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Gold price explosion fuelled by Fed rate cut looming
Gold's latest rally, triggered by expectations for U.S. interest rate cuts, fears about the independence of the Federal Reserve and healthy investor demand and central bank demand will likely propel prices to record levels in coming weeks. Analysts expect spot gold to be in a range of $3,600 to $3,900 in the short to medium term. It could even reach $4,000 in 2026, if geopolitical and economic uncertainties continue. According to polls, gold has gained over 33% this year. Analysts have raised their average price forecast for 2025 from $2,756 per ounce in January to $3065 in April and to $3220 most recently in July. Financial markets have been betting on a rate cut in September after Fed Chair Jerome Powell acknowledged the rising risks of employment. Ricardo Evangelista is a senior analyst at ActivTrades. He said that the dollar's bearish outlook, based on expectations of Fed cutbacks, investors' distancing themselves from U.S. investments, and tariff-related uncertainty, supports gold. Since Donald Trump's return to the White House, in January, the dollar has dropped by nearly 11%. The dollar's weakness makes gold priced in greenbacks less expensive for those who hold other currencies. Trump's criticisms of Powell, and his attempts to remove Lisa Cook as Governor have raised concerns about the Fed's independent and led to further gold purchases. Carsten Menke, Julius Baer's analyst, said: "The wildcard that is most likely to cause a bullish move in the market... could be the potential interference of the U.S. Federal Reserve or concerns over the dollar as a safe haven." Gold's appeal is also boosted by security concerns from the Middle East, between Russia and Ukraine, and demand from central banks in developing countries. This includes China's central banks adding gold to their reserves for the ninth consecutive monthly in July. World Gold Council data indicates that central banks are planning to increase their gold holdings in proportion to their reserves while reducing dollars reserves over the next 5 years. Michael Hsueh is a precious metals analyst at Deutsche Bank. He said that the combination of rising gold prices and central bank accumulation has led to a sharp rise in gold reserves for some central banks. Inflows into gold-backed ETFs are also significant. SPDR Gold Trust is the largest gold ETF in the world. Its holdings have risen to 977.68 tonnes, a 12% rise so far this season and their highest level since August 2022.
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South Sudan clashes kill 14 in renewed violence north
The military announced on Tuesday that at least four soldiers as well as 10 militia members had been killed during fighting in a South Sudanese area where previous clashes resulted in the arrest of the First Vice President Riek Machar. Machar, a long-time rival of Salva Kiir, was arrested in March. This sparked international calls for restraint. It also sparked fears that a civil war could break out between Kiir Dinka forces loyal to Machar and Nuer fighters loyal Kiir. Garang Ateny, South Sudan's military spokesperson, said that fighters from the White Army, a group Machar's critics claim is affiliated with the SPLM-IO, the party he leads in Upper Nile, attacked the South Sudanese military on Monday near Nasir, in Upper Nile State. Early this year, violence erupted in the northeastern town that led to Machar’s arrest. Ateny stated that the White Army had launched three attacks against the position of the army, and added that the army lost four soldiers during the conflict while 10 attackers died. It was not possible to reach the spokespeople of SPLM-IO or White Army. Machar and his group deny that they have any links with the White Army. Since a 2018 agreement that ended a civil war rife with ethnic tensions between the two men, which resulted in hundreds of thousands deaths, Kiir has been a Dinka who shares power with Machar. Machar's arrest for allegedly trying to incite a revolt through his supposed support of the White Army militia has sparked fears that ethnic conflict will erupt again. (Written by Elias Biryabarema, edited by William Maclean).
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Ivory Coast secures Africa's first sustainability-linked loan with World Bank guarantee scheme
Ivory Coast has raised 433 million euros ($507 million) with Africa's first sustainability-linked foreign currency loan in a transaction that also comes with guarantees from the World Bank, arrangers of the deal said on Tuesday. In recent years, the West African nation has turned to sustainable financing to increase its resilience to climate shocks as well as diversify their funding sources. In July, it raised $337m in an ESG certified Japanese samurai Bond. The structure of the sustainability-linked loan helped Ivory Coast to "attract significant appetite from international investors and secure favourable financial terms," said Rothschild and Co, which advised the Ivorian government in the deal. The World Bank Group’s International Bank for Reconstruction and Development, or IBRD, offered a guarantee for the first loss while its Multilateral Investment Guarantee Agency provided a guarantee for the second. Hiroshi Mattano, MIGA's executive vice president, said in a press release that "we are helping Ivory Coast to secure financing at better terms, accelerate climate commitments and build resilience in key sectors." The terms of the loan, which are more favorable than standard financing, are tied to performance targets for renewable energy, prevention of deforestation as well as reforestation. Standard Chartered acted both as sole lender and lead arranger. The World Bank announced in December that it would support Ivory Coast with a debt for education swap. This was a first-ever transaction for this Washington-based lender.
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India's JSW Cement reports larger quarterly loss due to one-off charges
India's JSW Cement reported on Tuesday a larger quarterly loss in the first results it has released since its listing in August. The company was hurt by an one-off charge relating to the conversion from preference shares to equity shares. The combined net loss for April-June was 13.56 billion rupees (154.96 millions), compared to a loss 151.2 million rupees one year earlier. Cement maker reported that 160 million compulsory convertible preferential shares were converted during the quarter into 235.7 millions equity shares at an additional premium of 132.75 rupies each, resulting in a valuation differential of 14.66 billion rupies. This was reported as a one-time charge by the company in its quarterly results. The company's profit before tax, excluding this charge of 81.4 million rupies, rose to 1,65 billion rupies from 81.4 millions a year ago. Ambit Capital analysts said that the company's quarterly earnings were boosted by a 2% increase in prices year-over-year. The company's operating revenue increased by 8% while its expenses decreased by 1% compared to the previous period. The company is part of the JSW Group (steel-to-autos), which has cement mills located in Western, Southern and Eastern India. The stock's modest debut last month was due to investors who looked past the market jitters, and instead bet on the long-term prospects that emerged from India's continued emphasis on developing infrastructure. $1 = 87.5060 Indian Rupees (Reporting and editing by Sumana Mukherjee, Tasim Zaid and Sahal Muhammad in Bengaluru)
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Gold reaches record high of $3,500 an ounce as attention turns to payroll data
Investors piled into gold after it surged to an all-time record above $3,500 an ounce on February 2, as they grew more confident of a Federal Reserve interest rate cut, and the lingering economic and political risks. As of 10 am EDT (1400 GMT), spot gold was up by 0.5%, at $3,491.47 an ounce, after reaching a record high price of $3,508.00. Bullion is up 33% for the year. U.S. Gold Futures for December Delivery gained 1.1%, to $3.554.30. The gold market has entered a period of strong consumption for the season, and there are expectations that rates will be cut at the Fed's September meeting. Suki Cooper is a precious metals analyst with Standard Chartered Bank. She said that we continue to expect record highs. Cooper continued, "We expect gold to continue its upward trend and predict that it will average $3,500/oz during Q3-25, and $3,700/oz during Q4-25." According to CME FedWatch, the markets are pricing a 90% probability of a rate cut of 25 basis points at the Fed meeting on September 17. Gold that does not yield typically gains in an environment of lower interest rates. Analysts believe that gold's record-breaking run in 2018 is due to sustained central bank purchasing, diversification from the U.S. Dollar, a resilient safe haven demand amid geopolitical tensions and trade frictions and broader dollar weakness. The appeal of gold has been boosted by the uncertainty surrounding U.S. policies under President Donald Trump. His public battles with the Fed - including his criticism of Chairman Jerome Powell and his push to remove Governor Lisa Cook - have raised questions about central bank independence. "The allegations against Cook are a warning to other FOMC Members to yield to government pressures for substantial rate reductions... In such a climate, gold investments are more attractive," Commerzbank wrote in a note referring to Federal Open Market Committee. The focus now shifts to the nonfarm payrolls report in the U.S. on Friday, which will provide clues as to how much of a rate cut there might be for September. Zain Vawda said that a weak job report this week might reignite talk about a possible 50-bps rate cut during the meeting. Vawda said, "I don't think this will occur, even if the NFP is poor, but the market participants might start pricing in the possibility and that could fuel a gold rally." ETF inflows have fueled the rally. SPDR Gold Trust, the world's biggest gold-backed ETF said that its holdings increased 1.01% to 977.68 tonnes on Friday, the highest level since August 2022. Spot silver fell 0.5% to $40.48 an ounce after reaching its highest level since September 2011. Palladium dropped 1.4%, to $1.121.75, and platinum fell 0.7%, to $1.389.75.
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US construction spending dips in July
The U.S. housing market was still constrained by high mortgage rates in July, which lowered the construction spending. Census Bureau of the Commerce Department reported on Tuesday that construction expenditures dropped 0.1%, following a 0.4% decline in June. The drop was expected by economists. In July, spending fell 2.8% compared to the same month last year. Spending on private construction fell by 0.2%. Residential construction investment increased by 0.1%. Outlays for new single-family housing projects also rose 0.1%. The second quarter saw the fastest contraction in residential investment in over two and a half years. The third quarter is expected to see a further decline, marking the third consecutive quarterly decline. High mortgage rates have harmed the housing market. Mortgage rates are still high, despite the fact that they have dropped from their lofty levels this year on expectation of a Federal Reserve rate cut in September. Slowing employment is also affecting home sales. In July, the inventory of new homes completed and for sale reached its highest level in 16 years. In July, spending on multifamily housing units decreased by 0.4%. Investments in non-residential private structures such as offices and factories fell by 0.5%. The second consecutive quarter saw a decline in nonresidential structure spending. The increase in public construction spending was 0.3%. The state and local governments increased their construction expenditures by 0.1%, while federal government spending increased by 3.2%. Lucia Mutikani, reporting; Andrea Ricci, editing.
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What drives the gold market and how investors buy it?
As rising expectations of a U.S. Federal Reserve The yellow metal's demand was boosted by the interest rate reduction this month. Bullion prices reached a record-high of $3,508.50 an ounce this year, marking a gain of almost 33%. Gold that does not yield a return tends to do well in low interest rate environments. Here are some ways you can invest in gold. SPOT MARKET Big banks are usually the gold buyers for large investors and buyers. The spot market is determined by the real-time dynamics of supply and demand. London has the largest influence on the spot gold markets, thanks to the London Bullion Market Association. The association establishes standards for gold trading, provides a framework for over-the counter trades, and facilitates transactions between banks, dealers and institutions. China, India, Middle East, and the United States, are also major gold trading centers. Futures Market Futures exchanges are another way for investors to get exposed to gold. They allow them buy or sell commodities at a set price, on a specific date in the future. COMEX, part of the New York Mercantile Exchange (NYMEX), is the world's largest gold futures exchange in terms of volume of trading. Shanghai Futures Exchange (China's largest commodities exchange) also offers gold contracts. TOCOM (the Tokyo Commodity Exchange) is a major player in the Asian market for gold. Exchange Traded Products Exchange-traded product or exchange-traded fund issue securities backed with physical metal, allowing people to gain exposure without having to take delivery of the metal themselves. Exchange-traded fund demand has become the largest category for precious metal investment. The World Gold Council reported that physical gold exchange traded funds saw a modest inflow of $3.4billion in 2024. This was their first net inflow in four years despite their holdings falling by 6.8 tons. BARS AND COINS Metals traders can sell bars and coins to retail consumers in shops or online. Both gold bars and coins can be used to invest in physical gold. DRIVERS: Investor Interest and Market Sentiment The price of bullion has been affected by the rising interest in investment funds over recent years. Sentiment fueled by news, global events, and market trends can drive speculative gold buying or selling. FOREIGN CHANGE RATE Gold is an excellent hedge against the volatility of currency markets. Gold has historically moved in the opposite direction of the U.S. Dollar, as a weaker dollar makes gold priced in dollars cheaper for holders other currencies. MONETARY POLICY & POLITICAL TENSION In times of uncertainty, precious metals are widely regarded as a "safe-haven". Trump's trade tariff threats and the imposition of additional duties against Chinese goods have sparked fears of an international trade war. They also rattled currency markets, and sparked fears of a spike of inflation in the United States. The global trade conflict that has caused financial market turmoil and recession fears is intensifying. Trump raised tariffs on Chinese goods to an effective rate 145% while China increased tariffs on U.S. products from 84% up to 125%. Gold's direction is also affected by the policy decisions made by global central banks. Gold is less expensive to hold when interest rates are lower, since it does not pay interest. CENTRAL BANK GLOBAL GOLD RESERVES Gold is held by central banks as reserves. The demand for central bank gold has been high in recent years due to macroeconomic and political uncertainties. In its annual survey, conducted by the World Gold Council in June, it was revealed that more central banks intend to increase their gold reserves in the next year, despite the high price of the metal. The World Gold Council reported that global gold demand including over-the counter trading rose by 1% in 2024 to reach a new record. Central banks also increased their purchases in the fourth quarter. (Compiled and edited by Bangalore Commodities and Energy Team)
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Serbian Vucic wants to increase cooperation with Russia
Aleksandar Vucic, the president of Serbia, said that Serbia is hoping for a better cooperation with Russia. Vucic, along with Russian President Vladimir Putin, took part in the regional security summit held in Beijing. The Chinese hope to use this event as a counterweight to Western influence on global affairs. Vucic stated that "cooperation with Russia at the highest levels is very important for Serbia. This is especially true in the areas of energy and Russian supplies of gas," at the beginning of the meeting with Putin. Serbia is aspiring to be a member of the European Union. However, Russia, its traditional Slavic, Orthodox Christian, and Christian ally, continues to be Serbia's largest gas supplier. Pro-Russian sentiments are also strong in this Balkan nation. Gazpromneft and Gazprom own Serbia's NIS Oil Company, which operates the only oil refinery in Serbia. Vucic said to Putin that gas purchases were very important. "I'm sure we can enhance and strengthen our bilateral cooperation." Serbia has condemned Russia's invasion in Ukraine 2022. Vucic also met Ukrainian president Volodymyr Zelenskiy four times. Vucic, the Serbian president, said that Serbia would remain neutral. He said: "Since beginning the Ukrainian crisis, Serbia is in a very challenging situation and is under great pressure. But... we will maintain our neutrality." In recent months, relations between Belgrade and Moscow deteriorated after the Russian SVR agency of foreign intelligence accused Serbia twice of selling artillery to Ukraine via intermediaries in Eastern Europe. Since then, Moscow has openly supported Vucic in his attempt to confront anti-corruption demonstrations that began ten months ago. (Reporting and editing by Kevin Liffey; Aleksandar Vasovic)
Centrica confirms extension of life for two UK nuclear reactors until 2028
British Gas's owner Centrica announced on Tuesday that the lifespan of two nuclear power plants in the UK in which it holds a 20% stake has been extended to 2028.
Centrica has announced that Heysham 1 & Hartlepool, operated by the French utility EDF, will now be able to produce electricity until March 2028.
Britain wants to reduce its dependence on natural gas plants that currently supply around a third its power by 2030.
In order to improve energy security, and to meet climate goals, the country is also looking to build new nuclear power plants to replace its aging fleet.
Centrica anticipates that the total number of life extensions announced by December 2024 will add 12 terawatt hours (TWh) to its electricity production between 2026 and 2030.
The expected closure date of March 2030 for the Heysham 2 nuclear plant and Torness is unchanged.
In July, Centrica purchased a 15% share in the proposed
Sizewell C
Investors including EDF, Canadian pension fund La Caisse, and the UK Government have joined forces to build a nuclear plant in Eastern England.
(source: Reuters)