Citi stays bullish on gold, hikes price 3-month outlook to USD 2,800 per ounce

Citi Research raised its three-month forecast for gold prices, citing possible further US labor market deterioration, interest rate cuts by the Federal Reserve, and physical and ETF buying, it said in a note on Monday.

The bank upgraded its three-month gold price view to USD 2,800 per ounce from USD 2,700 previously, adding that its 6 to 12-month forecast is USD 3,000.

It revised its 6 to 12-month forecast for silver prices upward to USD 40 per ounce from USD 38 per ounce.

“We note that gold and silver have performed extremely well despite weakening China retail physical demand and rising US interest rates since the Fed cut 50 (basis points) and payrolls beat last month,” the note said.

Gold should also rise in the scenario that oil spikes on near-term Middle East escalation, it added.

Gold surged to a record high on Monday while silver struck a near 12-year peak, as growing uncertainties surrounding the US presidential election and the Middle East war added to gold’s rally already fueled by expectations of interest rates easing.

Citi said it remains neutral-bullish on platinum with a three-month point price target of USD 1,025 per ounce and a 6 to 12-month target of USD 1,100 per ounce.

It added that it leans bearish palladium following the recent price gain with a three-month target of USD 1,000 per ounce and a 6 to 12-month target of USD 900 per ounce.

Citi also said that oil fundamentals point to USD 60 per barrel average prices in 2025, but that the potential for very near-term geopolitical escalation in the Middle East is high.

(Reporting by Anjana Anil in Bengaluru; Editing by Aurora Ellis)

Fed’s Schmid wants cautious, gradual, deliberate rate cuts

Kansas City Federal Reserve Bank President Jeffrey Schmid said on Monday he supports a “cautious and deliberate” approach to interest rate cuts now that inflation is heading back to the Fed’s 2% target and the labor market is normalizing.

“While I support dialing back the restrictiveness of policy, my preference would be to avoid outsized moves, especially given uncertainty over the eventual destination of policy and my desire to avoid contributing to financial market volatility,” Schmid said in remarks prepared for delivery to the Certified Financial Analysts Society of Kansas City, in Missouri.

“Lowering rates in a gradual fashion would provide time to observe the economy’s reaction to our interest rate adjustments and give us the space to assess at what level interest rates are neither restricting nor boosting the economy.”

The Fed last month cut the policy rate by a bigger-than-expected half of a percentage point, and signaled that most Fed policymakers expect that further, likely smaller, interest-rate reductions will be appropriate.

In his prepared remarks on Monday, Schmid did not lay out exactly how fast or how far he thinks the Fed should cut rates, but his remarks show he is among those who feel the central bank need not be too aggressive about it.

The economy, he said, likely grew at a 3% pace last quarter, supported by strong consumer spending and a labor market that is cooling but not deteriorating. In view of that strength, he said, “it seems unlikely that monetary policy is all that restrictive.”

Indeed, the level at which interest rates are likely to settle is probably “well above” what it was during the decade before the pandemic, he noted.

Big Fed interest rate cuts, he said, could feed into the idea that the US central bank will continue to cut rates rapidly, raising the risk of heightened financial market volatility, he said.

“My belief is that a cautious and gradual approach to policy adjustments would be best suited for this uncertain environment,” Schmid said.

(Reporting by Ann Saphir; Editing by Richard Chang)

Oil prices fall, weekly 7% drop on China demand woes, mixed Mideast outlook

HOUSTON – Oil futures fell on Friday, declining more than 7% on the week after data showed China’s economic growth slowed and investors digested a mixed Middle East outlook.

Brent crude futures fell USD 1.39, or 1.87%, to USD 73.06 a barrel. US West Texas Intermediate crude settled at USD 69.22 a barrel, down USD 1.45 or 2.05%.

Brent settled more than 7% lower this week, while WTI lost around 8%, marking their biggest weekly declines since Sept. 2, when OPEC and the International Energy Agency cut their forecasts for global oil demand in 2024 and 2025.

In China, the world’s top oil importer, the economy grew at the slowest pace since early 2023 in the third quarter, though September consumption and industrial output beat forecasts.

“China is key to the demand side of the equation so that is very much weighing on prices here today,” said John Kilduff, partner at Again Capital in New York.

China’s refinery output declined for the sixth straight month as thin refining margins and weak fuel consumption curbed processing.

“We cannot ignore the impact of electric vehicles in China,” said Neil Atkinson, Paris-based independent energy analyst and former head of the oil division at the IEA.

“There are various factors at play here, economic weakness in China but also the move towards the electrification of transport.”

Electric vehicle sales in China jumped 42% in August and reached a record high of over one million vehicles.

Meanwhile, China’s central bank rolled out two funding schemes that will initially pump 800 billion yuan (USD 112.38 billion) into the stock market through newly created monetary policy tools.

“Chinese data shows tentative signs of improvement, but recent briefings on additional economic stimulus left market participants underwhelmed,” said Rishi Rajanala, associate at Aegis Hedging.

US President Joe Biden said on Friday there was an opportunity to deal with Israel and Iran in a way that potentially ends their conflict in the Middle East for a while.

“We lost additional parts of the geopolitical risk premium in the price of oil on talks of this all reaching an end point,” said Again Capital’s Kilduff.

Biden, on a visit to Berlin, also told reporters he has an understanding of how and when Israel will respond to the missile attacks by Iran, something investors continue to anxiously wait for, said Alex Hodes, analyst at energy brokerage StoneX, said in a note.

After the killing of Hamas leader Yahya Sinwar, Lebanon’s Hezbollah militant group said on Friday it was moving to a new and escalating phase as it battles Israeli troops.

This dashed hopes earlier on Friday that Sinwar’s death would speed up an end to the escalating war in the Middle East.

In the US, crude production smashed another record last week, according to the Energy Information Administration on Thursday, as output rose by 100,000 barrels per day (bpd) in the week to Oct. 11 to 13.5 million bpd, from its previous peak of 13.4 million bpd first hit two months ago.

Helping to give prices a floor, the EIA also said US crude oil, gasoline and distillate inventories fell last week.

And US retail sales increased slightly more than expected in September, with investors still pricing in a 92% chance of a Federal Reserve rate cut in November.

“Positive US economic data has helped alleviate some growth concerns, but market participants continue to monitor potential demand recovery in China following recent stimulus measures,” said Hani Abuagla, senior market analyst at XTB MENA.

(Reporting by Georgina McCartney in Houston, Arunima Kumar in London, Florence Tan and Trixie Yap in Singapore; Additional reporting by Paul Carsten in London; Editing by Elaine Hardcastle, Louise Heavens, Christina Fincher, Richard Chang, and Deepa Babington)

China rolls out USD 112-billion funding schemes to bolster stock market

BEIJING/SHANGHAI – China’s central bank kicked off two funding schemes on Friday that will initially pump as much as 800 billion yuan (USD 112.38 billion) into the stock market through newly-created monetary policy tools.

The People’s Bank of China (PBOC) spelt out operational details of the swap and relending schemes first announced in late September, aiming to support “steady development” of capital markets.

China’s recent market bull run has been losing steam as euphoria turned into caution over the size and implementation of Beijing’s stimulus promises. Following the PBOC announcement, the benchmark Shanghai Composite Index reversed early losses to end the session sharply up 4%.

“The shoes finally dropped,” said veteran investor Wen Hao, who had been anxiously waiting for implementation of the schemes.

Wen said he expects many companies will tap the new facilities to buy shares, adding fuel to a bull market “which has just started.”

The announcement came after China’s financial regulators held a meeting with key financial institutions, urging them to swiftly implement expansive policies to support the economy and capital markets.

Under the swap scheme, initially worth 500 billion yuan, brokerages, asset managers and insurers can obtain liquidity from the central bank through asset collateralisation to buy stocks.

Currently, 20 companies have been approved to participate in the scheme and initial applications have exceeded 200 billion yuan, the PBOC said. Participants include China International Capital Corp (CICC), Citic Securities, China Asset Management Co and E Fund Management Co, China’s securities regulator said.

“The swap scheme will become a market stabilizer” as demand for the tool rises when stocks are over-sold, but the appetite naturally fizzles when the market recovers, Xinhua Financial said in an article on Friday.

In addition, institutions can use the tool to access liquidity in a stock market rout without having to sell shares in a downward spiral.

Under the facility, assets including bonds, stock ETFs, and holdings in constituents of the CSI300 Index can be exchanged for highly liquid assets such as treasury bonds and central bank bills, giving participants easier access to funding.

“If implemented effectively, these new policy efforts could bring incremental funds into the market and enhance shareholder returns, thereby driving valuation rerating,” BNP Paribas said in a note to clients.

RELENDING SCHEME

The central bank also launched a relending program, initially worth 300 billion yuan, that would allow financial institutions to borrow from the PBOC to fund share purchases by listed companies or their major shareholders.

The one-year interest rate for relending is set at 1.75%, and 21 eligible financial institutions, including policy and commercial banks, can apply for the loans at the start of each quarter, the PBOC said.

Listed companies and their major shareholders can then borrow from the banks at interest rates of up to 2.25% for share buybacks and purchases. It is an exception to rules that prohibit bank lending from flowing into the stock market.

Last week, Beijing Balance Medical Technology Co 688198.SS said its controlling shareholder plans to tap the facility to buy the company’s shares.

“I expect to see a growing number of companies to announce share buybacks or purchases using the cheap loans,” investor Wen said.

(Reporting by Ella Cao and Ryan Woo; Editing by Jamie Freed, Jacqueline Wong, and Shri Navaratnam)

Global uncertainties drive gold above unprecedented USD 2,700/oz milestone

Gold surged above the historic threshold of USD 2,700-per-ounce on Friday, powered by escalating tensions in the Middle East, uncertainties around the US elections and relaxed monetary policy expectations that pushed the metal into uncharted territory.

Spot gold was up 1% at USD 2,720.05 per ounce by 02:58 p.m. ET (1858 GMT) and has risen 2.4% so far this week.

US gold futures settled 0.8% higher to USD 2,730.

“With the conflict intensifying – particularly following Hezbollah’s announcement to escalate the war with Israel – investors are flocking to gold, a traditional safe-haven asset,” said Alexander Zumpfe, a precious metals trader at Heraeus Metals Germany.

Pledges from Israel and its enemies Hamas and Hezbollah to keep fighting in Gaza and Lebanon dashed hopes that the death of a Palestinian militant leader might hasten an end to the escalating war in the Middle East.

Rising geopolitical tensions prompt investors to seek safe-haven assets like gold, driven by risk aversion and concerns over global market instability.

“Adding to the momentum, concerns around the US presidential election and anticipation of looser monetary policies have further fueled the rally,” Zumpfe added.

Gold shattered records multiple times this year as expectations of more rate cuts by central banks and geopolitical uncertainties boosted prices by more than 30% so far this year, its best annual growth since 1979, as per LSEG data.

Lower rates enhance the appeal of bullion, which yields no interest on its own.

Sources told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise. Traders are also pricing in a 92% chance of a Federal Reserve rate cut in November, according to the CME Fedwatch tool.

Max Layton, global head of commodities research at Citi, sees gold prices reaching USD 3,000/oz over the next 6-12 months, as a store of wealth in a time of high US and European economic uncertainty, driving up ETF and investment demand.

Silver is expected to perform strongly to USD 35/oz over the next three months, Layton added.

Spot silver rose 6% to USD 33.58. Platinum added 2.4% to USD 1,016.25 and palladium gained about 4% to USD 1,083.25.

(Reporting by Anushree Mukherjee, Swati Verma, and Anjana Anil in Bengaluru; Editing by Shailesh Kuber and Shreya Biswas)

US yields drop as market consolidates after rally

NEW YORK – US Treasury yields fell on Friday as the market consolidated following large yield increases over the past month as investors price in a less dovish Federal Reserve due to the US economy remaining stronger than previously expected.

Traders priced out the odds of an additional 50 basis point interest rate cut by the US central bank after data showed much stronger job gains than expected in September. Fed Chair Jerome Powell has also pushed back against the likelihood of further large cuts.

The Fed is expected to make steady 25 basis point reductions at its coming meetings. But traders are also focused on the outcome from the Nov. 5 US presidential election, geopolitical tensions in the Middle East and the strength of riskier asset markets.

“The market is decidedly in the mode of consolidation; there’s not any obvious potential triggers on the horizon,” said Ian Lyngen, head of US rates strategy at BMO Capital Markets in New York.

However, it is “poised to respond to external influences. Those could come in the form of moves in the equity market, moves in credit, geopolitical concerns or even the progress towards the presidential election,” Lyngen said.

Benchmark 10-year yields were last down 2.1 basis points at 4.075%. They reached 4.12% on Oct. 10, which was the highest since July 31 and are up from 3.599% on Sept. 17, the lowest since June 2023.

The 10-year yields are holding just below the 200-day moving average at 4.17%.

Interest rate-sensitive two-year yields fell 3.2 basis points to 3.955%.

The yield curve between two-year and 10-year notes steepened 1 basis point to 11.8 basis points.

Atlanta Fed President Raphael Bostic
said Friday he will be patient on cutting rates to make sure inflation does not stall out above the US central bank’s 2% target.

Traders are now pricing in 44 basis points of cuts by year-end, implying they see a less-than-certain chance that the Fed will make a 25 basis point reduction at each of its next two meetings.

Data on Friday showed that US single-family homebuilding surged in September, though excess supply of new homes and prospective buyers holding out for lower mortgage rates pose a near-term challenge.

(Reporting by Karen Brettell; Editing by Jonathan Oatis)

Wall Street zeroes in on semiconductors after turbulent week

NEW YORK – US semiconductor companies will get a closer look from investors in the coming weeks, after diverging reports from two industry leaders abroad set off a volatile few days of trading.

Because semiconductors are key components in a broad array of products, chipmakers, and related equipment companies are closely followed for insight into the economy. Wall Street also watches the stocks as indicators of overall market trends.

This year, the industry has been at the center of the artificial intelligence enthusiasm powering the stock market to record highs, highlighted by massive gains for Nvidia, the AI poster child.

“It’s vitally important that these chip stocks hold up,” said Matt Maley, chief market strategist at Miller Tabak. “If they go down, it weighs on the rest of the market.”

The Philadelphia SE Semiconductor index has pulled back after climbing more than 40% in the first half of the year. It is now up about 25% in 2024 against a 22.5% gain for the benchmark S&P 500.

Semiconductor and related equipment stocks account for 11.5% of the weight of the S&P 500. Nvidia, which is approaching Apple as the largest company by market value, holds a 6.8% weight in the index.

The sector had its share of drama in the past week. Chip shares tumbled on Tuesday after equipment maker ASML, Europe’s biggest tech firm, projected lower-than-expected 2025 sales and bookings. But the group rebounded on Thursday after Taiwan Semiconductor Manufacturing Co., which produces advanced chips used in AI applications, reported a forecast-beating 54% jump in quarterly profit.

Following the dueling announcements, the SOX semiconductor index is down 2.5% so far this week, with the S&P 500 up 0.5%.

The semiconductor group could take its next cues from imminent corporate reports, including from Texas Instruments and equipment company Lam Research next week.

Texas Instruments’ products are used in a broad range of applications, including automotive and industrial, and could be a barometer for whether such areas that have been sluggish for the chip industry are starting to rebound, said Daniel Morgan, portfolio manager at Synovus Trust.

Overall, Morgan said, the semiconductor group is trading at 5.6 times price-to-book valuation, which he said was fair, noting that group topped 8 times price-to-book levels in 2021.

Advanced Micro Devices’ earnings report the following week will give some initial insight into AI-related demand ahead of Nvidia’s highly anticipated report due late next month.

If AMD’s 2025 forecast for its AI chips is strong, “that’s going to be bullish for the sector,” Maley said.

The semiconductor reports are due in a busy week for US corporate earnings overall, with well over 100 S&P 500 companies set to report, including Tesla, Coca-Cola, and IBM.

“The (semiconductor) group is very important, if nothing else because of the market cap that it carries,” said Chuck Carlson, chief executive officer at Horizon Investment Services.

(Reporting by Lewis Krauskopf; Editing by Ira Iosebashvili and Richard Chang)

Dollar rides ‘Trump trade’ toward third weekly rise

SINGAPORE – The dollar headed for a third weekly gain in a row on Friday, helped by a dovish European Central Bank and strong US data that is pushing out expectations for how fast US rates can fall, particularly if Donald Trump wins the presidency.

The euro is down almost 1% for the week so far, has fallen through its 200-day moving average, and at USD 1.0828 in early Asia trade is parked near a 2-1/2 month low.

On a rolling basis, the dollar’s 3.1% three-week gain on the euro is the sharpest rally since the middle of 2022, and it has forged to the strong side of 150 yen for the first time since early August. It last bought 150.24 yen.

On Thursday, data showed US retail sales growth was higher than expected and the ECB cut interest rates by 25 basis points.

Four sources close to the matter told Reuters the ECB was likely to cut again in December unless economic data suggests otherwise.

Meanwhile, markets have been disappointed at the lack of detail offered by Chinese authorities on plans to revive the slowing economy, and the yuan is headed for its largest weekly fall in more than 13 months.

“All of that has played in to a stronger dollar,” said Jason Wong, senior strategist at BNZ in Wellington.

“There’s also been a Trump trade going on in the background,” he said, with the dollar tracking Trump’s newfound lead in election prediction markets, since his tariff and tax policies are seen as likely to keep US interest rates high.

Trump’s prospects have also set bitcoin rallying since his administration is seen as taking a softer line on cryptocurrency regulation. It was last at USD 67,335, up 13% since Oct. 10. The US goes to the polls on Nov. 5.

Later on Friday, Chinese growth and activity data is due and is likely to show a slowdown that puts this year’s economic growth target of around 5% at risk.

The Australian dollar, sensitive to China’s outlook owing to commodity exports, steadied at USD 0.6697 on Friday for a fall of around 0.8% on the week.

It had received a boost on Thursday when stronger-than-expected jobs data reduced bets on interest rates cuts. The New Zealand dollar is also down 0.8% on the week and was a fraction lower at USD 0.6055 early in the Asia session.

Israel said it had killed Hamas leader Yahya Sinwar in Gaza, a mastermind of the Oct. 7, 2023, attack that triggered war.

Israel’s shekel rose and touched a two-week high after the news, though Israeli Prime Minister Benjamin Netanyahu said fighting would go on and broader markets had little immediate reaction.

Sterling regained the USD 1.30 level overnight but is also headed for a weekly loss after a bigger-than-expected drop in British inflation raised bets the Bank of England might cut interest rates twice before the end of the year.

British retail sales and US housing starts data are due later on Friday, as are plans from Japan’s largest union group, Rengo, for the year’s wage negotiations. Data showed Japan’s core consumer prices were up 2.4% year-on-year in September, a bit higher than expected.

The US dollar index hit a 2-1/2 month high on Thursday at 103.76 and is up 0.8% this week.

China’s yuan hovered at 7.1370 in offshore trade, ahead of the onshore open.

(Reporting by Tom Westbrook; Editing by Jamie Freed)

Gold hits record highs on US election uncertainty, more policy easing

Gold prices hit record highs on Thursday as uncertainty surrounding the US presidential elections and the war in the Middle East prompted investors to seek out the safe-haven asset, while easing monetary policy environment kept prices elevated.

Spot gold rose 0.7% to USD 2,690.60 per ounce by 1:42 p.m. ET (1742 GMT). US gold futures settled 0.6% higher at USD 2,707.5.

Gold has seen a surge of over 30% this year, surpassing record levels, driven by prospects of further Federal Reserve rate cuts after a half percentage point rate cut last month and ongoing geopolitical uncertainties.

“On top of the concerns in the Middle East, you are also nearing the US election, which is looking like a very closely contested election. And that generates a whole host of uncertainty, and gold often is the place to go in times of uncertainty,” Nitesh Shah, commodity strategist at WisdomTree, said.

Gold prices are expected to rise to USD 2,941 a troy ounce over the next 12 months, delegates to the London Bullion Market Association’s annual gathering predicted earlier this week.

“The LBMA poll that came out from Miami earlier in the week, where the base look for gold prices was to rally near USD 3,000 in the next year and silver doing even better, I think that potential is also just attracting a bit of attention,” said Ole Hansen, head of commodity strategy at Saxo Bank.

Earlier in the US session, prices had backed off from record highs after data showed US retail sales increased slightly more than expected in September while a Labor Department report said unemployment unexpectedly fell last week.

“Those two reports fall into the camp of the monetary policy hawks,” Jim Wyckoff, senior market analyst at Kitco Metals, said.

Gold, which yields no interest on its own, tends to gain when interest rates are cut.

The European Central Bank also cut interest rates for the third time this year by a quarter-point.

Elsewhere, spot silver fell 0.3% to USD 31.56 per ounce. Platinum rose 0.1% to USD 994.00 and palladium gained 1.7% to USD 1,041.

(Reporting by Anushree Mukherjee, Swati Verma, and Rahul Paswan in Bengaluru; Editing by Shailesh Kuber)

US Treasury yields rise as Fed expectations ease on retail sales data

NEW YORK – US 10-year Treasury yields climbed on Thursday after economic data pointed to an economy on solid footing, easing market expectations for Federal Reserve aggressiveness in cutting interest rates.

The Commerce Department said retail sales rose 0.4% last month, above the 0.3% estimate of economists polled by Reuters, and after an unrevised 0.1% gain in August, in a sign consumer health remains resilient.

In other data, the Labor Department said weekly initial jobless claims dropped by 19,000 last week to 241,000 and below the 260,000 estimate, but could remain at elevated levels in the coming weeks due to the effects of Hurricanes Helene and Milton.

“It’s just one thing after another that is hitting the economy, but so far US growth is defying gravity,” said Brian Jacobsen, chief economist at Annex Wealth Management in Menomonee Falls, Wisconsin. “Monetary policy is still restrictive, the cuts are taking the foot off the brake, not pushing on the accelerator. We’re still a long way from neutral so the Fed can cut, but it doesn’t have to be in a hurry.”

In addition, the Federal Reserve Bank of Philadelphia’s monthly manufacturing index rose to 10.3 in October from 1.7 in the prior month and above the 3.0 estimate as manufacturing activity in the US Mid-Atlantic region expanded more than expected.

The yield on the benchmark US 10-year Treasury note US10YT=TWEB rose 7.9 basis points to 4.095%. The 10-year is on track for its biggest one-day jump since Oct. 4.

Yields have experienced a sharp run higher since a strong jobs report in early October, but have eased in the last three sessions, with the 10-year yield holding below the 2-1/2 month high of 4.12% hit last week.

The yield on the 30-year bond jumped 9.4 basis points to 4.393% and was on pace for its biggest daily climb since Aug. 6.

While the data still gives the Fed enough cushion to continue cutting rates, investors now see less of a chance for rate cuts at the two remaining meetings this year.

Markets are now pricing in a 90.3% chance for a cut of 25 bps at the Fed’s November meeting, down from 93.7% in the prior session, with only an 9.7% chance the central bank will hold rates steady, according to CME’s FedWatch Tool.

Expectations for a cut of 25 bps at the December meeting were scaled back to 73.6% from 85.6% on Wednesday.

Earlier on Thursday, the European Central Bank (ECB) cut interest rates for the third time this year, saying inflation in the eurozone was increasingly under control while the outlook for the wider economy was worsening.

A closely watched part of the US Treasury yield curve measuring the gap between yields on two- and 10-year Treasury notes, seen as an indicator of economic expectations, was at a positive 11.3 basis points.

The two-year US Treasury yield, which typically moves in step with interest rate expectations, rose 4.5 basis points to 3.98%.

The breakeven rate on five-year US Treasury Inflation-Protected Securities (TIPS) was last at 2.246% after closing at 2.219% on Oct. 16.

The 10-year TIPS breakeven rate was last at 2.3%, indicating the market sees inflation averaging about 2.3% a year for the next decade.

(Reporting by Chuck Mikolajczak; Editing by Christina Fincher and Will Dunham)

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