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Gold gains following US PPI data and focus on Middle East tensions
The gold price reversed its earlier declines on Wednesday, after U.S. producer prices unexpectedly dropped in June. However, escalating Middle East tensions?limited gains as they kept inflation and interest rate concerns alive. By 1258 GMT, the spot price of?gold? rose 0.3% to $4067.60 an ounce at 858 AM EDT. U.S. gold futures rose 0.2% to $4 075.80. Phillip Streible is the chief market strategist for Blue Line Futures. He said that gold has recovered from its earlier losses as PPI was lower than expected. This eases some concerns regarding multiple interest rate hikes by the Fed this year. According to the Bureau of Labor Statistics of the Labor Department, last month's Producer Price Index fell 0.3% after a downwardly-revised 0.6% rise in May. The PPI was expected to remain unchanged by economists polled, after a 1.1% increase in May. CME FedWatch Tool data shows that traders expect a 9.1% chance of an increase in interest rates at the Federal Reserve meeting on July, as opposed to 16.6% before data. Data on Tuesday also showed that U.S. consumer prices slowed down more than was expected in June. The U.S. announced that it had begun a second wave of attacks against Iran, after reimposing a naval blocade?of Iranian ports. Iran, meanwhile, threatened to cut off even more regional energy exports. Oil continued to rise on Wednesday. Recent developments in the 'Strait of Hormuz' have simply re-ignited fears about unchecked price pressures. If tensions escalate further and oil prices rise, gold could be exposed to downside risks, said Lukman tunuga senior research analyst of?FXTM. A solid break below this level may open the doors to $3,950 or $3,000. If $4,000 is a reliable support level, the price may rise back to $4,100." Fuel costs may continue to drive inflation, prompting central banks to keep rates at high levels for longer. This could also affect gold's appeal as an asset that doesn't yield. Platinum gained 0.4%, bringing the price to 1,638.24. Spot silver fell 0.1%. Palladium dropped 0.1% to $1.303.50. Reporting by Ashitha Shivprasad in Bengaluru and Sukanya Mittra; editing by Shilpa Majumdar
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Russian government prioritizes fuel for vehicles serving food retail chains
Alexander Novak, the Deputy Prime Minister, said on Wednesday that Russia is considering prioritising fuel supplies to vehicles servicing large food retail chains. The government is concerned about fuel shortages, which are a result of the Ukrainian drone attacks against Russia's oil refineries and energy infrastructure. Two industry sources and a? After Ukrainian drone attacks caused a stoppage at large oil refineries, Russian gasoline production fell to an amount?equivalent only to around 65% the seasonal average consumption. "We discussed the importance of prioritizing fuel supplies for vehicles that deliver food products to major retail chains. Novak stated that it is crucial to avoid food spoilage and to avoid additional costs which could be reflected on consumer prices. Fuel cards are usually issued by the authorities for drivers to use when filling up their vehicles. He said that the task force set up by the government to combat the fuel shortage discussed diesel supply to the agricultural industry. The decline in fuel production in Russia will have an impact on the country's economy in the second quarter 2026, according to the central bank of Russia.
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German Government Plans EUR 13.3 Billion Energy Relief Package for 2027
The German Finance Ministry announced on Wednesday that the government will provide energy cost relief packages for businesses and consumers in the amount of EUR13.3 billion ($15.2 billion) by 2027. These funds are to be drawn from KTF (the Climate and Transformation Fund). The package includes a subsidy to electricity grid fees, and relief for energy-intensive industry through an industrial electricity pricing scheme, as well power-price compensatory measures that help offset costs associated with carbon pricing. According to the KTF business plan for 2027, and the financial planning of the government up to 2030, by 2030, EUR13.2 billion will be redirected to the core budget. Since the beginning of the Iran War, energy costs have increased sharply. This has put pressure on Germany's manufacturing and energy-intensive industries. German companies, such as automakers and steelmakers had complained about high energy costs before the war. The amount of relief granted is EUR2.5billion higher than that planned for 2026. More than EUR5.5billion has been allocated to grid charges. EUR5billion to compensations on power prices and approximately EUR2.5billion to industrial electricity rates. CUTS ELSEWHERE INSIDE CLIMATE FUND The government reduces spending in other areas of the climate fund at the same time. Finance Ministry said that funding for KTF programs not committed will be reduced by 30% in general, but some projects will be exempt. The support for electric vehicle transition, for instance, will be cut by 10% or EUR200million through 2029. Existing commitments will not be affected. The federal government approved the?proposed budget for 2027 and financial planning until 2030 last week. This plan did not include any plans for the KTF. The KTF budget will be able to close its deficits by utilizing the EUR2.7 billion that would have been generated from emissions trading revenue in 2027. The ministry announced that EUR22.5 billion of the KTF's planned EUR40.3billion spending?in?2027 has already been allocated?for modernisation project. The economic plan will be approved by the parliament along with the federal budget towards the end of November.
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Buffett: Gates Foundation decision not to accept donations was not a shock
Warren Buffett stated that it was no surprise to him when he informed Bill Gates of his decision to cease donating to the Gates Foundation. This ended their?two decade philanthropic relationship. Buffett, 95, did not include the Gates Foundation as part of a $6 billion donation to Berkshire Hathaway announced on Tuesday. This was in response to revelations regarding interactions between Bill Gates - the Microsoft cofounder and philanthropist - and the late sex offender Jeffrey Epstein. Buffett, the chairman of Berkshire, told CNBC's?on Wednesday that Gates and Buffett spoke three weeks ago, when Gates was in Omaha. The meeting was held after the Department of Justice released in February documents about Gates' relationship with Epstein. Gates also met with the Congress last month. Gates has expressed regret over Epstein and his involvement in the case. Buffett said, "I reevaluated the whole situation." It was not a shock. He said: "I'd read everything." I'd read it all. His children Susie Howard and Peter will continue to donate Berkshire shares, which includes the $6 billion donation, to four family foundations. Epstein, who was arrested on charges of sex-trafficking in August 2019, died in a Manhattan prison?cell. The medical examiner in New York City ruled the death a suicide. Buffett has donated Berkshire Stock worth more than $47.5 billion to the Gates Foundation.
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Rate outlook is clouded by inflation fears and gold falls as tensions in the Middle East fuel inflation concerns
Gold prices fell on Wednesday as escalating tensions continued to?stoke inflation concerns, reinforcing the expectation of higher U.S. rates. Spot gold dropped 0.6% at $4,030.50 an ounce as of 1130 GMT. Tuesday, prices had risen more than 2% after weak U.S. inflation figures. U.S. Gold Futures for August?delivery fell 0.8% to $4.036.20. The Islamic Revolutionary Guard Corps of Iran has threatened to shut all export?corridors that benefit Washington after Tehran closed the Strait of Hormuz, and the U.S. reimposed its?naval blocade of Iranian port. After closing Tuesday at an all-time high, oil prices have risen. UBS analyst Giovanni Staunovo stated that "higher U.S. oil, gasoline, and diesel prices are likely to result in higher inflation numbers for the next print in August. This could keep some Fed officials' tone on the hawkish, which does not help gold." Staunovo said that "in the near term, oil and gasoline prices in the U.S. will continue to affect gold as it is a major driver of U.S. Inflation." Gold is affected by higher interest rates, which increase the cost of owning the asset. Fed Chair Kevin 'Warsh' told lawmakers that the central bank has "no tolerance" for "persistently high inflation," hinting at the CPI data not being all that swell. According to the CME FedWatch Tool, traders have priced in a 61% chance of a September rate hike. Investors are now awaiting the U.S. Producer Price Index due at 1230 GMT?Wednesday to gain insight into inflation levels and the outlook for monetary policy. Silver spot fell 1.1%, to $57.96 an ounce, and platinum dropped 0.84%, to $1,617.97. Palladium fell 1.2% to $1289.45 after rising 5% the previous session. (Reporting by Sukanya Mitra in Bengaluru; Editing by Diti Pujara)
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Copper prices fall on the back of weak Chinese data but losses are capped by concerns about supply
Copper prices fell on Wednesday, despite disappointing economic data from China's top metals consumer. However, supply concerns due to mine disruptions and the Middle East conflict helped to limit losses. The benchmark three-month copper price on the London Metal Exchange fell 0.2%, to $13,610 per metric ton at 0945 GMT. It had reached a three week high in the previous session. Official data revealed that the GDP growth of China, the second largest economy in world, has slowed to a low of 3.5 years, due to weak domestic demand. Ole Hansen is the head of commodity strategy for Saxo Bank, a Copenhagen-based bank. Hansen said that the downside of the market was limited, in part due to persistent supply problems. The Shanghai Futures Exchange's most traded copper contract pared earlier gains and ticked 0.1% higher, to 104 220 yuan (15,392.11) per ton. Rio Tinto reported a 7% drop in copper production for the quarter ending June. The company said that a furnace failure at its U.S. Kennecott Mine will affect production during the second half. Hansen said, "We continue to be reminded of the potential risks on the supply-side and the high prices for energy will just increase the focus on electricification." The oil prices rose by another 2% on Tuesday after the U.S. reinstated a naval embargo on all Iranian ports, and Iran threatened to close other export routes. Hansen stated that "the long-term bullish'story for copper has most definitely not been negatively affected by the events in the last few months." Other metals include?LME Aluminium, which fell by 0.5% to $3.160 per ton. Zinc also dropped by 1%, to $3.561, while lead was down 0.6% at $1.855. Nickel was down 0.2% at $16,740, and tin lost 0.9%, to $53,340.
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Germany launches water monitoring system after Rhine drought strikes industry
On Wednesday, Germany launched a national information system to monitor water levels in the country. The aim is to better manage water supplies as climate change puts more pressure on Europe's biggest economy. Thyssenkrupp is forced to cut production due to a drought on the Rhine, highlighting the importance of the new platform. Carsten Schneider, Minister of the Environment, said that "Water is our most precious resource" when he launched the Low Water Information System (NIWIS). Schneider, citing studies, warned that if Germany does not take action, water scarcity will cost it EUR625 billion ($714billion) by 2050 or EUR25billion annually. ECONOMIC IMPACT Schneider stated that Germany has lost 60 billion cubic meters of water in the last?25 years as a result of climate change. He said that water availability is becoming an important factor in business decision-making. The debate over attracting data centres or tech companies is not just about skilled workers and energy anymore, but also about water availability. The NIWIS platform consolidates data from federal and state sources on river levels, soil moisture and groundwater, replacing a patchwork system of regional systems. RHINE DISRUPTION Low Rhine water levels have caused cargo transport to be disrupted. Thyssenkrupp said that on Wednesday it had'slightly reduced blast furnace production because of restricted raw materials supplies and suspended their own barge operations. Water?levels at Kaub near Koblenz in western Germany, were 42 cm (16 inches) high on Tuesday. They are expected to continue falling. The record low of 25 cm was achieved in October 2018. Munich, Germany’s southern metropolis, has implemented water restrictions until 1 August following heatwaves. Violations can result in fines up to EUR50,000. $1 = 0.8754 Euros (Reporting and editing by Rene Wagner and Kirsti Knolle)
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Rate outlook is clouded by inflation fears and gold falls as tensions in the Middle East fuel inflation concerns
Gold prices fell on Wednesday as escalating tensions continued in the Middle East to fuel inflation concerns, thereby reinforcing expectations for higher U.S. rates. Spot gold dropped 0.7%, to $4.027.49 an ounce at 0843 GMT. Prices rose by over 2% on Tuesday to a high of $4100.19 an ounce, after weak U.S. inflation figures. U.S. gold futures for August delivered?slid by 0.9% to $4.035.00. After Iran closed the Strait of Hormuz, and after the U.S. imposed a naval ban on Iranian ports, the Islamic Revolutionary Guard Corps of Iran threatened to shut all export corridors that would benefit Washington. After closing at an all-time high on Tuesday, oil prices have risen. The UBS analyst Giovanni Staunovo said that higher U.S. crude prices, gasoline and diesel will lead to high inflation figures in the next print of August. This could keep some Fed officials' tone on the hawkish, which does not help gold. In the short term, oil and gasoline prices in the U.S. will continue to have an impact on gold. It remains a major driver of U.S. inflation." Staunovo?added. Gold is affected by higher interest rates, which increase the cost of owning the asset. Fed Chair Kevin Warsh said on Tuesday that the central bank has "no tolerance" for persistently high inflation, hinting at the fact that CPI data is not so good. According to the CME FedWatch Tool, traders are pricing in a 59% probability of a rate increase in September. Investors are now awaiting the U.S. Producer Price Index due today at 1230 GMT for?insights on inflation levels and monetary policy outlook. Silver spot fell 0.5%, to $58.314 an ounce, while platinum rose 0.2%, to $1,634.36. Palladium increased 0.8% to $1315.05 after rising 5% the previous session. (Reporting by Sukanya Mitra in Bengaluru; Editing by Diti Pujara)
Japan dominates Asian markets following strong JGB sales
Japanese stocks led gains on Asian markets Thursday, as investors bid heavily for government bonds at an auction. Meanwhile, the U.S. Dollar recovered from its five-week low.
The Nikkei rose by 2.2%, led largely by the industrial robot maker Fanuc Corp. MSCI's broadest Asia-Pacific index outside Japan traded flat due to declines in Korea, New Zealand and Australia.
Early European trading saw pan-regional futures up 0.6%. German DAX Futures also rose 0.6%. FTSE Futures increased 0.31%.
Tokyo's most recent debt sale attracted the highest demand in over six years. This helped calm investor nerves following a selloff which pushed yields for super-long-dated bond to record highs, and spread to global fixed income markets this week. Bond yields increase when bond prices drop.
Shoki Omori is the chief desk strategist at Mizuho, Tokyo. He said that "the 30-year JGB was unexpectedly strong." The extent of previous selling seems to have created a feeling of cheap valuation, which in turn encouraged demand.
He added that the sentiment would need to be improved by multiple auctions. The yield of the 30-year Japanese Government Bond was down by 4.0 basis points to 3.38%.
The dollar last rose 0.1% to 155.32 yens. The Japanese currency recovered some ground following reports that the Bank of Japan was likely to increase interest rates in December, and the government would tolerate such a move, according to three government sources who are familiar with deliberations.
S&P 500 futures are little changed after the overnight momentum in U.S. markets has waned in Asia. Weaker-than-expected data on economic growth reinforced expectations that the Federal Reserve would cut interest rates next week.
Wall Street stocks advanced on Wednesday, led by small cap companies. The Russell 2000 index rose 1.9% while the benchmark S&P 500 gained for the second consecutive day. Gains were made after the U.S. private employment data showed their largest drop in over two-and-a half years.
A separate survey by the Institute for Supply Management revealed that its measure of employment in the services sector contracted in November. The subindex of prices received fell to a 7-month low.
Henry Russell, an economist at ANZ, said on a podcast that this move is in line with his view that recent supercore inflation will subside and pave the way for a resumption in disinflation by 2026.
"We still believe that the Fed should continue to reduce interest rates in response to the downside risks of the labour market," he added, adding that the bank anticipates a 25 basis-point reduction at the meeting next week and further easing for next year.
Fed funds futures indicate an 89% implied probability that the U.S. Central Bank will cut interest rates by 25 basis points at its next meeting, on December 10. This is compared to an 83.4% implied probability a week earlier.
The U.S. Dollar Index, which measures the strength of the greenback against a basket six currencies, last rose 0.1% to 98.99. This ended a nine-day loss streak, after it had reached its lowest level since November 29.
The yield on the U.S. Treasury 10-year bond last increased 2.7 basis points to 4.083%. This was after the Financial Times reported that bond investors expressed concern to the U.S. Treasury on Wednesday, citing people familiar with these conversations, that Kevin Hassett - a candidate for the next Federal Reserve Chair next year - could aggressively reduce interest rates in order to align himself with President Donald Trump’s preferences.
In Hong Kong, the Chinese yuan fell 0.1% to 7.64 yuan per dollar after reaching its highest level in over a year against the greenback on Wednesday.
The Australian dollar gained 0.1% following official data showing that Australian household expenditure surged to the highest level in nearly two years in October. Meanwhile, the goods trade surplus of the country widened more than expected due to a rise in gold exports for the second consecutive month.
After a recent run of hot metals, precious metals have cooled. Last week, gold was down 0.6% to $4,179.91 an ounce. Silver was 2.2% lower, at $57.28 an ounce.
Brent crude rose 0.4% to $62.94. (Reporting and editing by Gregor Stuart Hunter, Lincoln Feast, and Sonali Paul).
(source: Reuters)