Gold Futures Set Fresh Record High as Middle East Tensions Flare, Fed Hints at Rate Cuts

Commodity

Summary:

Gold futures hit a record high amid Middle East tensions and Fed rate cut prospects, with prices peaking at $2,502.8 a troy ounce. Safe-haven demand surged following geopolitical instability and dovish Fed signals.

Gold futures reached a new all-time high in Asian trading, sparked by rising Middle East tensions and increasing prospects of the Federal Reserve lowering U.S. interest rates.

Continuous gold futures on the New York Mercantile Exchange recently rose 0.3% to $2,479.7 a troy ounce, having reached as high as $2,502.8 earlier in the session. The prior all-time record was $2,487.4 an ounce, set on July 17.

The precious metal was one of the few commodities to rise over the month of July, gaining on Middle East-related concerns fuelling safe-haven demand, a noticeable uptick in gold-backed Exchange-Traded Fund inflows and dovish comments from the Fed on the prospects of interest rate cuts, MUFG analysts said in a note.

After the assassination of Hamas leader Ismail Haniyeh in Tehran, investors are turning to gold over fears of an escalation in the Israel-Palestine conflict. At the same time, bullion's gains follow Fed officials holding interest rates steady at Wednesday's meeting, though Chair Jerome Powell said officials could cut rates at September's meeting as signs of inflation tick lower.

Gold's gains paralleled a sharp fall in U.S. Treasurys with yields sliding across the curve, as the market is now pricing in a guaranteed chance of a 25 basis point cut, SP Angel analysts said in a note.

Non-interest bearing bullion typically has an inverse relationship with interest rates, with higher rates damping investor enthusiasm for gold.

Turning to the U.S. election, with the gap between nominees Vice President Kamala Harris and former President Donald Trump narrowing and Trump's lead in swing states sliding in recent polls, the dollar is under pressure, said Dilin Wu, research strategist at broker Pepperstone.

Safe-haven demand and expectations of a weaker dollar are like strong winds at gold's back, pushing prices higher, Wu said in an email.

"As with the start of 2024, gold remains our most bullish call on a trifecta of Fed cuts, supportive central bank demand and bullion's role as the geopolitical hedge of last resort," MUFG analysts said.

Market attention now turns to Thursday's U.S. nonfarm payroll data, which is set to extend or halt the rally, Wu said.

"From my perspective, if job gains fall below 140,000 and the unemployment rate exceeds 4.1%, gold could very well challenge [its] historic high," Wu added.

Source: DowJonesNewswires

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Thomas

Energy

China adopted classic cutthroat pricing to shift a record 120,427 megawatts (MW) of solar module capacity exports in the first half of 2024, ensuring the country remains the dominant solar supplier despite ongoing trade disputes in key markets.

The first half tally was up 6.3% year-on-year or around 7,150 MW above the previous record half-year period - set in the opening half of 2023 - and means the country has exported nearly 720,000 MW of solar module capacity since the start of 2020, data from think tank Ember shows.

Key to the strong export flow was a steep cut in module prices, which averaged 13.7 cents per megawatt over the first half of 2024, compared to an average of 18 cents/MW for the whole of 2023.

China Discounts Its Way to Record Solar Module Exports_1

China's module prices have roughly halved from their average of 2022, and are by far the cheapest components available globally for each megawatt of solar generation capacity.

Key Markets

Europe was the top destination for China's solar modules, accounting for 43% of the total, or 52,158 MW.

That total was down 20% from the same period in 2023, as high interest rates, economic growth concerns and trade tensions with China stifled solar installation demand across the continent.

Nonetheless, Europe's purchase total was the second highest tally for a half-year period behind the first half of 2023.

The Netherlands remained the top country market for China's modules, taking in 23,421 MW of capacity during the opening half of the year.

While that total was 25% less than during the opening half of 2023, The Netherlands' purchases were still more than twice the size of any other nation during the first half of the year.

Spain, Germany and Italy were also notable buyers in Europe, but all also showed steep year-on year contractions in purchase volumes, Ember data shows. China Discounts Its Way to Record Solar Module Exports_2

China Discounts Its Way to Record Solar Module Exports_2

Brazil was China's second largest market during the first half of the year, snapping up 10,511 MW of capacity.

That total was up 10% from the same period in 2023, and contrasts with a slight contraction in imports by the Latin American region as a whole during the first half of the year.

Growth Areas

Asia was the second largest regional destination for China's solar parts, accounting for a record 32,109 MW of capacity, or around 27% of the total.

That total was 86% more than during the first half of 2023, and was driven mainly by strong growth in South Asia.

Pakistan was Asia's largest single market, accounting for 10,450 MW, while India snapped up 8,324 MW.

Both markets recorded more than 200% jumps in solar imports from the same period in 2023, and represent key growth markets for China in the future.

The Middle East was another key destination for China so far this year, with exports to the region topping 13,000 MW for the first half of the year to account for a record 11% share of China's total solar panel and parts exports.

That compares to 6,228 MW during the first half of 2023, and was driven in large part by strong purchases by Saudi Arabia (7,649 MW), United Arab Emirates (1,892 MW) and Oman (1,396 MW).

Elsewhere, North America remained a tiny market for Chinese panels and parts due to the ongoing trade spat between China and the United States, while Africa's purchases shrank by around 9% from the first half of 2023, and accounted for only 4.3% of China's total sales.

Overall, and despite slower sales into Europe, the strong growth pace of exports to the Middle East and South Asia bodes well for China's export-oriented solar sector, as those markets look primed for further sustained growth in the decades ahead.

China's steep cost cuts also look set to undermine the production potential of solar modules in other regions, and ensure Beijing's continued dominance of the sector.

Source: Reuters

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Warren Takunda

Economic

Venezuela's contested election is the latest in a blockbuster year that will see nearly half the world head to the polls. Races so far have served as a reminder that voters can still deliver surprises to politicians and markets alike.

Here is a selection of the recent, and upcoming, votes and how they are impacting markets.

Election Jolts Course Through Markets as Risk Returns_1

1. VENEZUELA

President Nicolas Maduro and his opposition rival both claimed victory in Sunday's contest.

While electoral authorities said that Maduro had won a third term with 51% of the vote, extending a quarter-century of socialist rule, opposition leaders said their candidate, Edmundo Gonzalez, had won, citing voting tallies they have collected from polling stations. Protesters and a major international observer have said the vote was undemocratic.

The turmoil sent the debt-defaulted country's already low bond prices into a new spiral - and dampened investor hopes that for a post-election restructuring.

Election Jolts Course Through Markets as Risk Returns_2

2. FRANCE

An unexpected election threw a curve ball at markets, focusing attention on political instability in France. The closely-watched French/German bond yield gap briefly hit its widest since 2012 as investors fretted over the nation's already weak fiscal position.

A surprise left-wing surge in the second-round vote on July 7 blocked a far-right quest for power. But with no single group securing a majority, France faces a hung parliament and policy paralysis.

The left-wing alliance that came first in the election wants to radically change France's economic course with a tax-and-spending drive, meaning efforts to rein in high debt will likely stall.

2. BRITAIN

Britain's July 4 election, which delivered big win for the Labour Party, ushers in potential calm after a turbulent period that included 2022's mini-budget crisis.

Labour must now convince investors its economic growth plans are credible. Markets are giving the new government the benefit of the doubt - sterling is near its highest levels in a year, Britain's FTSE 250 midcap index is close to two-year highs and has outperformed Europe.

Election Jolts Course Through Markets as Risk Returns_4

3. MEXICO

The scale of the MORENA party's win in the June 2 election roiled markets due to the supermajority it gave President-elect Claudia Sheinbaum.

Stocks and the peso currency took a hit in the days following the vote. Uncertainty around the U.S. election has continued to weigh on the peso - disrupting a popular "carry trade" that seeks to exploit the differences in interest rates between regions.

4. UNITED STATES

No election looms larger than the Nov. 5 U.S. presidential race. The stakes are high with global trade, funding for Ukraine, defence for Taiwan and the outlook for inflation and rates all potentially impacted.

President Joe Biden's withdrawal upended a race already marked by an assassination attempt on Republican rival Donald Trump. He and Vice President Kamala Harris, the Democrats' presumptive nominee, are neck-and-neck in the polls.

If Trump wins, he would likely pursue major policy changes including expansive tariffs. Trump had a big impact on the U.S. dollar in his first term, and a reversal of the strong dollar policy that he has advocated would reverberate globally.

5. SRI LANKA

Sri Lanka will hold a presidential election on Sept. 21, a contest expected to shape future of reforms.

The country defaulted on its debt in 2022 after an economic crisis sparked by heavy borrowing and the COVID-19 pandemic, which led to a plunge in crucial remittances and tourism earnings.

Current president Ranil Wickremesinghe, seen as the most market- and reform-friendly candidate, has overseen a fragile economic recovery, including a pending international debt rework and an IMF bailout. But poverty, corruption and pain from the reforms could boost his opponents.

Election Jolts Course Through Markets as Risk Returns_6

6. GHANA

An ongoing economic crisis boosts former president John Dramani Mahama's chances of defeating ruling party candidate, Vice President Mahamadu Bawumia, in the December election.

The cocoa, gold and oil producer defaulted on most of its external debt in 2022, and secured a $3 billion International Monetary Fund bailout in 2023.

Mahama has said he would try to renegotiate the IMF deal and boost local ownership of future oil and mining projects - moves that could unsettle investors.

Ghana's cedi has already struggled this year due to the economic strains and faltering cocoa production.

Election Jolts Course Through Markets as Risk Returns_7

Source: Reuters

To stay updated on all economic events of today, please check out our Economic calendar

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Warren Takunda

Cryptocurrency

Bitcoin is seeing “wild” order book behavior as bulls attempt to stave off a fresh BTC price drop.

The latest data from monitoring resource CoinGlass shows a fresh support battleground forming near $63,000.

Bitcoin traders line up last line of defense

Bitcoin set new local lows of $63,400 on Aug. 1, 5% beneath the prior day’s highs, per Cointelegraph Markets Pro and TradingView.

While since recovering above the $64,000 mark, price is still due a rematch with those lows, traders believe.

According to CoinGlass, support liquidity at $63,300 alone now totals nearly $100 million across exchange order books. Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_1

Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_1

BTC liquidation heatmap (screenshot). Source: CoinGlass

Analyzing the situation, popular trader Daan Crypto Trades suggested that the latest liquidity below the spot price could form part of a deliberate attempt to drive the market higher.

“That's some wild action in the orderbooks on Binance futures,” he commented on X alongside a chart.

“We saw a lot of orders valued at ~$300M get filled down at these levels. There's an additional ~$300M in orders put below price now, supposedly to try and drive it up. Interesting action.”

Binance Bitcoin futures order book data. Source: Daan Crypto Trades/X

Previously, Cointelegraph reported on expectations for a sweep of range lows on BTC/USD to take liquidity and fuel a return higher.

Updating X followers, fellow trader Mark Cullen appeared confident despite the latest downside.

“All going to plan, just waiting for Bitcoin to sweep the lows or put in a bottoming structure here around the 38.2 Fib level,” he wrote.

“Lose the level and fail to reclaim it quickly and we could see low 61ks once again.”

BTC/USDT chart. Source: Mark Cullen/X

Analyst: $70,000 rejection was "worst" BTC price option

Bitcoin’s monthly close meanwhile continued a multi-month consolidation process.

Coming in at around $64,600, the close sealed total BTC price gains of 2.95% for July, CoinGlass confirms. Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_4

Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_4

BTC/USD monthly returns (screenshot). Source: CoinGlass

Despite this, a series of lower highs on the daily chart remains problematic for some market participants, with Bitcoin sellers still firmly in control at the old all-time highs of $69,000 and above.

“Bitcoin upside wicked into the low $70,000s (blue circle) and rejected from the top of the structure,” popular trader and analyst Rekt Capital responded, highlighting the series of lower highs. Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_5

Will $100M BTC Price Support Help Bitcoin Avoid a Drop to $61K?_5

BTC/USD chart. Source: Rekt Capital/X

In a further X post, he suggested that history favored an upside breakout to eventually result for BTC/USD, with the $70,000 rejection the “worst” outcome within the consolidatory phase.

Source: Cointelegraph

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Economic

Central Bank

Forex

Stocks

Powell flags a possible September cut

The Federal Reserve delivered no surprises on Wednesday, keeping interest rates unchanged as expected. But markets mostly got what they were hoping for – a clear signal that rates could be cut at the next meeting in September.

As had been widely predicted, the FOMC statement was tweaked to highlight the dovish shift. Officials cited "some further progress" on meeting their inflation objective and saw the risks as no longer being one sided.

But what really cheered markets was Jay Powell's remarks in his press conference where he told investors that "a rate cut could be on the table at the September meeting" if certain conditions are met. In a further boost to rate cut hopes, Powell revealed that there was a "real discussion" on whether there was a case to move at the July meeting. Yet, he stopped short of fully committing to a September cut.

Dovish Fed helps tech stocks bounce back

One likely reason why policymakers are maintaining caution is that despite the progress, the data isn't going entirely the Fed's way, as shown by last week's upside surprises in the GDP and core PCE readings. Friday's nonfarm payrolls report will be another test for the dovish expectations.

Investors have almost fully priced in a 25-bps rate cut at the three remaining meetings of the year and Treasury yields have also come under pressure.

The 10-year yield brushed a six-month low yesterday, giving Wall Street bulls a helping hand. US tech stocks staged an impressive rebound, with the Nasdaq 100 jumping by 3.0% after a dreadful two weeks. Reports that Washington's proposed ban on the sale of chips to China will come with exemptions also lifted chip stocks.

Nvidia and Meta shine

Nvidia was the star of Wednesday's session, rallying by 12.8% on expectations that demand for AI chips will remain strong as companies increase their spending on AI. Both Alphabet and Microsoft have ramped up their AI capex, sparking investor jitters, and Apple and Amazon will likely follow their lead when they announce their earnings later today.

Facebook parent, Meta, has been the exception, whose stock is expected to surge today after its results, announced after yesterday's close, impressed.

Dollar and yen stand tall, pound slips, oil climbs

The US dollar escaped a broad selloff on the back of the Fed's near pivot and is edging up today against a basket of currencies despite extending its slump against the Japanese yen. With the Bank of Japan now seemingly in a tightening cycle and the Fed close to pressing the cut button, the yen's fortunes have turned.

The pound on the other hand has been on the backfoot lately as investors increasingly expect the Bank of England to announce a rate cut today at 11:00 GMT. Although the decision could well be a 'hawkish cut', the rising odds, which stood at just 50-50 a few days ago, is proving a headache for sterling.

Meanwhile, oil prices are up sharply for a second day as tensions in the Middle East escalate once again. Israel's strikes in recent days, killing a senior Hezbollah commander and the leader of Hamas, will likely result in some kind of retaliation by Iran, raising fears of a wider conflict in the region.

To stay updated on all economic events of today, please check out our Economic calendar

Risk Warnings and Disclaimers

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Warren Takunda

Stocks

London open

The FTSE 100 is expected to open 30 points higher on Thursday, having closed up 1.13% on Wednesday at 8,367.98.

Stocks to watch

Barclays reported a return on tangible equity (RoTE) of 11.1% for the first half on Thursday, alongside announcing £1.2bn in capital distributions to shareholders. The FTSE 100 bank also increased its 2024 net interest income guidance to around £11bn, driven by higher interest rates and improved deposit dynamics. Despite a slight year-on-year decline in group income and an increase in operating expenses, Barclays maintained its key financial targets, including a CET1 ratio of 13.6% and a cost-to-income ratio of around 63%.

Next reported a 3.2% increase in full-price sales for the second quarter, surpassing expectations by £42m, despite forecasting a slight decline. For the first half of the year, full-price sales rose by 4.4%, leading the company to raise its full-year profit guidance by £20m to £980m, a 6.7% increase from the previous year. The high-street retailer said the profit boost was driven by higher sales and £9m in cost savings, primarily in logistics.

Newspaper round-up

Meta’s shares rose in after-hours trading on Wednesday off the back of a strong earnings report that comes as the company is spending heavily on AI tools. The company’s stock price grew around 5% following the report, which revealed the company outperformed analysts’ expectations for its second quarter. Meta, which owns Facebook, Instagram and WhatsApp, reported $39.07bn in revenue and $5.16 earnings per share. Both results outpaced market predictions of around $38bn in revenue and $4.7 per share, while the company also reported $8.47bn in capital expenditures – lower than analysts expected. – Guardian

Two of the largest City firms have joined forces to invest as much as £20bn of pension money in fast-growing UK businesses such as green energy, after government reforms designed to increase returns for savers and the British economy. Phoenix Group, the country’s largest savings and retirement business, and Schroders, the investment manager, announced the launch of a joint venture to plough pensions money into high-growth companies which are not listed on the stock market. – Guardian

Asda chief Mohsin Issa has announced an emergency £30m cash injection amid an alarming sales slump at the troubled supermarket chain. The investment package, which will be used to boost staffing hours and improve customer service levels, will be implemented before the end of the year. It comes amid growing concern over Asda’s dwindling market share, as it is the only major supermarket losing customers. – Telegraph

A senior member of the Barclay family, which owns The Telegraph, has struck a confidential settlement with a leading private bank to avoid the threat of bankruptcy. According to court filings, Investec has dropped a legal claim against Alistair Barclay after months of wrangling over almost £1m in unpaid debts. The settlement was submitted to the High Court in late July, two days before Mr Barclay was expected to appear before a judge. – Telegraph

Two former directors of Chill Brands Group have been accused of “blatant fraud” and embezzlement against the London-listed vaping company, and of allegedly misusing funds for personal expenses and using a company email account to “engage with an X-rated business for personal purposes”. Chill Brands has been locked in an extraordinary dispute and power struggle with Antonio Russo, its former chief commercial officer, and Trevor Taylor, its former chief operating officer, and has now begun legal action in the United States in an attempt to regain control of its chill.com domain and some trademarks. – The Times

US close

Hawkish comments from the head of the Federal Reserve ignited US stocks on Wednesday with hopes rising for an interest-rate cut at the central bank's next meeting in September.

The S&P 500 jumped 1.6% to 5,522.30, while the Nasdaq surged 2.6% to 17,599.40.

The Dow, however, only rose 0.2% to 40,842.79 with the index now just inches away from its all-time closing high of 41,198,08 reached on 17 July.

The Fed's two-day policy meeting concluded on Wednesday with no change in policy, as was widely anticipated, but chair Jerome Powell indicated that the central bank would be prepared to loosen monetary policy at its next meeting if price pressures continue to ease.

On the macro front, US mortgage applications fell 3.9% in the fourth week of July, according to the Mortgage Bankers Association, extending the prior week's 2.2% drop to record the steepest weekly decline in almost two months.

Applications to purchase a home fell by 1.5% for a third weekly decline in a row, while those to refinance a mortgage tanked by 7.2% week-on-week.

Source: Sharecast

Risk Warnings and Disclaimers

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Thomas

Political

Here is a selection of the recent, and upcoming, votes and how they are impacting markets. Indonesia's July Inflation Eases to Lowest Since February 2022_1

Indonesia's July Inflation Eases to Lowest Since February 2022_1

Venezuela

President Nicolas Maduro and his opposition rival both claimed victory in Sunday's contest.

The turmoil sent the debt-defaulted country's already low bond prices into a new spiral - and dampened investor hopes that for a post-election restructuring. Indonesia's July Inflation Eases to Lowest Since February 2022_2

Indonesia's July Inflation Eases to Lowest Since February 2022_2

France

A surprise left-wing surge in the second-round vote on July 7 blocked a far-right quest for power. But with no single group securing a majority, France faces a hung parliament and policy paralysis.

The left-wing alliance that came first in the election wants to radically change France's economic course with a tax-and-spending drive, meaning efforts to rein in high debt will likely stall. Indonesia's July Inflation Eases to Lowest Since February 2022_3

Indonesia's July Inflation Eases to Lowest Since February 2022_3

Britain

Britain's July 4 election, which delivered big win for the Labour Party, ushers in potential calm after a turbulent period that included 2022's mini-budget crisis.

Mexico

The scale of the MORENA party's win in the June 2 election roiled markets due to the supermajority it gave President-elect Claudia Sheinbaum.

United States

Indonesia's July Inflation Eases to Lowest Since February 2022_6

Sri Lanka

Sri Lanka will hold a presidential election on Sept. 21, a contest expected to shape future of reforms.

The country defaulted on its debt in 2022 after an economic crisis sparked by heavy borrowing and the COVID-19 pandemic, which led to a plunge in crucial remittances and tourism earnings.

Indonesia's July Inflation Eases to Lowest Since February 2022_7

Ghana

An ongoing economic crisis boosts former president John Dramani Mahama's chances of defeating ruling party candidate, Vice President Mahamadu Bawumia, in the December election.

The cocoa, gold and oil producer defaulted on most of its external debt in 2022, and secured a $3 billion International Monetary Fund bailout in 2023.

Mahama has said he would try to renegotiate the IMF deal and boost local ownership of future oil and mining projects - moves that could unsettle investors.

Ghana's cedi has already struggled this year due to the economic strains and faltering cocoa production. Indonesia's July Inflation Eases to Lowest Since February 2022_8