Gold Smashes Record Highs Again As US Inflation Worries Loom

Commodity

Summary:

Gold prices extended a record run on Wednesday as concerns of inflationary pressures boosted demand for bullion as a hedge.

Gold prices extended a record run on Wednesday as concerns of inflationary pressures boosted demand for bullion as a hedge, with traders shrugging off doubts over an imminent US interest rate cut and rising Treasury yields.

Spot gold was up 0.2 per cent at $2,283.76 per ounce, as of 0602 GMT, and hit a record high of $2,288.09 earlier in the session. Bullion has hit record highs consecutively since Thursday. US gold futures gained 1 per cent to $2,304.20.

"Gold continues to receive safe-haven flows as Ukraine continues to attack Russia's oil infrastructure, to the point it is ignoring rising US yields and the prospects of the Fed not cutting rates in June," City Index senior analyst Matt Simpson said.

Federal Reserve policymakers on Tuesday said they think it would be "reasonable" to cut US rates three times this year, even as stronger recent economic data has sown investor doubts about that outcome.

Data this week showed US manufacturing unexpectedly rebounded, with the rise in raw materials prices triggering fears that inflation could resurge. "With commodity prices rising in general, it brings the risks of another round of inflation - so perhaps investors are hedging for inflation," Simpson said.

Gold, which is used a hedge against inflation and a safe haven during times of political and economic uncertainty, has gained more than 10.8 per cent so far this year and is set for a seventh consecutive daily rise.

"Right now, gold is sensing that inflation is more of a driving variable than the interest rates and part of the momentum is also driven by speculators, hedge funds and commodity funds that start buying gold whenever their quantitative systems give them signals," Marex analyst Edward Meir said.

Elsewhere, spot silver rose 1 per cent to $26.36 per ounce, platinum gained 0.9 per cent to $926.80 and palladium was up 0.8 per cent at $1.011.62. Gold's searing rally is doing nothing to reignite enthusiasm for platinum jewellery in Asia, analysts said.

Source：zeebiz

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Warren Takunda

Economic

Forex

In a new research note assessing the Pound's outlook, analysts at the independent research firm say the Pound has benefited over recent months from bottoming house prices and a resilient labour market.

However, "much of this good news is already well recognised by economists and market participants," says Chester Ntonifor, Foreign Exchange Strategist at BCA Research.

This observation comes amidst a favourable technical setup that hints at a larger move to the downside might be brewing:

"The British pound has been trading into the apex of a very tight wedge. Historically, such price action suggests a big technical move is imminent. Our bias is that this move will be to the downside," says Chester Ntonifor, Foreign Exchange Strategist at BCA Research. Pound Sterling A Sell With BCA Research, "Big" Move Seen Coming_1

Pound Sterling A Sell With BCA Research, "Big" Move Seen Coming_1

BCA Research says a potential trigger for a pullback in the Pound is likely to be external rather than domestic.

"Given the UK runs a large balance of payments deficit, it relies a lot on portfolio flows for funding domestic spending. A sea-change in these flows will be a likely catalyst for a pullback in sterling," explains Ntonifor.

He says foreign holdings of UK equities sit at around 70%, and for bonds, it is about 30%. "Ergo, portfolio flows have an outsized effect on the performance of sterling.

BCA Research says equity portfolio flows are at risk as the majority of UK shares are financials, industrials or in the energy sector. Pound Sterling A Sell With BCA Research, "Big" Move Seen Coming_2

Pound Sterling A Sell With BCA Research, "Big" Move Seen Coming_2

"Energy prices have been soft, especially on the back of warmer weather and rising supply of LNG. Financials are likely to suffer if interest rates decline, as this will bite into net interest margins. Industrials offer some beacon of optimism, but many other markets offer much more decent exposure to reshoring and/or a green energy revolution. Put simply, earnings revisions in the UK are falling relative to its trading partners, and that has usually been a negative for cable," says Ntonifor.

BCA Research recommended selling Pound-Dollar at 1.28, saying the exchange rate will bottom around the 1.20-1.22 level "as stale speculative longs liquidate their positions".

Longer-term, GBP "is cheap" and BCA says it can recover when the dollar eventually enters a bear market.

The Pound's longer-term value will depend on capital inflows.

"The UK needs to be at the forefront of disruptive technologies such as electric cars, digital currencies, 3D printing, and green technology. We will be monitoring UK’s productivity growth in the next few quarters for evidence that this thesis is playing out," says Ntonifor.

Source: Poundsterlinglive

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Thomas

Economic

Commodity

Market Overview

Oil prices are stable but tense, reflecting concerns over supply disruptions from Russian refinery attacks and the escalating Israel-Hamas conflict, potentially involving Iran.

These geopolitical events have pushed oil to a five-month high, signaling a robust upward trend.

Natural Gas markets may also be affected as energy sector dynamics shift, with investors closely monitoring these developments for their potential impact on global energy supply and prices.

Natural Gas Price Forecast

Natural Gas and Oil Forecast: Market Eyes $85 for USOIL Amid Global Unrest_1

Natural Gas (NG) is currently priced at $1.9240, marking a modest increase of 0.31%. The market is hovering around the pivot point of $1.9218, indicating a critical juncture for future price direction. Resistance levels are spotted at $1.9396, $1.9720, and $2.0068, showcasing potential barriers for upward movement.

Conversely, support is established at $1.8797, $1.8503, and $1.8214, signifying thresholds for downward price action. With the 50-day EMA at $1.8599 and the 200-day EMA at $1.8350, NG exhibits a bullish trend within an upward trading channel.

A sustained move above $1.9218 would reinforce this bullish outlook, whereas a drop below could signal a shift to bearish momentum.

WTI Oil Price Forecast

Natural Gas and Oil Forecast: Market Eyes $85 for USOIL Amid Global Unrest_2

USOIL is currently priced at $85.08, reflecting a slight downtrend of 0.35%. The market is hovering around the pivot point of $85.01, which is crucial for the day’s trading strategy. Resistance levels are set at $86.10, $86.83, and $87.81, challenging the bullish momentum.

Conversely, support levels at $84.09, $82.98, and $81.84 provide downside protection. The 50 EMA at $82.74 and the 200 EMA at $79.99 underpin a bullish sentiment, indicating a potential for further gains above the $85.01 pivot, with a risk of a downturn if the price dips below this key level.

Brent Oil Price Forecast

Natural Gas and Oil Forecast: Market Eyes $85 for USOIL Amid Global Unrest_3

UKOIL is trading at $88.94, showing a slight decrease of 0.33%. Positioned near the pivot point of $88.75, it navigates through the day’s market fluctuations. The oil faces resistance at $89.35, $89.91, and $90.65, indicating possible price ceilings.

On the downside, support is observed at $88.08, $87.31, and $86.52, outlining areas where the price may stabilize. The 50-day and 200-day EMAs, at $87.40 and $85.58 respectively, coupled with an upward channel, suggest a bullish trend for UKOIL above $88.75. However, falling below this pivot could trigger a bearish shift in the market.

Source: FX Empire

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Samantha Luan

Commodity

Oil prices stabilized on Wednesday as investors closely monitored concerns surrounding crude and fuel supplies. These concerns were triggered by attacks on Russian refineries and the potential escalation of the Israel-Gaza conflict.

At 05:15 GMT, Brent crude futures for June increased by 4 cents to reach $88.98 per barrel, while U.S. West Texas Intermediate (WTI) crude futures for May slightly decreased by 4 cents to $85.11 per barrel. During the previous session, both Brent and WTI experienced a 1.7 percent climb, reaching their highest levels since October.

The surge in prices was a result of a drone attack on another Russian refinery, which raised the risk of additional disruptions in the country’s processing capacity, leading to a reduction in gasoline and diesel fuel output. Russia is one of the world’s top three oil producers and a significant exporter of oil products.

Investors are also apprehensive about potential supply disruptions in the crucial Middle East producing region due to possible Iranian retaliation against Israel for an attack that claimed the lives of high-ranking military personnel. Iran, the third-largest producer in the Organization of the Petroleum Exporting Countries (OPEC).

Yeap Jun Rong, a market strategist at IG, commented that geopolitical tensions continue to generate uncertainty regarding potential supply disruptions. He noted that oil prices have been on an upward trend, reaching a five-month high and maintaining an upward bias.

Supply concerns

Additionally, there are supply concerns related to Mexico’s state energy company Pemex, as it requested its trading unit to cancel up to 436,000 barrels per day of crude exports this month in preparation for processing domestic oil at the newly established Dos Bocas refinery, Reuters reported.

Early indications suggest that oil stockpiles in the United States, the world’s largest oil consumer, are diminishing. Traders reported that data from the American Petroleum Institute indicated a 2.3 million barrel decrease in crude inventories last week, surpassing the 1.5 million barrel drop predicted by analysts in a Reuters poll. U.S. government inventory data is scheduled to be released at 1430 GMT on Wednesday.

According to five OPEC+ sources, a ministerial panel for OPEC and its allies, including Russia, is unlikely to recommend any changes to oil output policies at their meeting on Wednesday, as reported by Reuters.

Source：economymiddleeast

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Thomas

Economic

Energy

Natural gas distributors in Chinese cities are likely to raise prices for households as the government moves to support the companies by insisting they pass on more of the costs of imported fuel.

The National Development and Reform Commission, the country’s top economic planner, opened discussions in recent months with local authorities and major gas distributors to request they remove fixed household price caps by September, according to people with knowledge of the matter.

Removing curbs will probably lead to higher costs for residential gas consumers, said the people, who requested anonymity to discuss private details. The changes will also impact industrial consumers, who’ve previous paid higher rates and will benefit as differing tariffs charged to households and businesses are abandoned in favor of market-based pricing, according to the people.

Distributors have typically had to supply to households at fixed rates in each city and pay market prices for the majority of their fuel, meaning profits were eroded as the cost of imported liquefied natural gas surged following Russia’s invasion of Ukraine.

The NDRC did not immediately respond to a request for comment.

China’s government began easing rules last year, allowing more frequent updates to fixed rates for industrial or residential consumers. That helped to support earnings last year for gas distributors including ENN Energy Holdings Ltd., Kunlun Energy Co. Ltd. and China Resources Gas.

Officials aim to now accelerate those reforms and distributors will need to report to local authorities both the costs paid to acquire gas from domestic suppliers or overseas, and their selling prices, according to the people.

Changes to pricing rules would make it more attractive for the firms to import additional LNG, as the low domestic fixed rates haven’t provided an incentive for companies to stock-up on supplies.

China’s LNG imports lagged behind a 2021 peak last year with the distributors reluctant to buy expensive spot cargoes. In some cases, supply was diverted from industrial gas users to ensure there was sufficient fuel for households during the coldest winter months.

The spread between spot LNG prices and China’s downstream domestic gas rates remains key to determining whether ENN makes additional purchases of prompt supply, Chief Executive Officer Zhang Yuying said at a briefing last month.

Growth in China’s overall gas demand is forecast to slow this year to about 6.1%, according to China National Petroleum Corp., the nation’s largest supplier of the fuel.

Source: Bloomberg

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Kevin Du

Cryptocurrency

The no. 2 cryptocurrency, which commands less than a fifth of the $2.7 trillion crypto market, has not done poorly. But ether is up just around 53% in the first three months of this year, compared with bitcoin's 65%.

Bitcoin scaled new peaks last month. Trading around $3,612 on Monday, ether is at least 26% below its Nov. 2021 all-time high of $4,867.60.

Even a recent technical upgrade of the Ethereum blockchain, which is used to build applications, barely made a splash beyond the circle of crypto enthusiasts, in contrast to the excitement ahead of bitcoin's "halving" next month, a technical change designed to slow the coin's supply.

In a typical case of markets selling the fact, ether dropped 12% after the underlying blockchain's Dencun upgrade on March 13 aimed at lowering transaction fees on its ecosystem.

"Ethereum is persistently dogged by its lack of name recognition among non-endemic investors," said Joseph Edwards, head of research at London crypto firm Enigma Securities.

"There's a lot more economic activity on it compared to 2020... but it reaching all-time highs will likely come fairly late."

Much depends on whether the U.S. Securities and Exchange Commission (SEC) approves spot ether ETFs. For, it was the approval and launch of several U.S. spot bitcoin ETFs that spurred institutional demand and drove it to record highs.

Ether ETFs too are waiting, with VanEck's filing first in line for a decision on May 23.

Standard Chartered Bank expects U.S. ether ETFs to be approved on May 23, propelling it to $8,000 by end-2024 and $14,000 by end-2025.

Commodity or security?

Not everyone is as optimistic about the U.S. regulator greenlighting a spot ether ETF.

Lawyers and industry sources have said ether's legal status is ambiguous and they expect regulators to move cautiously.

The SEC has said bitcoin is a commodity, but has not ruled on ether.

Unlike bitcoin, ether is traded on a so-called 'proof-of-stake' blockchain that allows users to earn yield in exchange for locking up tokens for a period of time.

And because ether is often 'staked', or deposited, it could be deemed a security, which will entail stricter rules around disclosure that fly in the face of cryptocurrency's ethos of bypassing the traditional gatekeepers of finance, such as banks and exchanges.

But that complicates the calculus for ETFs, as the yield on staked ether is often higher than that of just plain passive tokens.

"Getting the SEC on board to allow staked ether ETFs will be a very tough bargain and is, for now, extremely unlikely," said Anders Helset, head of research at digital assets analytics firm K33

Institutional demand for ether has been a fraction of that for rival bitcoin. Digital asset funds tracking ether have seen outflows of $46.4 million in the month to March 23, according to CoinShares data, versus inflows of over $4 billion for products tracking bitcoin.

Some market participants believe in focusing on ethereum technology, which forms the backbone of much of the internet's 'Web3' vision and powers applications involving crypto offshoots such as decentralised finance and blockchain gaming.

BlackRock unveiled its first tokenized fund on the ethereum blockchain last month, sparking conversation around the platform's use in broader tokenisation of real world assets.

So far over $2 billion worth of commodities and government securities, among other traditional assets, have been tokenized on several networks, of which 80% are on the ethereum blockchain, according to Swiss cryptocurrency manager 21Shares.

Source: Reuters

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Samantha Luan

Economic

Stocks

As General Electric completes its $191.9 billion breakup, bullish investors are betting it will defy the lackluster share price performance that has followed many corporate spinoffs over the last few decades.

Shares of GE were up nearly 37% this year as of Monday and stood near a seven-year high.

On Tuesday, the company's energy spinoff - whose businesses include wind turbine production and powering data centers - began trading under the name of GE Vernova. GE Aerospace, which makes engines for commercial and military aircraft, kept the GE ticker symbol. Investors who held GE as of March 19 received one share of GE Vernova for every four shares of GE they owned.

Shares in Vernova were up around 3.8% on Tuesday, while GE's shares were up 1.2%.

While spinoffs are typically designed to unlock value, many have been followed by unremarkable share price performance. A Bain & Co study of more than 350 spinoffs between 2000 and 2020 showed that spinoffs generated an average total investor return - defined as equity appreciation plus dividend yields - of 5.1% a year over the three years after the split. That compares to an average annual 8.7% total return for the S&P 500 during the same time frame.

"You don't get multiple expansion for free in this type of transaction, you have to earn it," said Jeff Haxer, a partner at Bain who led the study.

Spinoffs underperformed in the three-year timeframe for a broad range of reasons, including a loss of synergies that had helped the parent company control costs or maintain margins, Haxer said. The firm looked at spinoffs that created companies with a market value of more than $1 billion, including Baxter's spinoff of its Baxalta biopharma business and Kraft's spinoff of its snack business into Mondelez International.

Whether GE's latest spinoff will meet a similar fate remains to be seen. GE in 2021 said it would split into three companies focused on aerospace, healthcare and energy, part of CEO Larry Culp's plan to unlock value and make capital allocation more transparent to investors.

Its healthcare business, GE HealthCare Technologies, was spun off in January 2023 and has so far bucked the broader trend. The company's shares are up nearly 50% since it broke off, while the parent company's shares have risen almost 170%.

Investors Hope GE Spinoff Will Defy Poor Track Record of Breakups_1

Some investors are betting the company's latest spinoff will see similar success.

Jason Adams, portfolio manager of the T Rowe Price Global Industrials Fund, said GE's aviation business puts it in the top tier of global industrial companies.

GE Aerospace has been a cash cow for the Boston-based company, with some analysts estimating its market value at more than $100 billion after the spinoff.

At the same time, the new GE Vernova could see growth due to the increasing consumption needs of data centers that will power generative artificial intelligence, Adams said.

"Aerospace was a better known entity and its growth outlook better understood, but I think Vernova has been more recently discovered by the investment community and that's what has been behind the pop in (GE's) the stock this year," said Adams, who plans to be a shareholder in both companies.

Vernova last month said it expects to clear a massive backlog in offshore wind equipment over the next two years, signaling improved market conditions for the beleaguered sector, which has faced hefty writedowns as soaring inflation, interest rate hikes and supply chain issues increased project costs.

Larry Tentarelli, chief technical strategist at Blue Chip Daily Trend Report, said the remainder of GE is now a better pure play on aviation. He expects its multiples to improve from a current 22 times trailing earnings as investors get a clearer look at its earnings growth and balance sheet, separate from GE's power business.

"The aviation business is humming along on all cylinders," said Tentarelli, who owns GE and plans on holding onto his Vernova shares.

Whether the deal becomes a net positive for investors will likely hinge on the growth of the renewable business for GE Vernova, said Chris Snyder, an analyst at UBS. He has a buy rating on both companies, with a target price of $154 for GE and $37 for GE Vernova.

Of the analysts covering GE, 13 now have a buy or strong buy and 5 have a hold, according to LSEG.

"GE is taking share and has pricing power," Snyder said, while the rising demand for energy due to AI data centers is making him "increasingly positive on the prospects for GE Vernova."