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Gold increases as oil declines due to a pause in US/Iran strikes. Fed rate decision is in focus
Gold prices rose on Monday as the United States and Iran agreed to cease hostilities, sending crude oil prices down to their lowest level in a week, which eased inflation fears ahead of this week's U.S. rate decision. Spot gold rose by 0.9%, to $4.087.59 an ounce, at 09:43 am EDT (1343 GMT), whereas U.S. Gold Futures for August Delivery rose by 0.5%, to $4.090. The dollar index weakened by 0.1%, making greenback-priced bullion more affordable for buyers overseas. The dollar index weakened by 0.1%, making greenback priced bullion more accessible to buyers abroad. Bart Melek is global head of commodity strategies at TD Securities. He said that the oil price has dropped from $100 to $90 in just one week, which is driving down interest rates. After two weeks of strikes, the U.S. paused their?strikes at the weekend. This raised hopes of a diplomatic resolution that would deescalate this conflict and allow shipping in the Strait of Hormuz to resume. Lower energy prices reduce inflation fears and lower bets on higher interest rates for longer. Gold is often seen as a hedge to inflation but higher interest rates tend to weigh on the metal. CME FedWatch data shows that 66% of traders expect the Federal Reserve to keep interest rates at their current level. They are still pricing in a rate increase of about?79% for September. Investors are also awaiting the U.S. The Personal Consumption Spending data for June is due Thursday. This will provide further clues about monetary policy. Data from Hong Kong’s?Census and Statistics Department revealed on Monday that China's net imports of gold via Hong Kong had more than doubled in the past year, but dropped over 5% compared to?the prior month. Silver spot rose by 1.3%, to $58.92 an ounce. Platinum gained 2.3%, to $1625.31, while palladium increased 3.4%, to $1285.79. (Reporting from Noel John, Bengaluru. Editing by Tasim Zaid)
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The Russian oil tax falls short of the budget target in July
Calculations showed that the rouble-denominated oil price in Russia used to calculate taxes was averaging 19% lower than the budgeted level for the federal government this month. This added pressure to the public finances, which were already strained due heavy military expenditures. The government's Budget Portal shows that federal spending and budget deficits could be higher than official projections for 2026 by over?1 trillion (US$12.85 billion). Russia has increased its military spending dramatically to fund the war in Ukraine. Calculations showed that the tax rate on?Russian crude oil? averaged 4,406 Russian roubles per barrel between July 1 and 24, which is 1,034 roubles below the 5,440 roubles level used in 2026's budget. For the?budget revenues calculations?, the government assumed that Russian oil would cost $59 per barrel, and an exchange rate between 92.2 roubles and dollars, which is equivalent to 5,440 Roubles per barrel. The Middle East conflict has caused oil prices to fluctuate in recent weeks. Oil prices dropped 7% to a new low on Monday, after the U.S. and Iran suspended their strikes for the weekend following two weeks of attacks. This raised hopes of a diplomatic resolution that would ease tensions and allow shipping through the Strait of Hormuz to normalise. Last week, Brent crude was at $100 per barrel as the conflict disrupted oil shipments through the Strait of Hormuz. Oil spilled out into the Red Sea and hampered shipments to Asia from Saudi Arabia.
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Copper prices increase as US-Iran lull calms concerns over oil and economic growth
Prices of copper rose on Monday as oil prices dropped after the U.S. & Iran ended hostilities. This eased 'concerns over price pressures and global economic growth. Benchmark copper on the London Metal Exchange was up 0.9% at $13,770 per metric ton of official rings. The Pentagon suspended its campaign against Iran on Friday after 13 nights of increasing airstrikes by the United States. Iran has been holding fire for the past two days after it had responded to each night's U.S. airstrikes with its own strikes on neighbouring countries which host U.S. base. The oil prices fell as the pause in fighting gave rise to hopes of a diplomatic resolution that would allow shipping in the Strait of Hormuz to resume. Tom Price, a Panmure Liberum analyst, said: "The market now waits for a resolution and is trying to price in peace instead of an ongoing war." "Chile was hit by unusual storms that put pressure on the grid of power distribution and raised questions about the copper production guidelines across the industry." According to the U.S. Geological Survey, Chile accounted 23% or 5.3 millions tons of global mined copper production last year. Traders also said that the market was focused on "copper stocks" in LME approved warehouses. Stocks have fallen 30% to 272,975 tonnes since May. Since February of last year, producers and traders have shipped?copper into the United States, after President Donald Trump 'threatened tariffs on imports.' This has created a premium in U.S. Copper over LME Prices. The U.S. Commerce Department had to finish a review of the copper market?by June 30. However, Trump has not yet announced his decision on tariffs. Price of Panmure Liberum said that the movement of copper to the United States will tighten short-term supplies elsewhere, because inventories are just that: "short-term supplies". Aluminium gained 0.6% at $3180 per ton. Zinc rose 0.8% at $3,619; lead increased 0.4% to $1,894; and tin was up 1.4% at $54,545. Nickel was unchanged at $17375.
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Gold rises 1% amid US-Iran truce; oil prices are under pressure. All eyes on Fed meeting
Gold prices rose on Monday as the pause in the strikes between the United States' and Iran's forces lowered crude oil prices. This helped ease inflation fears and concerns about higher interest rates during the week that Fed policymakers will meet. Spot gold rose 1% by 1200 GMT to $4,092.87 an ounce, while U.S. Gold Futures for August Delivery rose 0.7% to $4,098.00. "Precious Metals started the week in a positive way, thanks to a pause of hostilities in the Middle East. "Oil has fallen and both the dollar yield and U.S. Treasury yields are down," said Ross Norman, an independent analyst. The U.S. Dollar Index dropped by 0.2% making greenback bullion prices more affordable to buyers abroad. Iran announced on Sunday that it would halt its attacks if the United States did the same, according to a senior Iranian official. Washington paused their bombing campaign when President Donald Trump’s advisers informed him that they were running low on targets and worried about depleting U.S. weapons. The oil prices fell more than 5% Monday, raising the hopes of a diplomatic resolution to the conflict around the Strait of Hormuz. Energy prices are rising, which is a factor that fuels inflation fears and increases expectations for higher interest rates. Gold is seen as an inflation hedge, but its non-yielding nature makes it less attractive in high interest rate environments. Investors are now looking forward to the Fed's rate decision meeting on Wednesday. About 34% of participants in the market expect a rate increase. Gold is sending cautiously positive signals. One eye on Iran and the other on Fed. Norman stated that if Warsh tries to revert the two hikes currently embedded in the curve and pushes back, it could be very supportive for gold. According to the CME FedWatch tool, traders are pricing in a '79% chance that interest rates will be raised in September. The price of spot silver increased by 1.5%, to $59.05 an ounce. Platinum rose 2.7%, to $1.631.22 and palladium gained 2.7%, to $1.277.47. (Reporting and editing by Ronojoy Mazumdar in Bengaluru, Joe Bavier, Joyjeet Das).
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Indonesia eases the bottleneck that is preventing alumina and nickel exports by easing rare-earth inspections
Indonesia's Presidential?staff Office has called for a?cooperation among government agencies, law-enforcement officials and the?industry? to resolve a regulatory void that has reportedly delayed exports of nickel and alumina products due to their rare-earth contents. Indonesia is one of the world's largest exporters of minerals, but it produces rare earths only as a minor by-product. No rules have been established yet to govern how much of these elements can be added to shipments of other mineral. Officials stated that exporters faced delays in their shipments on Monday due to the lack of clear regulations. Dudung Abdurachman, the Chief of Staff to the President, said that he had received reports about disruptions in mineral exports from "several" companies. He made this statement after he chaired a meeting between representatives of government agencies and law enforcement officials. According to two sources in the aluminium industry, exports of alumina - the main raw material used for aluminium smelting - had been?affected. One source said that the government claimed our alumina contained rare earth materials, and added?that it had an immediate impact on shipments. Two nickel industry sources confirmed that some shipments, including nickel pig iron - a critical input in stainless steel - and mixed hydroxide precipitate – used to produce materials for electric vehicle batteries - had been delayed. The sources did not specify how much material was affected. The four sources refused to identify themselves because they weren't authorized to speak with the media. RARE EARTHS Prioritised for Domestic Use Dudung stated that exports of rare earth elements, as by-products, were hindered due to a regulatory gap regarding the allowable content in rare-earth products. He did not specify which type of shipment was affected. He said that authorities, such as the military, shouldn't obstruct trade in the absence rules for rare earth by-products. He was joined by representatives of key economic ministries, the national research and development agency BRIN (National Research and Innovation Agency), the Attorney General's Office (Attorney General's Office), sovereign wealth fund Danantara as well as state mining firms, industry groups, and the police. Indonesian regulations specify that rare earths should be given priority for domestic use, and the President Prabowo Sbianto set up a separate agency to oversee their development. Trade Data Monitor data shows that the top five destinations for Indonesian alumina exports were Malaysia, India and Qatar. Singapore, China, and Singapore were also on the list. China received almost 98% Indonesian ferronickel exports during the same time period. This category includes nickel pig iron. (Reporting from Dewi Kurniawati, Tom Daly and Dylan Duan respectively in London and Shanghai; Additional reporting by Bernadette Cristina in Jakarta; Editing done by Jan Harvey).
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Russell: Crude oil futures prices are a measure of market adaptability and not a sign of Iran peace.
Since the beginning of the Iran War, there has been a debate about whether crude oil futures accurately reflect?the stress in the physical markets for oil and refined products or if the are blindly 'optimistic' that peace is on the horizon. The Iran War between the United States of America and Iran continues on its volatile and unpredictable course, with renewed hope that there is a chance for a new pause in the?reverse strikes. This flicker of optimism led Brent futures to fall in the early Asian trading on Monday. The price fell by nearly 5%, reaching around $92.06. The Strait of Hormuz is still at best contested. Shipping volumes have dropped through the narrow waterway after surging in mid-June during a three-week ceasefire between the Trump Administration and Tehran. After the collapse of the deal and the renewed U.S. attacks on Iran, Tehran responded with a series of strikes against U.S. bases and vessels attempting to cross the Strait of Hormuz. Tehran appears to also have activated its Houthi ally in Yemen to target Saudi oil tankers that are trying to cross the Bab el-Mandeb Strait. This eliminates a route that Saudi oil could have taken to reach refineries on the Asian continent via the Red Sea Port of?Yanbu. Alternative routes include a much longer and more complex route via the Suez Canal. This involves partial discharging of cargoes as well as using the SUMED Pipeline due to draft restrictions. Overall,?the crude oil exports out of the Middle East are still constrained. There is a limited volume through the Bab el-Mandeb and Hormuz straits. A lasting peace agreement also seems distant as the United States is far from Iran on important points, and they are deeply distrustful of each other. UKRAINE LESSON This situation seems to call for a much stronger reaction than what has been seen in the oil futures market. Brent fell as low as $70.14?a barrel during the brief cessation of hostilities on July 2. It then rallied by 45%, reaching a high price of $102.00 in July 23 before falling back. This may seem like a big rally, but it is still well below the $139.13 peak Brent achieved in the weeks following the Russian invasion of Ukraine in February 2022. At the time, this event raised concerns about the disruption of Russia's exports, as they were the second largest crude shipper. These fears were not justified, as crude markets quickly adapted. They rerouted Russian oil to China and India buyers while Europe increased its imports from Americas and Africa. The situation is different with the?Iran conflict in that there is a real disruption of crude supplies. And the longer this continues, the more the buffers are strained by inventory drawdowns as well as China's reduction of imports. The argument is that crude futures are not high enough to reflect the risk of a prolonged disruption in Middle East crude supply, which appears to be more likely. It's less likely that crude futures will not price the worst-case scenarios, or even the best-case scenarios of "lasting peace", and more likely they will price adaptability. The market has effectively bet that it will handle disruptions through rerouting of flows and increasing alternative sources. The Suez Canal is a more expensive and longer route for Saudi Arabian Red Sea crude to reach Asia, but this is still possible and will be done if the market demands it. Other smaller workarounds, like Iraq sending fuel oil to Turkey are also emerging. These, when combined, help reduce the loss of approximately 10 million barrels of crude and products per day from the Middle East. It may be that the market is betting on traders of crude and refined products to help mitigate the worst effects of the Iran Crisis. You like this column? Check out Open Interest, your new essential source of global financial commentary. ROI provides data-driven, thought-provoking analysis on everything from soybeans to swap rates. The markets are changing faster than ever. ROI can help you keep up. Follow ROI on LinkedIn, X. These are the views of the columnist, an author for.
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After crude's plunge, investors reduce rate-hike bettings and the Pound rises
The pound edged up against the dollar Monday, as a sharp fall in oil prices helped ease concerns about energy-driven inflation and dampened expectations of further tightening by the Bank?of?England ahead of its policy meeting this week. By 1010 GMT the pound had risen 0.07%, to $1.3330. This was a recovery for a second consecutive session after Thursday's low of three weeks. Brent crude prices fell 9% to $87.24 a barrel, after U.S.-Iran paused their strikes at the weekend. This boosted hopes for a de-escalation. Last week, the flare-up of hostilities briefly drove oil prices above $100 per barrel. This stoked concerns about inflation. The yields on two-year gilts, which are more sensitive than other maturities to the short-term interest rate outlook, fell by 6 basis points to 4.362%. This is a greater decline than what was seen with comparable U.S. or German government bonds. On Thursday, the BoE will likely keep rates at 3.75% after June's inflation was below central bank forecasts. The longer-term outlook remains divided between economists and the markets, as higher energy costs threaten to?complicate the inflation picture. Money markets are pricing in a roughly even chance of an increase in September rates. Francesco Pesole of ING FX wrote that if inflation remains contained, the BoE is likely to keep rates the same for the remainder of the year. He added that a dovish repricing is "the most immediate risk" for sterling. Sterling strengthened by 0.2% against the euro to 84.55pence, continuing its recovery from an?more-than-one-year low reached on July 15 of 84.5pence. Pesole stated that "our short-term models still suggest that the pair is inexpensive at these levels." NEW GOVERNMENT, NEW RULES? Investors are also evaluating the fiscal outlook of Britain's new government, after Andy Burnham and John Healey were appointed last week. Burnham's government intends to maintain the previous administration's approach of pro-growth to the financial services industry, including regulation. A person familiar with the matter said on Friday. Healey retained several Treasury Ministers who worked under his predecessor Rachel Reeves. This is a sign of continuity in the financial services sector, said this person. The data on currency positions also showed an improvement in sentiment. For the fourth week in a row, speculators have reduced their net bearish bets on the pound sterling ahead of Burnham taking over Downing Street. According to the U.S. Commodity Futures Trading Commission, net short positions in sterling fell from $5.96 to $4.64 billion during the week ending July 20, down from $5.96 to $5.96 billion a few weeks earlier. (Reporting from Bengaluru by Medha Singh; editing by Amanda Cooper and Arun K. Koyyur.)
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Sundance Resources has announced that it has won an arbitration award of $616 million in Cameroon for its iron ore project
Sundance Resources announced that it had 'won an arbitration by the International Chamber of Commerce against Cameroon. A tribunal awarded the Australian miner $616 million for damages, costs and interest over a project stalled in iron ore. The Perth-based mining company said that the tribunal had found that Cameroon breached their legal obligations towards Sundance, its subsidiary Cam Iron?SA and their investment in the Mbalam Nabeba iron-ore deposit which is located on the border of Cameroon with the Republic of Congo. Mbalam-Nabeba, Africa's largest?iron ore deposit, has been mired in dispute after Cameroon revoked Sundance’s mining rights. It then awarded the Mbalam permit to another developer. Sundance then launched arbitration proceedings to seek compensation for its losses. In January, the?company lost an?arbitration involving the same deposit and the Republic of Congo. A tribunal rejected its $8.8 Billion damages claim related to the Nabeba Iron Ore Project. Sundance released a statement Sunday stating that the tribunal had ruled that Cameroon also violated an arbitral agreement by refusing to 'comply with ICC emergency orders issued in March 2020 that prohibited it from granting a mining permit for Mbalam to another?party. The Cameroon mines ministry didn't immediately respond to an inquiry for comment. The mines minister said in July that Mbalam is one of the new projects that will boost mining revenues to 1 trillion CFA francs (1,75 billion dollars). Sundance chairman David Porter stated that the company and its legal advisers Clifford Chance, as well as litigation funder Burford Capital, were happy with the decision of the tribunal. Sundance said that if the government did not comply voluntarily with the award, it would have to take enforcement action.
Stocks and bonds rally as oil prices fall
The stock and bond markets around the world staged a relief rally Monday, as easing Middle East conflict sent oil prices down and eased inflation concerns ahead of an upcoming week packed with central bank meetings and earnings announcements.
U.S. president?Donald?Trump has halted the two-week long bombing campaign that was launched against Iran. According to reports, U.S. officials were concerned about the depletion in air defence weapons. Iran has said that it will halt its attacks as long as U.S. officials continue to fire.
Brent crude fell 7.8% to $89.41 per barrel during the lull of fighting in the Strait of Hormuz, while U.S. Crude dropped almost 7% to $83.2.
STOXX 600 Europe climbed by 0.9% to close in on the all-time highs of early July. Retail and travel stocks, which are sensitive to economic conditions, rose more than 2%. However, a decline in oil stocks hurt the overall market.
S&P futures increased by 0.9%, while Nasdaq Futures gained 1.4%. This positive start to Wall Street is a result of the futures.
As traders reduced the probability of a rate hike by the Federal Reserve in the coming week, most major currencies rose against the dollar.
The dollar fell 0.2% against yen (163.64) and the euro rose 0.2% to $1.139.
Markets indicate that the U.S. Central Bank's decision will be made on Wednesday. Most analysts do not believe Chair Kevin Warsh is likely to support such a move.
Since the last FOMC, the inflation, labour market, and consumption data were?all sufficiently comfortable that they prevented the need for aggressive hikes. Samy Chaar is the chief economist of Lombard Odier. He said that oil prices were closer to $70 than $100.
Chaar said the relatively high oil price created a window for hawks to push rate increases at the U.S. Central Bank. "But we are not there yet." "I think it depends how long tensions persist in the Middle East," he said.
Oil's decline helped the 10-year Treasury yields drop 4.3 basis points on Monday to 4.64%, further below their 18-month-old high of last week. This is the largest single-day fall in Treasury yields since June 24, and it was a result of the pullback. The yields of all European government bonds also dropped.
Both the Bank of England and Bank of Japan are expected to keep their policy decisions unchanged, but remain cautious regarding inflation risks.
Earnings from TECH BULLS
LSEG IBES' data shows that about a third of S&P500 companies will report their results this week. Earnings are on track to increase by 26.5% over the previous year.
Even blockbuster results might not satisfy investors with the high expectations and growing unease about the cost of AI capex.
A report in the Wall Street Journal stated that Nvidia had been in discussions to provide an estimated $250 billion as part of OpenAI's data center project.
This week, companies reporting include Microsoft, Meta Platforms and Apple, as well as a host of industrial, healthcare and defence stocks.
CXMT Corp, a Chinese chipmaker, soared 466% - in its Shanghai debut, following Asia's largest IPO of the year.
The U.S. second-quarter advance GDP is a data highlight. After a slow start to the year, growth should pick up to 1.5% annualised after accelerating from a soft first quarter. Weekly?jobless claim, the second quarter employment costs index, and July Michigan consumer confidence round out this week's calendar.
The Eurozone's schedule includes the flash Q2 GDP (Gross Domestic Product), July economic sentiment (consumer confidence), flash inflation (inflation in a flash) and June unemployment.
According to the Ifo Institute survey conducted on Monday, German business morale increased more than expected in August due to significantly better expectations.
The drop in yields has helped gold prices to rise 1.1%, or $4,098.76 per ounce, on commodity markets. (Reporting and editing by Wayne Cole, Sruthi, and Sruthi Shakar; Sam Holmes, Mrigank, Dhaniwala and Amanda Cooper)
(source: Reuters)