Gold Holds Losses With US Rate-Cut Outlook Muddled By Data Void

Summary:

Gold steadied, after three days of losses underpinned by fading expectations of a US interest rate cut next month.

Bullion was trading around $4,030 an ounce on Tuesday. With investors and policymakers awaiting a backlog of data after the longest US government shutdown in history, several Federal Reserve officials have cautioned against another reduction in the cost of borrowing.

Interest-rate swaps now imply a less-than-50% likelihood of a December rate cut after all but pricing in a quarter-point reduction less than a month ago. This has dampened the outlook for gold, which doesn't pay interest and typically benefits from lower rates.

The first clues to the state of the American labor market will appear on Thursday, when the Bureau of Labor Statistics is scheduled to release the September jobs report. The data will be more backward-looking than usual but will help shed light on the state of the world's largest economy as Washington emerges from its six-week shutdown.

Despite its recent pullback, gold has gained 54% this year and remains on course for its best annual performance since 1979. Investors have bought the metal as a hedge against growing fiscal unease in several major economies, while elevated central-bank purchases also provided crucial support for bullion's blistering run to a record above $4,380 last month.

These purchases likely continued in November, analysts from Goldman Sachs Group said in a note on Monday. Central banks bought an estimated 64 tons in September, more than triple the amount in August, they said. China alone added an estimated 15 tons.

"We continue to see elevated central-bank gold accumulation as a multiyear trend, as central banks diversify their reserves to hedge geopolitical and financial risks," said the analysts, including Lina Thomas.

Gold edged down 0.3% to $4,032.42 an ounce as of 8:19 a.m. in Singapore. The Bloomberg Dollar Spot Index was flat. Silver and palladium fell, while platinum rose slightly.

Source: Bloomberg Europe

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Bethany Sullivan

Federal Reserve Governor Christopher Waller supports a 25 basis point rate cut at the December 9-10 FOMC meeting, citing weakness in the U.S. labor market.

This potential rate cut could enhance liquidity in crypto markets, benefiting assets like BTC and ETH, while encouraging greater risk-taking among investors.

Federal Reserve Governor Christopher Waller suggests a 25 basis point rate cut at the December FOMC meeting due to a weakened labor market.

This decision may increase liquidity and affect markets, notably cryptocurrency sectors such as BTC and ETH.

Waller Advocates 25 Point Rate Cut Due to Weak Jobs Data

Federal Reserve Governor Christopher Waller has publicly endorsed a 25 basis point rate cut, pointing to a weakened U.S. labor market as his reason. He mentioned declining job postings and weak payroll data. Waller stated that such a move at the upcoming FOMC meeting is necessary for risk management. His comments highlighted conversations with CEOs about corporate plans for layoffs. He remarked, "This reading of the data leads me, at this moment, to support a cut in the FOMC's policy rate at our next meeting on Dec. 9 and 10 as a matter of risk management" (American Banker).

Rate Cut Sparks Potential Crypto and DeFi Growth

A rate cut typically lowers the cost of capital, potentially boosting both traditional and cryptocurrency markets. Crypto assets like BTC and ETH might see increased activity due to improved liquidity.

The anticipated decision could lead to larger inflows into DeFi protocols and rising TVL. An increasing risk appetite may influence both market and consumer behavior positively.

Historical Rate Cuts: How Crypto Rallies Respond

Past interest rate cuts have often been followed by significant rallies in cryptocurrencies like BTC and ETH. Historical data supports the notion of expanded dollar liquidity benefiting risk assets.

Projected outcomes suggest enhanced staking activity and liquidity in DeFi. Experts predict strengthened Layer 1 and governance token dynamics as market conditions shift.

Source: CryptoSlate

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Henry Thompson

Australia's central bank said on Tuesday that it could keep holding the cash rate at the current level if incoming data surprises on the strong side, but there are also scenarios where it sees more policy easing.

Minutes of its November 3-4 policy meeting showed the Reserve Bank of Australia board judged the current cash rate of 3.6% as being slightly restrictive, but said it was possible this was no longer the case, citing the jump in housing credit to investors.

The board noted several factors that could lead it to hold the cash rate steady, including data suggesting the recovery in demand is stronger than expected or persistently high inflation.

"Members determined that they could afford to be patient while assessing what the incomeing data reveal about their judgements on the extent of spare capcity, the outlook for the labour market and the degree of restrictiveness of monetary policy."

The RBA held policy steady this month after three rate cuts this year, saying it was cautious about easing further given higher inflation, firmer consumer demand and a revival in the housing market.

A surprisingly high third-quarter inflation reading meant the central bank now saw inflation stuck above the 2-3% target band until mid-2026 and settling at 2.6%, above the 2.5% mid-point of its target range.

Concerns about the labour market proved to be overblown, after employment roared back in October and the jobless rate fell back to 4.3%. That led markets to price out the chance of any more policy easing from the RBA, with a move in May next year just priced at 40%.

Still, there are scenarios in which monetary policy may need to be eased further, said the RBA, citing the possibility that the labour market weakens materially or the recovery in the economy lags behind.

The board noted that it was not possible to be confident about which scenario was most likely to happen, reiterating that they will remain cautious and data dependent.

Source: Investing

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Daniel Carter

Central Bank

Economic

The data available during the recent U.S. government shutdown shows the job market near stall speed, with state unemployment claims rising slightly, layoff numbers increasing, and no evidence of building wage pressures, facts ‌that warrant another quarter-percentage-point interest rate cut when the U.S. central bank meets next month, Federal Reserve Governor ‌Christopher Waller said on Monday.

"The labor market is still weak and near stall speed," Waller said in remarks prepared for delivery to an economists' group in London. Meanwhile, inflation, once the likely temporary impact of tariffs is excluded, "is relatively close" to the Fed's 2% target,⁠ Waller said, while economic ‌growth has likely slowed.

"I am not worried about inflation accelerating or inflation expectations rising significantly," Waller said. "My focus is on the labor market,‍ and after months of weakening, it is unlikely that the September jobs report later this week or any other data in the next few weeks would change my view that another cut is in order" when the Fed meets on December 9-10.

The 43-day federal government shutdown delayed the release of core economic data, ‌including the September jobs report that is due to be released on Thursday.

Waller, a candidate to replace Fed Chair Jerome Powell in the central bank's top job next year, said the central bank was not, as some of his colleagues have analogized, "in a fog" that requires it to delay rate cuts until there was more clarity.

"We have a wealth of private and some public-sector ⁠data that provide an imperfect but perfectly actionable picture of the U.S. economy," he said, including information from private sources like payroll processor ADP, state government unemployment claims, and surveys from groups like the Conference Board and the University of Michigan.

He said the drop in consumer ‍sentiment and stress on families ⁠whose budgets are stretched by housing and other major costs point to slower economic growth.

"I worry that restrictive monetary policy is weighing on the economy, especially about how it is affecting lower-⁠ and middle-income consumers," Waller said. "A December cut will provide additional insurance against an acceleration in ‌the weakening of the labor market and move policy toward a more neutral setting."

Source: Yahoo Finance

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

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Daniel Carter

Political

The United Nations Security Council approved a resolution backing President Donald Trump's Gaza peace plan, in a move the US said would help bolster the fragile truce between Israel and Hamas.

The top decision-making body at the United Nations saw 13 votes Monday in support of the US-led proposal, with Russia and China abstaining. The action is largely symbolic, since Trump's 20-point plan has been in motion since Israel and Hamas agreed to a broad peace deal in October.

US officials had nonetheless pushed for the Security Council's stamp of approval for the plan, arguing the support would help ensure diplomatic momentum. The resolution would also help rally the necessary international troops to help monitor the ceasefire in Gaza, officials argued.

"Today's resolution represents another significant step towards a stable Gaza that will be able to prosper and an environment that will allow Israel to live in security," US Ambassador to the UN Mike Waltz said at the Security Council.

"No" votes from China and Russia would have killed the proposal given the veto power they wield as permanent members of the council. The fact that they abstained signaled that they're not going to stand in the way, at least publicly, of the US-led plan.

Waltz said troops from some Muslim-majority nations including Indonesia and Azerbaijan will help make up an International Stabilization Force. The troops will work closely with Egypt and Israel to help keep order while the Israel Defense Forces withdraw from the Gaza Strip and the so-called Board of Peace outlined in Trump's proposal helps set up a transitional government.

These would remain authorized until Dec. 31, 2027, and can be renewed by the Security Council if necessary.

The UN document also calls on the Board of Peace, which is led by Trump, to report on its progress to the Security Council every six months.

"Congratulations to the World on the incredible Vote of the United Nations Security Council, just moments ago, acknowledging and endorsing the BOARD OF PEACE, which will be chaired by me, and include the most powerful and respected Leaders throughout the World" Trump wrote on Truth Social after the vote. "This will go down as one of the biggest approvals in the History of the United Nations."

Even though the resolution has some support from outside the council — including from the Palestinian Authority and other member states — some countries worry that the plan doesn't pave the way for a two-state solution.

The resolution says the plan will facilitate "a credible pathway to Palestinian self-determination and statehood" and that the US "will establish a dialogue between Israel and the Palestinians to agree on a political horizon for peaceful and prosperous coexistence."

Last week, Russia pushed its own draft resolution that prioritized Palestinian statehood. The US delegation warned that attempts to "sow discord" would have "grave, tangible, and entirely avoidable consequences for Palestinians in Gaza."

Source: Bloomberg Europe

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Manuel

Political

Japanese Prime Minister Sanae Takaichi is facing her first major diplomatic test less than a month into office, after angering China with remarks about Tokyo’s position on the red line issue of Taiwan.

Takaichi this month became the first sitting Japanese leader in decades to publicly link a Taiwan Strait crisis with the possible deployment of Japanese troops, prompting Beijing to unleash a flurry of economic reprisals and threats of more retribution.

China’s Foreign Ministry spokeswoman Mao Ning at briefing on Monday re-upped a demand for Takaichi to retract her comments about the self-ruled island Beijing considers its territory. Making clear the terms for deescalation, she called on Japan to: “Stop crossing the line and playing with fire, retract the wrongful remarks and deeds and honor its commitments to China with real action.”

So far, Takaichi has refused to recant. Elected by her party as a nationalist who’d show strong leadership, Takaichi would face significant political blowback if she bowed to Beijing. That’s creating a stand-off between Japan and its largest trading partner with little off-ramp in sight, as Chinese state media implies Beijing could impose sanctions and cut diplomatic, economic and military communication channels if things spiral.

Kunihiko Miyake, a former Japanese diplomat based in China, said he didn’t expect Takaichi to back down and didn’t think she had to. “If China is pressuring us to weaken Takaichi it’ll probably have the opposite effect,” he said, noting her high approval ratings, which have reached over 80%. “They are fueling her engine.”

Takaichi may have made a strategic error, he added, but history has shown that when Japan and China spar over sensitive issues an agreement typically comes after a months-long diplomatic freeze.

“Although China’s reaction has been very strong so far, it’s very calculated,” said Rui Aoyama, a professor of Japan-China relations at Waseda University in Tokyo. “China is aiming to deal a blow to Japan’s economy, but I don’t think there’s an intention to cut ties.”

The danger for Takaichi is if China turns the screw on Japan’s economy and businesses more than expected. Beijing’s supply of critical minerals that Tokyo’s auto industry relies upon is among its clearer chokeholds. Further weaponization of rare earths might complicate matters by attracting the attention of US President Donald Trump, who claimed his trade truce with China had “settled” the issue over rare earths “for the world.”

That pledge came on the same trip the Republican leader told Takaichi: “Anything you want, any favors you need, anything I can do to help Japan, we will be there.”

While China’s ties with Japan have been rocky for decades over disputes spanning Tokyo’s invasion of its neighbor in the 1930s to competing territorial claims, in recent months relations had stabilized. The forthright views of Takaichi, who visited Taiwan’s President Lai Ching-te in April months before she took office, could now undermine that progress.

As crisis mode kicked in, Tokyo on Monday dispatched a top diplomat to Beijing to try to calm ties. China’s Foreign Ministry said it had no information on that visit, and told reporters Premier Li Qiang had no plans to meet with the Japanese leader this weekend at the G-20 leaders’ summit in South Africa.

Without a resolution, Beijing will likely ramp up pressure. China in recent days has urged its citizens — who make up about a quarter of all visitors to Japan — to avoid its Asian neighbor citing safety risks. Tour operators so far haven’t seen any significant flight or hotel cancellations, Bloomberg reported, citing people familiar with the matter.

For Beijing, Takaichi’s remarks were not a blunder as some have suggested, but in-keeping with her right-wing stance, two researchers at a top government think tank in Beijing wrote on Sunday in state media. They called her “a spokesperson for Japan’s new militarism,” citing Takaichi’s frequent visits before taking office to the Yasukuni shrine honoring Japan’s war dead, and a plan to boost defense spending.

All previous Japanese leaders have deflected on the question of what would be a “survival threatening situation” to Japan, maintaining strategic ambiguity and saying they would make a decision based on the circumstances at the time. Takaichi’s comments marked a departure from that stance.

“This was totally provoked by the Japanese prime minister,” said Henry Wang Huiyao, founder of the Center for China and Globalization research group in Beijing, urging more action from Tokyo. He added that when former US President Joe Biden strayed from strategic ambiguity and said his country would defend Taiwan, US officials would quickly clarify there was no change in position.

The last time China’s ties with its neighbor spiraled to this extent was in 2012, after Tokyo decided to nationalize contested islands known as the Senkaku in Japan and the Diaoyu in China — an uninhabited but possibly resource-rich area in the East China Sea. Back then, bellicose rhetoric in China’s state media helped fuel anti-Japanese protests in more than a dozen cities. Japan’s Takaichi Has Few Good Options to End China´s Retaliation_1

Japan’s Takaichi Has Few Good Options to End China´s Retaliation_1

This time around, Xi is likely to be more cautious about stoking nationalism. A spate of violence against Japanese citizens in China, including the stabbing to death of a schoolboy last year, has shown the dangers to provoking such anger, meanwhile Beijing is generally wary of public demonstrations of any kind especially amid growing malaise over the slowing economy.

The Japanese embassy in Beijing has urged citizens to take precautions amid rising tensions between Japan and China, according to a notice issued on its website on Monday evening.

While the 2012 stand off produced a months-long boycott of Japanese products, the impact was contained. Japan took a roughly 10% hit to exports — a dent Takaichi might gamble she can ride out, given wider global volatility over trade flows.

Japan’s carmakers — among the companies impacted last time around — have reduced their reliance on the Chinese market from a decade ago, but the importance of China’s supplies of rare earths and semiconductors has risen, according to Tatsuo Yoshida, senior analyst for autos at Bloomberg Intelligence.

“If a rare-earths embargo is exercised, it will disrupt auto production, particularly rare-earth rich products like electrified vehicles,” Yoshida said. “But I think there will be a time-lag as suppliers, automakers and trading companies must have built up inventories as a contingency plan.”

Nevertheless, the longer the dispute continues the more it is likely to weigh on Japan’s economy, running counter to Takaichi’s goal of producing stronger growth.

“Still, I don’t expect this to escalate to an extent we saw in 2012,” said Atsushi Takeda, chief economist at Itochu Research Institute. “I don’t think it’s in China’s interests to get into a deep spat with Japan while it is also confronting the US.”

Source: Bloomberg

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Manuel

Political

Central Bank

Pulte’s second referral letter made a similar claim about Cook’s Cambridge, Massachusetts property, accusing her of claiming it as a primary residence while using it as a vacation or rental property.

According to Cook’s response on Monday, her claim about the Ann Arbor property was true. She said she bought the home in 2005 when she started a full-time job as an assistant professor at Michigan State University and used the property as her primary residence until 2011, when she briefly relocated to Washington to serve as a senior economist at the White House Council of Economic Advisers.

“Governor Cook returned to her Ann Arbor home in 2012 and continued teaching and doing research at MSU for an additional 10 years,” Lowell wrote. “In the spring of 2021, when Governor Cook refinanced the mortgage on her Michigan home (the loan with which Director Pulte now takes issue), that property was still her primary residence and she was still residing in Ann Arbor and employed by MSU.”

Lowell said Pulte’s claims about the Atlanta property are similarly off-base, and that there is no evidence that she intended to defraud the lender. She purchased the property so she could have a permanent place near her family. One line in the document listed it as her “primary residence,” which Lowell said was “at most an inadvertent notation.”

“Governor Cook was raised in Milledgeville, Georgia, where her family owned a home for decades,” her lawyer wrote in the letter. “After her family sold its jointly-owned family home in Milledgeville in 2021, Governor Cook wanted to have her own place to stay when she would come home to visit family.”

Cook’s letter said the Cambridge property was purchased in 2002, when she was a first-time home buyer. She lived there until she accepted a job at Michigan State University, and converted it into a second home mortgage in 2021 “as she had been living away from Cambridge and was renting out the home for most of the calendar year by this point.” Cook used a second-home rider when she refinanced the home, and her bank accepted it, according to the letter.

“When she originally obtained her mortgage on the Cambridge property, she accurately stated that it was her primary residence, having begun her career as an academic economist at Harvard University in 1997,” Lowell wrote.

Legal Fight

Cook was appointed by President Joe Biden in 2022 to a term that was set to expire in 2038.

According to Cook’s legal filings, Trump’s move is designed not to uphold accountability, but to seize political influence over monetary policy. Trump has blasted Fed Chair Jerome Powell for not moving as quickly as the president wanted to reduce interest rates.

Under the Federal Reserve Act, a governor can only be removed “for cause,” meaning proven misconduct or neglect while in office. Cook’s alleged misconduct, which took place a year before her appointment, had nothing to do with her duties as Fed governor and therefore doesn’t meet that standard, she argues.

The Justice Department contends that courts don’t have a role to play in second-guessing the president’s reasons for firing a governor “for cause.” The administration has largely succeeded in defending Trump’s controversial firings before the Supreme Court this year and has framed Cook’s case as part of a pattern of judicial interference, but the justices in the past have made clear that they see the Fed as a unique entity.

No justice noted a dissent when the court refused to let Trump fire Cook before hearing the case.