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Gold falls on fears of rate hikes ahead of U.S. Inflation data
Prices of gold fell on Tuesday as a result of the broader market sell-off, and rising expectations that interest rates will be raised in the United States this year. Investors are now focusing their attention on key inflation data to be released later this week. As of 11 am, spot gold was down 0.7% at $4,298.75 an ounce. ET (1500 GMT), following a fall of more than 1% in the previous session. U.S. gold futures for August delivery fell 0.9% to $4323.90. "Traders have become a bit nervous about the market. All markets across the board are now in risk-off mode. Bob Haberkorn is a senior market strategist with RJO Futures. He said that the current risk-off has led to a drop in gold. The Nasdaq Composite index, which is a tech-focused index, and the benchmark S&P 500 Index?were both down by 0.9% and 0.4% respectively. Haberkorn continued, "Gold and Silver remain under pressure until we get clearer direction from the Fed." The focus this week has shifted from last week's positive job numbers to the key inflation data, such as the U.S. Consumer Price Index for May on Wednesday and the Producer Price Index on Thursday. These are important indicators of the U.S. monetary policies outlook. If the U.S. Inflation data for May surprise to the upside again on Wednesday, then the gold price will likely fall even further. Commerzbank also said that this could increase the possibility of a recovery in the second half of the year if, as expected, the Fed does not raise interest rates. According to CME FedWatch, traders are pricing in a 70% chance of a Fed rate increase in December. The Middle East is showing signs of a possible peace agreement, which has pushed the oil price lower. This was after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald Trump. The higher crude oil prices can cause?inflation, and therefore keep interest rates high for longer. Gold is often viewed as an inflation hedge. However, higher interest rates can weigh down on this non-yielding material. Silver spot fell by 3.2%, to $65.98 an ounce. Platinum was down 1.1%, at $1.736.08, and palladium dropped 2.5%, at $1.234.93. (Reporting and editing by Shilpa Majumdar, Jonathan Ananda and Anushree mukherjee from Bengaluru)
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US Energy Secretary: Ship traffic in Strait of Hormuz is increasing'very significantly'
Chris Wright, the U.S. Energy secretary, said that the ship traffic through the Strait of Hormuz is increasing "very?meaningfully", as the conflict between the U.S. and Iran continues. Wright replied, "I'd say that it has risen very significantly" when asked about the ship traffic through the Strait in comparison to a few weeks ago. Wright said this at an Atlantic Council conference, adding that it will take many months before energy flows return to normal once the war is over. Since the U.S.-Israeli strikes on Iran, late in February, vessel movements have been largely blocked. This has disrupted around 20% of global supplies of oil and LNG. Some vessels are now 'transiting' the narrow waterway that borders Iran with their transponders off, and often under the cover of darkness. The disruptions to normal flow have caused a surge in global energy prices. This has upended economies all over the world, and created a political vulnerability for U.S. president Donald Trump and his Republican Party ahead of midterm election in November. Washington has been pushing for a peace agreement with Tehran that includes a complete reopening the strait. (Reporting and editing by Mark Porter and Alexandra Hudson.
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Canada's trade surplus reaches a 15-month high on the back of soaring crude oil prices
Statistics Canada reported that the Iran War has increased the price of crude oil, which is a major factor in the increase in Canada's April goods trade surplus. Analysts surveyed by? Analysts polled by? Statscan reduced March's surplus to C$1.75 from C$1.78. The total exports rose 1.6% to a record C$75.16 Billion in April. Exports of energy goods increased 9.7% in April after a 23.4% increase in March. Statscan stated in a comment that "Both increases were primarily due to higher prices which continued to increase in April despite the uncertainty created by the conflict in Iran." Crude oil experts, up 7.0%, contributed the most to this gain. Canada is the world's largest oil producer. Exports of metals and non-metallic minerals, which were booming in February and march, fell by 17.5%. The fall was largely due to lower shipments of gold to Britain. Stuart Bergman is the chief economist of Export Development Canada. He said: "April was quite a tug-of-war between gold and oil. 1.6% growth, in light of everything going on around us, is something we are certainly happy with." In a telephone interview, he stated that the May data should show continued growth in energy exports due to global supply shortages. Imports increased by 0.3%, reaching a record C$72.44 Billion, due largely to an increase of 16.9% in imports?of basic and industrial chemicals, plastics and rubber products. Analysts believe that the positive data will lead to a positive GDP growth in April after two consecutive quarters of negative growth. Ariane Curtis is a senior North America economist with Capital Economics. She said that Canada's improved?terms-of-trade since the Iran War suggests the trade surplus will continue to rise in the months ahead. The United States still dominates Canadian exports, despite Ottawa's efforts to diversify away from it amid a trade war between the two nations. Exports to the United States increased by 4.8%, reaching C$51.98 Billion, which represents 69.2%, the highest share of trade since September 2025. Imports increased 1.6%, to $42.50 billion. As a result, Canada's surplus with the U.S. grew to C$9.48billion, the highest since February 2025. Exports to other countries fell by 4.8% in April after reaching a new record in March. Exports to China reached a new record of $3.84 billion.
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Oil falls ahead of inflation data, gold gains as dollar weakens
Gold rose on Tuesday, rebounding from its two-month low. A weaker dollar, falling oil prices, and investors evaluating Middle East peace prospects before key inflation data, all contributed to the rise. As of 9:05 am, spot gold was up 0.2% at $4,338.69 an ounce. ET (1305 GMT). It fell to its lowest levels since March 23 during the previous session. U.S. Gold Futures for August Delivery remained at $4,363.90. Dollars are now cheaper for those who hold other currencies. Fawad Rasaqzada is a market analyst at Forex.com. He said: "We have seen some weakness in the oil price... While gold has pulledback recently, it appears that the uptick was largely driven?by short-covering." The Middle East is showing signs of a possible deal. Oil prices dropped after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald Trump. Lower oil prices may ease inflation concerns, allowing central banks to cut interest rates and increasing the appeal of non-yielding metals. The focus this week has shifted from the strong jobs numbers of last week to the key inflation data, such as the U.S. Consumer Price Index 'print for May on Wednesday, and the Producer Price Index'readout on Thursday. The outlook for monetary policy. If the U.S. Inflation data for May surprise to the upside again on Wednesday, then the gold price will likely fall even further. The?potential of a recovery in the second half of the year is also increased if, as expected, the Fed does not raise interest rates. According to CME FedWatch, traders are "pricing" in a 70% chance of a Fed rate increase in December. Silver spot rose by 0.7%, to $68.61 an ounce. Platinum rose 1.4%, to $1778.98. Palladium rose 3.8%, to $1251.05. (Reporting by Anushree Mukherjee in Bengaluru; Editing by Shilpi Majumdar)
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Russian Urals oil is discounted as Asian demand declines, say sources
Four trade sources said that the price of Russian Urals crude had flipped from a premium to a discount against dated Brent in Indian and Chinese ports due to a drop in demand by Asian refiners. Since March, Urals, Russia’s “flagship” oil grade, has traded at a higher price than Brent in India, China and other major markets. This is because the Middle East conflict disrupted oil supplies globally and increased demand for cheaper alternatives. Sources said that the demand for 'Russian crude' has fallen now, but Asian refiners had 'drawn down their inventories, found alternative alternatives, and in some cases, cut back on runs. Sources said that urals cargoes for delivery to India between July and August were traded this month at discounts of $2 and $3 per barrel compared to Brent dated, as opposed to a premium of $7 to $8 per barrel in April and may. Urals oil prices fell by $7 to $8 per barrel during the winter months in the northern hemisphere when U.S. sanctions were tightened and reduced Russian oil production. From June to August of last year, discounts were around $1 to $3 per barrel. China's reduced purchases have a wider impact on all grades, even though the Chinese and Indian markets are closely linked. It purchases less Urals crude than India but more lighter Russian grades, such as?ESPO blend, Arctic and Sakhalin crude. One source reported that in some cases Chinese buyers refused to accept Russian oil cargoes for delivery in June, making sellers vulnerable during price negotiations. Teapots, or'small independent refiners' in China, have reduced production due to lower crude oil prices and weaker margins. Reporting in Moscow by Nidhi Verm, New Delhi by Siyi LIu, Singapore by Siyi Liu, editing by Barbara Lewis.
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McGeever: The $500 billion T-bill fix by ROI-Treasury is not a problem yet.
The U.S. Treasury issues more than half a billion dollars in T-bills each?week. For now, this spike in short-term funding is not a concern, but it could be if U.S. lending costs continue to rise. Trump's administration has a good reason for favoring the short end of the curve. The term premium has been pushed up by persistently large?budgets deficits, and high inflation that has exceeded the Federal Reserve's target of 2% for over five years. This is what investors are paying for long-term bonds. It makes short-term loans more appealing. The problem of rolling over $500 billion in bills each week is not an urgent one. Cash-like instruments are a huge market, and they're essential for overnight and short term collateral and liquidity management. The Fed and money market funds in the US have a combined balance of $8 trillion dollars, which is enough to absorb the new issuance. Even the demand for high-quality collateral can't last forever. Eventually, flooding will reach a level where it's impossible to absorb without a dangerous increase in money market interest rates. Treasury's interest bill may present a more immediate problem. Bills are affected by the impact of rolling notes and bonds over at higher interest rates in a matter of months, not years. The fiscal impact is already being felt, as the federal interest bill is on track to exceed $1 trillion in this fiscal year. Fed rate hike expectations are also increasing. 25% THRESHOLD Are we approaching the tipping point of too many bills issued? The current share of bills in the outstanding federal debt is just under 22.4%. This is slightly below the historical norm of 22.4% but well above the range of 15% to 20% recommended by the Treasury Borrowing Advisory Committee. The trend appears to be towards 25%, which is a threshold that many analysts believe should be watched. Lou Crandall is the chief economist of Wrightson ICAP. She said that it's difficult to pinpoint a specific tipping point, but once you reach a level of 25% of a growing?net borrowing requirement, the Treasury must look at more likely sources of demand. It's not a line that, when crossed, will instantly reduce demand for bills. In recent years, however, the share of bills in government debt was only 25% or higher during financial crises and economic recessions. And so, borrowing policies seen only in the pandemic of 2020 and the financial crisis of 2008 could become the norm. It is not known how the market will react to this over time. 1 TRILLION BARRIERS Treasury is currently facing record interest costs, both in nominal terms as well as when viewed by the percentage of GDP and revenue. The federal government's cumulative interest costs in the first four months of the year totaled $616 billion. This is an increase of more than $100 billion compared to the period January-April two years ago. According to the Congressional Budget Office (CBO), total interest payments will surpass $1 trillion in this fiscal year. They are expected to reach 3.3% of GDP, and 18.6% revenue, both records. This bill is expected to grow, particularly if the Fed decides to raise interest rates from their current range of 3,50-3.75% in the next few months. Rate hikes would not only increase short-term borrowing costs, but they could also threaten economic growth. Treasury would be in a weaker position, as it already borrows at the low end of the curve, and pays high interest rates. This could reduce investor interest and drive yields higher even if Fed policy was loosened to promote growth. Martin Tobias is the U.S. Rates Strategist at Morgan Stanley. Recession doesn't seem to be on the horizon anytime soon. A stock market correction or economic slowdown is not ruled out by a rise in borrowing costs. The $500 billion T-bills that are renewed every week will be scrutinized if this happens. You like this column? Check out Open Interest, your new essential source for global financial commentary. Follow ROI on LinkedIn and X. Listen to the Morning Bid podcast daily on Apple, Spotify or the app. Subscribe to the Morning Bid podcast and hear journalists discussing the latest news in finance and markets seven days a weeks.
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Gold gains as oil prices fall and US interest rate hike fears cap gains
Gold prices rose on Tuesday, aided by lower oil costs as tensions in the Middle East?easened?. However, concerns over U.S. rate hikes before this week's key inflation data capped gains. As of 1156 GMT, spot gold was up by 0.3% to $4,340.31 an ounce. In the previous session, gold fell to its lowest since March 23. U.S. Gold Futures for August Delivery?were unchanged, at $4.364.90. "Gold prices stabilised following a two-day decline that saw them break below the key technical support... "However, the rising expectations of more U.S. interest rate increases continue to create a difficult backdrop for bullion," Saxo Bank's Ole Hansen said. Oil prices dropped after Iran and Israel announced that they had stopped their attacks against each other in response to an appeal by U.S. president Donald?Trump. The rise in crude oil prices increases the risk of inflation and higher interest rates. Gold is often viewed as a hedge to inflation but in an environment of high interest rates, gold tends not to be so attractive. Investors are now awaiting the May U.S. Consumer Price Index data (CPI) on Wednesday and Producer Price Index data (PPI), on Thursday, for clues about the Federal Reserve's future moves. A robust jobs report released last week boosted bets that a rate -hike would happen this year. Hansen stated that "tomorrow's U.S. CPI is expected to surpass 4% for almost three years and the 17th?June FOMC Meeting remains crucial as the market looks for comments and intentions from the new fed chair." According to the CME FedWatch tool, traders are now pricing a 68% probability of a Fed interest rate hike in December. Since October 2023, spot gold has traded below the 200-day moving average. Citi analysts said that the breakout below the 200-dMA was viewed as a negative technical signal. This indicates further downside potential in near term. Silver spot rose 0.6%, to $68.56 an ounce. Platinum gained 0.9%, to $1,769.83. Palladium increased 2.9%, to $1,238.66. (Reporting and editing by Janane Vekatraman, Jonathan Ananda, and Noel John from Bengaluru)
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Indonesia's Trade Ministry faces a barrage of questions about new export control plans
On Tuesday, officials from Indonesia's trade ministry were bombarded with questions from?exporters? of coal, ferroalloys and palm oil who were concerned?about the impact of a controversial export control plan that aims to maximize profits from Indonesia's natural resources. Businesses expressed concerns about the implementation of the new rules in an online forum hosted by the government. This was despite the fact that the detailed rules were published earlier this week. Last month, President Prabowo revealed a plan that would channel all exports of Indonesia's key commodities through a state-owned firm. The goal was to increase government revenue and tighten controls on the sale of Indonesia's natural resources. The government released 11 pages of regulations earlier this month that outlined the implementation schedule for new controls. The?trade ministry released this week more detailed guidelines on three of the strategic products that are subject to the new rules which came into effect on June 1st. In the first phase of this new law, exporters will be required to report their entire export activity to Danantara Sumberdaya Indonesia. Exporters expressed concerns during an online awareness campaign held by the Trade Ministry about the integrity long-term contracts and the commercial mechanism of exporting products that are affected by the new regulations. Producers also don't know who pays for their product if all exports go through the government. "Starting January 1, we will be selling through DSI... Is the sale to DSI recognised as an export (paid in) U.S. dollar, or as a sale locally with payments made in Indonesian rupiah?" One company representative asked about currency risks associated with U.S. Dollar loans. He asked if the payment for the goods would be made by the customer or before the goods are exported. This is a crucial issue for a business's cash flow. Ministry officials deferred the majority of questions to DSI. DSI did not attend 'the event and merely'said that contracts would be executed on a business-tobusiness basis. Several participants asked how to contact DSI. At the time Prabowo announced his announcement, DSI had only one employee - its CEO. Indonesia's sovereign fund Danantara stated that its new unit would initially be backed by civil servants of several ministries. However, DSI will hire and develop the technologies for export monitoring. A participant asked who would be responsible for negotiating the prices with end buyers during the transition period and up until December 31, 2026. Danantara has said that it will examine the prices of existing export contracts in order to ensure they do not fall below market level. Prabowo stated last month that the under-priced commodities have cost the country almost a trillion dollars in the last 34 year.
McGeever: Trump blinks at the bond market's teeth as it grows bigger and worse.
Donald Trump, the president of the United States, is learning - again - how powerful and unforgiving bond markets can be.
The sovereign debt markets have been hit by a global selloff, with rising inflation driving yields on bonds of long duration to the highest level in decades.
The yield on the 30-year U.S. Treasury hit 5.20% on Wednesday, its highest since 2007. BNP Paribas' analysts predict a "deanchored rise" to 5.50% or even higher.
The Federal Reserve's response function has changed dramatically, and traders are now predicting a rate increase by December with a 80% probability. They were preparing for two to three rate cuts in this year before the Iran war.
The U.S. doesn't stand alone. Monday, the 30-year gilt yield climbed to 5.90% - its highest level since 1998. The UK bond sale has been fuelled not only by inflation concerns but also by increasing alarm about the country's financial outlook.
It's already having political consequences. Andy Burnham, mayor of Manchester and widely considered the frontrunner for replacing embattled PM Keir starmer in a leadership race, reneged on a pledge made earlier to ease fiscal rules by the government if he won.
Trump might seem to share little with a leftist mayor from the northern?of England. The rate drop and inflationary spike have been so extreme that Trump now seems to be backing off some of his previous pledges.
In recent days, Trump has toned down his expectations that the incoming Fed chair Kevin Warsh would preside over rapid and aggressive rate reductions.
Trump said in an interview published by Fortune magazine on Monday that he might have to wait for the war against Iran to be over before lowering interest rates. "You can't look at the numbers until the war ends," he said.
Trump continued his comments on Tuesday by telling the Washington Examiner that he would let Warsh do what he wanted to do in regards to interest rates. He's very talented, and he will be fine.
REALITY CHECK
Uncertainty surrounds whether Trump's softening of his stance on interest rates was a result of his own assessment or that of Treasury Secretary Scott Bessent. Bessent is a former hedge-fund manager and former George Soros colleague who has been familiar with bond market sentiments for a long time.
Trump seems to accept the fact that rates will not be reduced any time soon.
The energy supply shock caused by the Iran War and the closing of the Strait of Hormuz has led to a surge in price pressures. This is because a fifth of all global oil and LNG supplies pass through this sea route.
Inflation has also been higher than the Fed's target of 2% for over five years, and it is now on course to exceed 4%. According to a survey by the Philadelphia Fed of professional forecasters, CPI inflation is expected to average 6% in this quarter.
Be Rational
This backdrop is causing the pressure on the bond markets to increase rates. The spread between the two-year and the fed funds target is the largest in more than three decades. Investors are clearly saying that the Fed needs to tighten its policy.
Tim Duy, SGH Macro Advisors, argues that the Fed will raise rates in September if it is "rational". It would still be less than two month before the midterms, which is a time that Trump will not like.
Duy says that inflation is a "clear political liability" for Trump as he enters these elections. This complicates the president's calculations.
Even though Trump may no longer be as fervent about lower rates, that doesn't mean he's now open to higher rates.
Trump told CNBC about a month back that he'd be disappointed if Warsh did not?cut interest rates immediately. He posted on his Truth Social platform only two weeks ago: "Interest rates too high!"
Reality, as reflected in the $30 trillion U.S. Bond Market, is beginning to bite for the moment.
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(source: Reuters)