000 surged 7% in August versus a nearly 2% rise for the S&P 500, the stock market benchmark. The Russell index dipped as September kicked off this week on a sour note for stocks, but its recent strength put it within about 4% of its November 2021 record closing high.

However, the S&P 500 is on pace to beat the Russell 2000’s annual performance for the 10th time in the past 12 years, a period that has seen the large-cap index more than double the gains of the small-cap gauge.

“They have underperformed relative to large caps for eons … so you get to a point where the bar to clear is pretty darn low,” said Jordan Irving, a small-cap portfolio manager at Glenmede Investment Management.

Small caps are central to many strategies that would benefit from a broadening of stocks leading the rally. Investors in recent years have piled into huge technology and growth stocks, which have pushed equity indexes higher but raised worries that the bull market is too concentrated in megacap shares.

While tech is a dominant sector in the S&P 500, the Russell 2000 is more heavily influenced by areas such as financials and industrials that have lagged tech.

Critical to recent small-cap gains are growing expectations for Federal Reserve rate cuts because smaller companies are more reliant on debt financing and stand to benefit more from lower borrowing costs, investors said.

The Russell 2000 had its biggest one-day gain in more than four months on August 22, when Fed Chair Jerome Powell’s speech was interpreted as paving the way for an imminent cut. In the week after Powell’s remarks, BofA clients posted the second-largest weekly inflows into small-cap stocks and ETFs, the bank said, citing data going back to 2008.

While a rate cut is widely projected at the Fed meeting on September 16-17, the extent of further expected easing could sway small-cap performance, with employment data on Friday to test the rate outlook.

If more monetary easing occurs than is currently priced in, “that can be enough to unleash those discounted valuations and that pent-up demand for the small-cap asset class,” said Angelo Kourkafas, senior global investment strategist at Edward Jones.

Strong earnings trends are also bolstering small caps, investors said. Second-quarter earnings for Russell 2000 companies are on track to have climbed 69% from the year-ago period, LSEG IBES data showed. The index’s quarterly earnings are projected to rise at least 35% for each of the next six quarters.

Meanwhile, profit-generating companies in the Russell 2000 on average are trading at a 26% discount to the S&P 500, according to Glenmede’s Irving, using forward price-to-earnings estimates.

“We’re now going to see growth rates next year faster for small caps than large caps,” said Mark Hackett, chief market strategist at Nationwide.

The performance of small caps is also seen as tied to the economic outlook.

Smaller companies tend to be more sensitive to the domestic growth than larger multinational firms, said Mark Luschini, chief investment strategist at Janney Montgomery Scott. Small-cap indexes are relatively heavily weighted in industries more tied to the economic cycles, Luschini said.

Not everyone is backing small caps. Strategists at the Wells Fargo Investment Institute last month downgraded US small-cap equities to “unfavorable,” citing that economic growth will not be enough to help the group beat large-cap stocks through 2026.

The small-cap trade could stumble in the event of an economic scare that leads investors to gravitate to the massive tech stocks, Irving said.

“The question is, can this keep going, or is this just going to be another blip?” Irving said.

(Reporting by Lewis Krauskopf; Editing by Alden Bentley and Nick Zieminski)

US yields slump on labor market jitters as rate cut odds climb

NEW YORK – US Treasury yields fell on Thursday, with those on two-year and 10-year notes dropping to four-month lows, after data showed mounting evidence of a weakening labor market that affirmed expectations the Federal Reserve will resume cutting interest rates at its policy meeting later this month.

US yields, however, came off their lows in the afternoon session as market participants positioned ahead of Friday’s nonfarm payrolls report.

A Reuters poll showed a forecast of 75,000 new jobs created last month, compared with 73,000 in July. The unemployment rate was seen to have ticked up to 4.3% from 4.2% in July.

“It’s going to come down to nonfarm payrolls and what it means for the Fed,” said Zachary Griffiths, head of investment grade and macro strategy at CreditSights in Charlotte, North Carolina.

“We’ve shifted our call fairly dramatically to call for a 50 basis-point cut in September as the labor market has weakened a lot…and we are looking for more weakness out of the report on Friday. And if you think about the Fed’s reaction function a year ago, they went 50 (bp cut) then, and the labor market looks quite a bit more fragile now based on the latest data.”

In afternoon trading, US two-year yields, which are tied to monetary policy, slipped 2.4 basis points (bps) to 3.589%. It slid to a four-month low of 3.588% earlier in the session.

The benchmark 10-year yield also slid to its lowest since early May of 4.167%. The yield was last down 4.4 bps at 4.167%.

US 30-year yields also retreated, down 3 bps at 4.862%. On Wednesday, it topped 5% amid a global bond selloff caused by fiscal worries. The 5% yield was the highest in about 1-1/2 months.

Treasury yields fell overall after the ADP National Employment Report showed that US private payrolls increased less than expected in August, rising by 54,000 jobs last month after a slightly upwardly revised 106,000 increase in July. Economists polled by Reuters had forecast private employment increasing by 65,000.

At the same time, data showed US initial jobless claims rose 8,000 to a seasonally adjusted 237,000 for the week ended August 30. Economists polled by Reuters had forecast 230,000 claims for the latest week.

“We continue to see softness growing in the labor market as tariff policy uncertainty lingers, immigration changes take effect, and AI adoption grows,” wrote Eric Teal, chief investment officer at Comerica Wealth Management in emailed comments.

“The silver lining is the weaker the jobs data, the more cover there is for stimulative interest rate cuts that are on the horizon. The boost in the latter half of this year should come from easier monetary policy and stimulative fiscal policies to avoid further economic deterioration.”

Following the data, US rate futures have priced in a 98% probability that the Fed will lower rates by 25 bps at the end of the two-day policy meeting on September 17, according to the CME Group’s FedWatch tool.

Traders have also priced in about 61 bps of easing this year, up from 56 bps earlier this week.

The Treasury yield curve, meanwhile, flattened for a second straight day, with the gap between two-year and 10-year yields narrowing to 58 bps, compared with 59.6 bps late on Wednesday. Earlier on Wednesday, the curve hit 63.8 bps, its widest spread since April.

The curve continued to show a bull-flattening trend, referring to a scenario in which long-term interest rates are falling faster than those on the short end of the curve. That, for now, reflects a slight decline in inflation expectations with the softening labor market and often precedes the Fed cutting interest rates.

(Reporting by Gertrude Chavez-Dreyfuss; Editing by Tomasz Janowski, Nick Zieminski, and Diane Craft)

Dollar edges higher with investors focused on labor market data

NEW YORK/LONDON – The US dollar edged higher on Thursday in a volatile week with markets eyeing a crucial jobs report, after data indicating labor market weakness reinforced expectations the Federal Reserve will cut rates this month.

Data showed on Thursday that the number of Americans filing new applications for jobless benefits increased more than expected last week, consistent with softening labor market conditions. Furthermore, the ADP National Employment Report showed US private payrolls increased less than expected in August.

The dollar edged higher in relatively steady trade, reflecting investor wariness of making any big moves ahead of Friday’s more comprehensive non-farm payrolls report.

The dollar strengthened 0.33% to 148.585 against the Japanese yen. It was up 0.22% to 0.80615 against the Swiss franc. The greenback lost ground against both safe-haven currencies on Wednesday. The euro fell 0.13% to USD 1.16455.

“It’s been choppy … with enough questions around where the economy is at that people are just likely trying to square up before Friday’s number and not taking any outward bets one way or the other,” said Marvin Loh, senior global market strategist at State Street in Boston.

The dollar index rose 0.20% to 98.334 after dropping in the previous session.

The US dollar tends to strengthen across the board against peers if the monthly payrolls report beats market expectations, but it weakens if the data falls short of estimates, according to Goldman Sachs analysts led by Karen Fishman.

“With risks to the labor market skewed to the downside and our more dovish view on the Fed, we have been recommending being short USD/JPY with a target of 142,” the analysts wrote.

Several Federal Reserve officials said labour market worries continue to underpin their view that rate cuts still lie ahead for the central bank, boosting expectations of an imminent rate cut. The Fed is due to meet on September 16 and 17.

Traders are pricing in a near-100% chance of the Fed cutting interest rates later this month, up from 87% a week ago, CME FedWatch showed.

In the bond market, yields on long-end notes across the globe have risen as investors become increasingly anxious about the fiscal health of major economies from Japan to Britain and the United States.

US Treasury yields slipped. The 2-year note yield fell 1.8 basis points to 3.594%. The yield on benchmark US 10-year notes fell 3.1 basis points to 4.18%.

A closely watched auction of 30-year Japanese government bonds passed smoothly on Thursday.

In other currencies, the pound sterling weakened 0.12% to USD 1.34310 after gaining in the last session. The Canadian dollar weakened 0.25% versus the greenback to C$1.3827 per dollar. The Australian dollar weakened 0.44% versus the greenback to USD 0.6514.

Spot gold fell 0.35% to USD 3,546.28 an ounce, easing from a record high reached on Wednesday.

(Reporting by Chibuike Oguh in New York and Amanda Cooper in London; Editing by Kevin Liffey and Nick Zieminski)

Fed rate cuts and doubts over independence to keep US dollar under pressure

BENGALURU – The US dollar will weaken over coming months as market participants ponder the Federal Reserve’s future independence and how many more rate cuts it may deliver, a Reuters survey of foreign exchange strategists showed on Wednesday.

The greenback, down nearly 10% against a basket of major currencies this year, has been the worst performer among them. The short-dollar trade has dominated FX markets since late March, according to Commodity Futures Trading Commission data.

Worries about the inflationary impact of tariffs, an enormous tax cut and spending law and repeated White House attempts to interfere with the world’s most powerful central bank have reversed the dollar’s fortunes after a multi-year run of strength.

A weaker dollar trend will likely persist in the near-term as interest rate futures show markets fully pricing in two Fed cuts this year and possibly another in early 2026.

Nearly 80% of respondents, 39 of 50, said net-short bets would either rise further by end-September or remain around current levels, according to the August 29-September 3 Reuters poll.

The remaining 11 said short bets would decrease. No one chose “a reversal to net-longs.”

“A big risk is the fact everybody seems to think the dollar is likely to weaken, which means that positioning is all one way. That’s sometimes a factor that should make us a little bit more wary,” said Jane Foley, head of FX strategy at Rabobank.

“If we get a lot of inflationary news from the US, there certainly would be room for pullbacks in favor of the dollar.”

FX strategists in Reuters polls, who have broadly accurately predicted the dollar’s slide this year, forecast the euro EUR=, currently USD 1.17, to climb steadily to a median USD 1.18 and USD 1.19 in three and six months respectively.

It was then predicted to trade at USD 1.20 in a year: the highest survey median since September 2021.

In the meantime, US President Donald Trump’s repeated pressure on Chair Jerome Powell to slash rates to 1% and his efforts to oust Fed Governor Lisa Cook over mortgage fraud allegations are testing the boundaries of presidential power.

Trump’s Fed board nominee Stephen Miran, chair of the Council of Economic Advisers, has called for sharply lower rates, argued tariffs have little inflationary impact, and proposed Fed governance reforms that would give the president greater control, including the power to dismiss its leadership at will.

“The dollar will face some pressure to soften into the end of the year and it’s going to be a function of two things: one, a resumption of the Fed’s rate-cutting cycle and second, the market’s questions with regard to the Fed’s independence,” said Paul Mackel, head of FX research at HSBC.

(Reporting by Sarupya Ganguly; Polling by Shaloo Shrivastava and Jaiganesh Mahesh; Editing by Hari Kishan, Ross Finley, and Nick Zieminski)

Safe-haven gold rally gains further momentum after soft US data

Gold extended its record-breaking rally on Wednesday, powered by softer US jobs data that reinforced expectations of a Federal Reserve interest rate cut later this month, while lingering global uncertainties kept safe-haven demand firmly in play.

Spot gold was up 1.2% to USD 3,576.59 per ounce by 2:25 p.m. EDT (1825 GMT), after hitting a record high of USD 3,578.50.

US gold futures gained 1.2% to USD 3,635.50.

The US government reported that job openings fell more than expected in July and hiring was moderate, consistent with easing labor market conditions.

Gold was already trading in record territory before the release of the data, and the softer numbers helped buoy the precious metal, with the next upside target eyed at USD 3,600 an ounce, said Fawad Razaqzada, a market analyst at City Index and FOREX.com.

Following the data, traders boosted the probability that the US central bank would cut rates by 25 basis points at its September 16-17 policy meeting to 98%, up from 92% earlier, according to CME Group’s FedWatch tool.

Investors’ focus now shifts to US jobless claims and ADP employment data on Thursday and the closely-watched monthly nonfarm payrolls report on Friday.

Fed Governor Christopher Waller on Wednesday repeated his call for a rate cut this month, and said how fast the central bank lowers borrowing costs after that meeting will depend on what happens next in the economy.

Fed Governor Lisa Cook, meanwhile, laid out in greater detail on Tuesday her opposition to President Donald Trump’s bid to remove her from office. Trump has repeatedly criticized Fed Chair Jerome Powell for not cutting rates this year.

“Growing concerns over the independence of the US central bank are further undermining trust in dollar-denominated assets and pushing investors toward gold,” traders at Heraeus Metals said. USD/

Trump is set to ask the US Supreme Court to validate the legality of his broad import tariffs after two setbacks in lower courts.

Elsewhere, the euro zone economy kept expanding at a snail’s pace in August.

Bullion tends to gain traction during uncertain times and a low-interest rate backdrop.

“Gold’s rally has room to run, with short-to-medium-term targets around USD 3,600 to USD 3,800, and the breakout pattern suggesting USD 4,000 could be within reach by late first quarter next year,” said Peter Grant, vice president and senior metals strategist at Zaner Metals.

Riding the wave of gold’s rally, spot silver rose 1.1% to USD 41.34, its highest level since September 2011.

Platinum gained 2.2% to USD 1,434.17 and palladium was up 1.8% to USD 1,155.05.

(Reporting by Ashitha Shivaprasad, Sherin Elizabeth, and Anushree Mukherjee in Bengaluru; Editing by Joe Bavier, Paul Simao, and Cynthia Osterman)

Nasdaq, S&P 500 end higher with Alphabet, Apple, rate-cut hopes; Dow dips

NEW YORK – The Nasdaq rose 1% and the S&P 500 also ended higher on Wednesday as Alphabet jumped after a US judge ruled against breaking up the Google parent and as investors were optimistic that the Federal Reserve would cut interest rates this month.

The Dow finished slightly lower, with shares of Boeing down 2.1%.

Alphabet and Apple gave the S&P 500 and Nasdaq their biggest boosts. Shares of Alphabet rose 9.1% after the late Tuesday ruling, which allows Google to retain control of its Chrome browser and Android mobile operating system, while barring certain exclusive contracts with device makers and browser developers.

Shares of Apple gained 3.8% as the ruling also preserved lucrative payments to the iPhone maker from Google.

“Google and Apple got a lifeline … They won the sweepstakes,” said Jake Dollarhide, chief executive officer of Longbow Asset Management in Tulsa, Oklahoma. “The courts just cemented their reputation.”

Several Fed officials said labor market concerns continue to animate their belief that rate cuts lie ahead. Fed Governor Christopher Waller said he thinks the central bank should be cutting at its next meeting. Atlanta Fed President Raphael Bostic reiterated his view that a rate cut is in the cards, although he did not say how soon it might happen.

Data earlier showed US job openings fell in July, suggesting a softening labor market.

The Dow Jones Industrial Average fell 24.58 points, or 0.05%, to 45,271.23, the S&P 500 gained 32.72 points, or 0.51%, to 6,448.26 and the Nasdaq Composite gained 218.10 points, or 1.03%, to 21,497.73.

September is historically a weak month for the stock market. But Peter Cardillo, chief market economist at Spartan Capital Securities in New York, said he did not think the month would be “as trying as it usually is because of the fact that the Fed is expected to lower rates.”

US rate futures now widely expect the Fed to lower rates this month, pricing in a 96% chance of a 25 basis point cut at the end of the two-day Fed policy meeting on September 17, according to the CME Group’s FedWatch tool.

Investors were still anxious to see Friday’s monthly jobs report.

Shares of Macy’s jumped 20.7% after the company raised its annual forecasts. On the flip side, discount retailer Dollar Tree DLTR.O shares fell 8.4% after the company forecast current-quarter profit below estimates, with tariffs seen driving up costs for the retailer.

With the second-quarter US earnings season now at its end, investors are paying close attention to estimates for third-quarter results and possible impacts from President Donald Trump’s tariff war.

Advancing issues outnumbered decliners by a 1.33-to-1 ratio on the NYSE. There were 224 new highs and 45 new lows on the NYSE.

On the Nasdaq, 2,259 stocks rose and 2,337 fell as declining issues outnumbered advancers by a 1.03-to-1 ratio.

Volume on US exchanges was 14.95 billion shares, compared with the 16.18 billion average for the full session over the last 20 trading days.

(Additional reporting by Purvi Agarwal and Ragini Mathur in Bengaluru; Editing by Devika Syamnath and David Gregorio)

Anxious Wall Street braces for jumbo ‘September effect’: McGeever

ORLANDO, Florida – Data going back decades shows that, on average, September is the worst month for US stocks – and by a considerable margin. So should investors brace for another bumpy ride this year? Almost certainly, and not just because of the “September effect.”

If the market saying “Sell in May and go away” had any validity, September would be a bumper month, with investors returning from their summer holidays eager to buy back stocks that, presumably, had become cheaper since Memorial Day.

But history suggests the opposite.

Since 1950, the S&P 500’s average return in the month of September is -0.68%, according to Carson Group’s Ryan Detrick. If you round to one decimal place, September is the only month with an average negative return in the last 75 years.

And there have been more “down” than “up” Septembers over this period. The S&P 500 has only posted positive returns in September 44% of the time since 1950, the lowest positivity rate for any calendar month and the only one below 50%.

And the performance appears to be getting worse. In the last decade, the S&P 500’s average September return has been near -2%.

TOTAL OUTLIER

There is no obvious explanation for those seasonal factors.

Some analysts point to the looming fiscal year-end, as fund managers may seek to dump their worst-performing stocks. Others say tax-related selling is a factor, again because fund managers are shedding their losing positions, this time to limit or offset capital gains.

Investor psychology could also be at play. Investors, having experienced decades of lousy Septembers, may return from their summer holidays expecting a tough month. This caution can turn into pessimism, which can lead to selling, resulting in a self-fulfilling prophecy.

However dubious these explanations may be, the numbers don’t lie. For much of the last century, September has been the cruelest month for global equity investors.

EYES WIDE OPEN

The stage is set for a particularly rocky September this year.

Wall Street’s main indexes are at or near record highs, valuations are getting stretched, especially in the tech sector, and market concentration has never been greater.

True, momentum appears to be on the bulls’ side. The S&P 500 and Nasdaq have been up for four and five consecutive months, respectively. And as the second quarter earnings season wraps up, nearly 80% of companies have reported profit and revenue above analysts’ estimates, compared with long-term averages of 67% and 62%, respectively, according to LSEG data.

On top of that, investors can likely expect a Federal Reserve rate cut on September 17, if rates futures market pricing is accurate.

But all of that is already “in the price,” to use traders’ parlance. And Wall Street’s momentum is slowing as monthly gains have steadily diminished over the summer, especially for the Nasdaq, which rose 1.6% in August compared with 9.6% in May.

What happens next will likely largely depend – like most things in markets this year – on what happens in the technology sector. Tech stocks are by some valuation metrics the most expensive they have been since the dotcom bubble burst 25 years ago.

Investors appear to have noticed, as they have recently started rotating out of tech and into cheaper small caps. Given the record-high market concentration in this sector, a continuation of this trend could weigh heavily on the broader market.

So this September could be volatile, at the very least. Past results are no guarantee of future performance, of course. But caution is warranted. As Porter Collins, co-founder of Seawolf Capital, recently posted on X, when markets are this extended, an “eyes wide open approach” is advisable. With so many potential catalysts for a correction looming this September, investors would be wise not to look away.

(The opinions expressed here are those of the author, a columnist for Reuters)

(By Jamie McGeever; Editing by Tomasz Janowski)

Wall Street ends lower as ruling on Trump tariffs raises concerns

NEW YORK – Wall Street started off September on a sharply lower note on Tuesday as investors weighed the future of President Donald Trump’s tariffs after a federal appeals court ruled most of his sweeping tariffs illegal.

A divided US appeals court made the ruling on Friday, but allowed for the levies to be in place until October 14. Trump on Tuesday said his administration will ask the Supreme Court for an expedited ruling on the tariffs.

The appeals court ruling rattled investors after the long Labor Day holiday weekend, with September traditionally a weak month for equities. The Cboe Volatility Index – Wall Street’s fear gauge – rose, but the major stock indexes ended off their worst levels of the day.

With the ruling, “the question becomes, ‘Has the Trump administration alienated our trading partners as well as given up the revenue from tariffs?’ That’s what’s plaguing markets,” said Oliver Pursche, senior vice president and adviser for Wealthspire Advisors in Westport, Connecticut.

“By the same token, it’s too early to call this the beginning of a great correction,” he said. “At the end of the day, we all know that August-September tend to be more volatile and a little more challenging for investors before we get into the fourth quarter, which tends to be a pretty solid one.”

Data going back decades shows that, on average, September is the worst month for US stocks, and some investors are bracing for another bumpy ride this year.

In addition, investors are anxious to see the monthly US payrolls report, due on Friday, and whether weak US job growth continued for a fourth month in August.

The Dow Jones Industrial Average fell 249.07 points, or 0.55%, to 45,295.81, the S&P 500 fell 44.72 points, or 0.69%, to 6,415.54 and the Nasdaq Composite fell 175.92 points, or 0.82%, to 21,279.63.

US rate futures widely expect the Federal Reserve to lower interest rates this month, pricing in a 92% chance of a 25-basis-point cut at the end of its two-day policy meeting on September 17, according to CME Group’s FedWatch.

Real estate fell 1.7% and had among the biggest S&P 500 sector declines on the day, with US 30-year Treasury yields on Tuesday climbing to their highest levels since mid-July.

Also, shares of Kraft Heinz dropped 7% after the company said it will split into two companies, one focused on groceries and the other on sauces and spreads.

On the flip side, shares of PepsiCo gained 1.1% after Elliott Management disclosed a USD 4 billion stake in the beverages company, launching an activist campaign.

On the Nasdaq, 1,555 stocks rose and 3,099 fell as declining issues outnumbered advancers by about a 1.99-to-1 ratio There were 105 new highs and 118 new lows.

On the NYSE declining issues outnumbered advancing ones by a 2.4-to-1 ratio . There were 176 new highs and 53 new lows.

Volume on US exchanges was 16.41 billion shares, compared with the 16.26 billion average for the full session over the last 20 trading days.

(Reporting by Caroline Valetkevitch in New York; Additional reporting by Purvi Agarwal and Ragini Mathur in Bengaluru; Editing by Pooja Desai, Maju Samuel, and Matthew Lewis)

Gold’s record-breaking rally: who’s keeping it going?

LONDON – Gold prices hit a record USD 3,532 per troy ounce on Tuesday, extending a rally that has boosted them more than 90% since late 2022. Demand is expected to remain robust for some time due to a mix of factors.

Central bank purchases and strong investment demand, visible in inflows into physically backed gold exchange-traded funds, are the main drivers, fuelled by US President Donald Trump’s upending of Western security policy, his trade wars with other countries, and concerns about the independence of the US Federal Reserve.

WILL CENTRAL BANKS KEEP ON BUYING MORE?

Annual net purchases of gold by central banks have exceeded 1,000 metric tons each year since 2022, according to consultancy Metals Focus, which expects them to buy 900 tons this year – twice the annual average of 457 tons in 2016-2021.

Developing countries are seeking to diversify from the dollar after Western sanctions froze roughly half of Russia’s official foreign currency reserves in 2022.

Official numbers reported to the International Monetary Fund reflect only 34% of the 2024 total central bank gold demand estimate, according to the World Gold Council, an industry body.

They have contributed 23% to total annual gold demand in 2022-2025, double the average share recorded during the 2010s.

WILL THE DROP IN THE JEWELLERY SECTOR CONTINUE?

Demand for gold for jewelry, the main source of physical demand, fell 14% to 341 tons in the second quarter of 2025, the lowest since the pandemic-swept third quarter of 2020, as high prices deterred buyers, according to the WGC.

High prices spurred the decline, the bulk of which came from the largest markets – China and India – whose combined market share fell below 50% for only the third time in the last five years, the WGC estimated.

Metals Focus estimated that gold jewellery fabrication fell 9% to 2,011 tons in 2024 and will deliver a 16% slump this year.

ARE PEOPLE STILL BUYING SMALL GOLD BARS AND COINS?

There has been a major shift in appetite for different products in the retail investment market but total purchases in this sector remain robust.

Investment demand for gold bars rose 10% in 2024, while coin buying fell 31%, according to the WGC, which said the trend has extended to this year.

Metals Focus expects net physical investment to rise 2% this year to 1,218 tons as demand in Asia remains high amid positive price expectations.

CAN GOLD ETFs ATTRACT MORE INFLOWS?

Gold ETFs have become a more important source of demand for gold this year, recording inflow of 397 tons in the period from January to June, their largest first half inflow since 2020, according to the WGC.

Gold ETFs total holdings stood at 3,615.9 tons at the end of June, the largest since August 2022. Their record was 3,915 tons five years ago.

Metals Focus expects net investment in ETPs in 2025 at 500 tons after seven tons of outflows in 2024.

(Reporting by Polina Devitt; Editing by Nia Williams)

Two-year yields heading for largest monthly drop in a year

US Treasuries were mixed on Friday and interest rate-sensitive two-year yields were on track for their largest monthly drop in a year as traders squared positions ahead of Monday’s Labor Day holiday and after inflation data for July met economists’ expectations.

The Personal Consumption Expenditures (PCE) Price Index increased 0.2% last month after an unrevised 0.3% rise in June, data on Friday showed. Excluding the volatile food and energy components, the PCE Price Index increased 0.3% last month, matching the rise in June.

The data keeps the Federal Reserve on track to cut rates at its September 16-17 meeting.

“You can check this off as one more risk to potentially derailing a cut in September. The inflation part of it, at least in this measure, is not going to do anything to reduce odds of a cut in September,” said Michael Lorizio, head of US rates trading at Manulife Investment Management in Boston.

Fed funds futures traders are now pricing in 89% odds of a cut next month, up from 84% before the data.

US consumer spending increased by the most in four months last month. A separate report from the University of Michigan showed consumers’ one-year inflation expectations jumped to 4.8% in August from 4.5% in July.

Traders ramped up bets on more cuts after Fed Chair Jerome Powell last Friday adopted an unexpectedly dovish tone and said that risks to the job market were rising.

Efforts by President Donald Trump to fire Fed Governor Lisa Cook have raised the prospect that Trump could make more dovish appointments to the US central bank that would result in easier policy.

A court hearing on Trump’s attempt to fire Cook ended on Friday with no immediate ruling from the judge, meaning that Cook will remain in place for now.

Longer-dated yields edged higher on Friday as traders closed positions ahead of the long weekend and repositioned for month-end.

Some interest rate hedging was also likely influencing the market with corporate debt markets expected to pick up next week when many people return from summer vacations.

“We have a very busy week coming up … with primary markets and all the spread product markets returning in full force, especially the corporate bond market,” said Lorizio.

Jobs data for August is also due next Friday, which may be key in determining near-term Fed policy.

The 2-year note yield was last down 1.6 basis points on the day at 3.619%. It has fallen 33 basis points this month, the most since last August.

The yield on benchmark US 10-year notes rose 1.6 basis points to 4.223%.

The yield curve between two-year and 10-year notes was last at 60 basis points. It has steepened by 18 basis points this month, the most since April.

(Reporting by Karen Brettell; Editing by Nick Zieminski and Leslie Adler)

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