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Gold continues to decline as inflation worries weigh on rate-cut bets
The gold price fell a second time on Wednesday as inflation fears fueled by war weighed on the expectations for interest rate reductions. Markets were also looking forward to the upcoming summit between U.S. president Donald Trump and Chinese President Xi Jinping. At 1:59 pm EDT (1759 GMT), spot gold was down by 0.6% to $4,686.35 an ounce. U.S. Gold Futures closed 0.4% higher at $ 4,706.70. U.S. Producer Prices increased more than expected in April, posting the biggest gain since early 2020. This is the latest sign that inflation has accelerated amid a 'war on Iran. Peter Grant, senior metals analyst at Zaner Metals and vice president, said that inflation remains sticky, and expectations of higher rates were reinforced. This has been pushing gold down the last two weeks. Gold is often seen as a hedge to inflation. However, higher interest rates tend to?pressurize the metal. The data released on Wednesday shows that the U.S. consumer price index increased in April by a further 3%, and its annual rate has reached its highest level in three years. Last month, the U.S. Central Bank left its benchmark interest rate at 3.50%-3.75%. According to CME Group's FedWatch, traders have priced in a U.S. interest rate cut for this year. Trump was in China to make deals, to maintain the fragile trade truce between China and the second largest economy of world, and to boost his public approval ratings, which were hurt by his war against Iran. India increased its import tariffs for?gold and?silver to 15%, up from 6%. This was done to reduce the amount of metals purchased overseas and to ease the pressure on the country's reserves of foreign currency. India is the?second largest consumer of precious metals in the world. Grant stated that the news of higher import duties from India could create a demand concern and be a long-term obstacle. After hitting its highest level in the past two months, spot silver rose 1.6% to $87.28 per ounce. Platinum rose 1.6% to $2.159.58 after reaching its highest level since 12 March. Palladium rose 1.2% to $1,508.39. Ashitha Shivprasad reported from Bengaluru, and Alexander Smith, Ali Williams and Diti Pjara edited the article.
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Gold prices in India surpass $200/ounce records amid profit-taking
Bullion dealers reported that gold discounts in India reached a record high of over $200 per ounce on Wednesday. This was due to the surge in price after the 'import duty increase, which triggered investor selling in a weakening 'demand. India raised its import tariffs for gold and silver from 6% to 15% on Wednesday as part of an effort to reduce overseas purchases of these metals and relieve pressure on the country’s foreign exchange reserves. "Discounts were insane in the physical market." "We were double-checking before we executed deals," said the bullion division chief of a Mumbai-based bank who has been trading gold for over two decades. Discounts offered by dealers in India On Wednesday, the official domestic price of gold was $17 per ounce, but that increased to up to $207 per ounce, including 15% import duty and 3% sales tax. Mumbai-based dealers at private banks said that the duty increase triggered a steep rise in gold prices in their locality, which led some investors to sell gold at deep discounts in order to take advantage of gains. The two bullion dealers refused to be identified as they weren't authorised to talk to the media. The price of gold futures on the?second largest consuming market in the world jumped 7.2% to 164 497 rupees for 10 grams. This was the highest level seen in over two months. The bullion dealer stated that investors?were also able to make profits on gold exchange-traded fund (ETFs) and this was adding to the supply?into the market. Ashok Jain of Mumbai's gold wholesaler,?Chenaji Narsinghji, stated that retail buyers and jewellers were on the sidelines. This increased selling pressure, pushing discounts up to "unusual high levels". A bullion dealer in Chennai also expressed concerns that the recent duty hike could increase smuggling as it increased?margins for gray-market operators from 9% to around 18%. Grey market operators sell gold for cash in order to avoid duty, which allows them to offer the product at a discount to market price by evading tax. (Reporting by Rajendra Jadhav)
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Sources claim that the Brazilian government will announce a measure to subsidise gasoline.
Two sources familiar with the matter said that the Brazilian government will announce an executive order on Wednesday to subsidize gasoline. The goal is to cushion consumers from the higher oil prices caused by the Middle East conflict. In a?statement, the government announced that it would hold a?press conference at 3 p.m. local (1800 GMT) on?Monday to announce "measures" for the fuel industry aimed at "addressing war's effects," but did not give any further details. According to a?source, the?subsidy would be paid to producers and importers of gasoline who will then pass on savings to consumers. The goal is an effect that's?similar to partial reductions in federal fuel tax. Last month, the government announced subsidies for diesel fuel and liquefied petroleum gas (LPG), as well as lower taxes on biodiesel and jet fuel. High fuel prices are a concern to?President Luiz nacio Lula da Silva who is expected to run for reelection in this year. (Reporting and writing by Bernardo Caram, Editing by Gabriel Araujo).
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Egypt signs $1.5 billion loan agreement with ITFC for food and energy security
Egypt and the Islamic Trade Finance Corporation signed a $1.5 billion loan on Wednesday, to support the food and energy security of the country in the north. ITFC CEO Adib Yourssef Al?Aama stated during the signing ceremony that the ITFC had approved more than $24 billion of funding for Egypt since?2008 to support the energy sector, food security and small and medium enterprises. The funding includes $8.8 Billion for the General Authority for Supply Commodities to support Egypt’s imports of?food?commodities. This includes 12.6 Million tons of wheat. The ITFC has also helped Egypt to pay off arrears owed by foreign oil companies that it has pledged to fully repay by the end June. Egypt's bread subsidy program, which costs up to $2.6 billion per year and relies on by 70 million people, is one of the largest wheat importers in the world. The government announced last week that it could end the current subsidy programme and replace it with cash transfers beginning in July. The loan is coming as Egypt's economy absorbs the shockwaves from the war in Iran. This will put fresh pressure on the?country that is still navigating its fragile reform path under the $8 billion IMF program. The war cast a shadow on Egypt's fragile economic stability. It remains heavily reliant upon hot money inflows for financing, and on gas imports for energy.
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Tyson Foods CFO: 'Spotty' expansion of US cattle herd by Tyson Foods.
Tyson Foods' Chief Financial Officer Curt calaway stated on Wednesday that U.S. producers are "spotty",?in their efforts to rebuild a nation's reduced herd. Supplies will remain tight as low inventories pushed beef prices to record levels. As part of his efforts to reduce domestic beef prices, President Donald 'Trump' has been considering possible executive actions that would lower tariffs on imported beef and regulations for producers. Prices for milk, eggs and other grocery staples are down since Trump's presidency in January 2025. However, beef prices have increased by over 16%. HIGH?PRICES AND DROUGHT WORRIES Ranchers are slow to keep female cows, also known as heifers, for breeding. This is a crucial step in rebuilding herds, and increasing beef production. Cattle supplies have dropped to their lowest level in 75 years by 2026. Producers have instead sent animals to be slaughtered in order to profit from high prices, and due concerns about the 'dry weather' limiting grazing land. Calaway, speaking at the BMO Investor Conference in New York, said that cattle supplies would remain tight until 2027. He added that heifer retention is "spotty" and "regional." He said, "We will still manage with a limited cattle supply." Meatpackers are losing money on their beef business because rising cattle costs outweigh the gains made by higher beef prices. Tyson closed a beef facility in Nebraska and reduced operations at another one in Texas, laying off thousands workers. The beef prices rose due to a strong 'demand' and ranchers cutting their herds as grazing lands in the western U.S. were affected by drought. The Trump?administration also halted the imports of Mexican cows to prevent the New World Screwworm parasite. Calaway stated that Tyson's business of prepared foods, which uses raw materials such as beef and pork, had seen commodity inflation in seven out of eight quarters. The Iran War has accelerated inflation for consumers. Producer prices in April posted their largest increase in four-years. Donnie King, CEO of Donnie King Enterprises, said that there is a "point" where consumers will turn away from a product because of the price. "Inflation" is a real thing. It persists. "We don't think that will change in any meaningful way."
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Rate cut bets are impacted by inflation worries as gold prices ease
The gold price fell a second time on Wednesday as inflation fears fueled by war weighed down on expectations of interest rate reductions. Markets were also looking forward to the upcoming summit between U.S. president Donald Trump and Chinese President Xi Jinping. At 12:38 pm EDT (1638 GMT), spot gold fell 0.3% per ounce to $4,701,50. U.S. Gold Futures rose 0.5% to $4 709.50. U.S. Producer Prices increased more than anticipated in April, posting their largest gain since early 2022. This is the latest sign that inflation has accelerated amid 'the Iran War. Peter Grant, senior metals analyst at Zaner Metals and vice president, said that "inflation is still sticky, so expectations of higher rates were reinforced." Gold is often seen as a hedge to inflation. However, higher interest rates tend to?pressurize the metal. TRUMP'S TRIP IN CHINA The data released on Wednesday shows that the U.S. consumer price index increased in April by a further 3%, and its annual rate has reached its highest level in three years. Last month, the U.S. Central Bank left its benchmark interest rate at 3.50% - 3.75%. According to CME Group’s FedWatch, traders have priced in a U.S. interest rate cut this year. Trump was in China to make deals, maintain the fragile trade truce between the world's second-largest economy and boost his public approval ratings, which were shattered by his war against?Iran. India has also increased import tariffs for gold and silver from 6% to 15% in an effort to reduce overseas purchases and relieve pressure on its foreign exchange reserves. India is the second largest consumer of precious metals in the world. Grant stated that the news of higher import duties has caused some?concerns about demand and could be a long-term headwind. Spot silver increased 3% to $89.13 an ounce, the highest level for two months. Platinum rose 2.8% to $2186.55 after reaching its highest level since the 12th of March. Palladium rose 2% to $1,521.12. Ashitha Shivprasad, Bengaluru. Alexander Smith and Alison Williams edited the article.
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Hungary summons Russian Ambassador over drone attacks on Western Ukraine
Hungary summoned Russia’s embassy over a drone strike on western Ukraine, said Prime Minister Peter Magyar?on Wednesday. Russia launched a drone attack against Ukraine on Wednesday morning, killing three people and damaging critical infrastructure. Magyar stated during a press conference held following the first cabinet meeting of the new Hungarian Government that the Russian ambassador was summoned on Thursday morning to the Foreign Ministry to meet with Anita Orban. Orban, who will attend the meeting, will ask the ambassador to tell him when Russia intends to end its four-year war with Ukraine. Orban had earlier said on Wednesday in a video posted on Facebook that Hungary "deeply condemns" Russian drone attacks on ethnic Hungarian regions in western Ukraine. The Russian embassy in Budapest has not responded to an immediate request for comment. A request for comment from the Russian embassy in Budapest was not immediately responded to. Even after the 'Russian invasion of Ukraine' in 2022, Viktor Orban’s former government maintained close ties with Moscow. (Reporting and writing by Gergely szakacs, Jason Hovet, Anita Komuves. Editing by Kirsten Dnovan.)
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Four workers injured in a fire at Cajamarquilla Zinc Smelter, Peru
The fire that broke out at the Cajamarquilla Zinc Smelter of Nexa Resources in Peru on Wednesday has been brought under control. However, several workers were injured. Nexa sent a message to its workers in which it said that three Hitachi workers and one of their own employees were affected. The company reported that three of the injured people were transported for treatment and evaluation, and were in stable condition. A fourth person was treated on-site. Nexa has evacuated its workers as a precaution from the affected area and activated safety and emergency protocols, with local firefighters' support. The company said that the cause of the incident was under investigation. According to local media, the fire started at?7.17?a.m. Local time (1217 GMT), the fire broke out at Cajamarquilla in Lurigancho-Chosica east of Lima. It affected electrical equipment?at a substation. Cajamarquilla has the largest zinc smelter in Latin America. The firm has set aside?around $22 millions for renovations on the site by 2026. (Reporting and editing by Kyry Madry and Marco Aquino)
Hedge funds retreat from oil as war danger fades: Kemp
Financiers sold oil at the fastest rate for more than six months in the middle of indications that Israel and Iran have actually selected not to intensify their dispute, ensuring the rally in crude prices stalled well before reaching $100 per barrel.
Hedge funds and other money supervisors sold the equivalent of 95 million barrels in the six most important petroleum futures and options agreements over the 7 days ending on April 23.
Sales were the fastest given that October 2023 and take the two-week overall to 119 million barrels, according to reports submitted with ICE Futures Europe and the U.S. Product Futures Trading Commission.
The combined position was cut to 566 million barrels (49th. percentile for all weeks since 2013) from 685 million (66th. percentile) on April 9, as the war danger premium evaporated.
Chartbook: Oil and gas positions
The most current week saw heavy selling across the majority of the. complex, however particularly in crude and European gas oil, the. markets with most exposure to conflict in the Middle East.
Funds offered Brent (-39 million barrels), NYMEX and ICE WTI. ( -26 million), European gas oil (-24 million) and U.S. fuel. ( -7 million) however there was no modification in U.S. diesel.
Overall crude positions were cut to 453 million barrels. ( 46th percentile) from 522 million (59th percentile) previously in. the month at the height of the confrontation in between Iran and. Israel.
The ratio of bullish long positions to bearish brief ones. was cut much more strongly to 3.51:1 (33rd percentile) down. from a recent high of 4.97:1 (61st percentile) in late March.
Fund managers concluded there was no threat in the meantime to oil. production facilities around the Persian Gulf or tanker paths. through the Strait of Hormuz.
Saudi Arabia and its OPEC+ allies continue to restrict. production but are expected to increase output gradually in the. second half of the year.
Non-OPEC production boosts from the United States,. Canada, Brazil and Guyana are most likely to cover most consumption. growth in 2024.
Worldwide inventories stay near to the long-lasting seasonal. average while Saudi Arabia and other OPEC members in the Middle. East have more than 4 million barrels per day of idled. production capability.
U.S. GAS
Fund supervisors are revealing a much broader variety of views about. the outlook for U.S. gas prices in an election year.
Funds still held a net long position of 73 million barrels. ( 79th percentile) on April 23, down just slightly from a recent. high of 85 million (88th percentile) on April 9.
But the number of short positions had more than tripled to. 27 million barrels from a recent low of fewer than 9 million on. March 12.
Long positions outnumbered shorts by a ratio of 3.72:1 (43rd. percentile) below 8.73:1 (76th percentile) six weeks. earlier.
U.S. fuel usage stays resilient, underpinned by. consistent development in work and incomes, while refinery fuel. production deals with an elevated danger from an active hurricane. season.
However Ukraine's drone attacks on Russia's refineries have been. scaled back following pressure from the United States, decreasing. the threat to international gasoline materials.
U.S. gas stocks are just slightly lower than average. for the time of year and the deficit has actually stabilised after. operations resumed at BP's Whiting refinery in Indiana.
A minimum of some hedge funds seem to have concluded prices had. risen too far too quick, and the trade had ended up being crowded,. creating more danger on the drawback.
U.S. NATURAL GAS
Funds became less bearish about the outlook for U.S. gas. prices over the week ending on April 23, regardless of a continued. boost in excess seasonal stocks.
Hedge funds and other money managers bought the. equivalent of 382 billion cubic feet (bcf) in the 2 significant. futures and options contracts connected to rates at Henry Center in. Louisiana.
Purchasing was the fastest for 8 weeks considering that early March,. shortly after significant gas manufacturers announced cuts in drilling and. output.
The combined position was raised to a net short of simply 102. bcf (29th percentile for all weeks given that 2010) up from 483 bcf. ( 19th percentile) the previous week and 1,675 bcf (second. percentile) 2 months earlier.
Working gas inventories swelled to 2,425 bcf on April 19,. the highest for the time of year given that 2016 and before that. 2012.
Inventories were a huge 679 bcf (+39% or +1.46 standard. deviations) above the previous ten-year seasonal average.
The expense of physical gas in fact delivered to electrical energy. generators has actually fallen to its most affordable level since 1974 in real. terms.
However ultra-low rates are increasingly motivating gas-fired. generators to run as baseload, including throughout the night.
Gas-fired units are displacing even more coal and pressing. generators' gas combustion to seasonal records. Record gas. generation throughout the hot summertime is most likely to narrow the. surplus.
Lowered gas drilling will filter through into slower. production development by the end of the year, while the winter season of. 2024/25 is likely to be colder than the record warm winter season of. 2023/24, with El Nino fading.
From both positioning and fundamental point of views the. balance of price dangers has actually shifted to the upside in current. weeks.
Fund supervisors are responding by trying to end up being more. bullish or at least less bearish, for the fourth time in a year.
Related columns:
- Oil bulls lack conviction about sustainability of greater. costs (April 22, 2024)
- Oil traders sanguine about dangers from Israel-Iran conflict. ( April 18, 2024)
- Financiers bank on additional increase in U.S. fuel rates. ( April 11, 2024)
John Kemp is a market expert. The views expressed. are his own. Follow his commentary on X https://twitter.com/JKempEnergy.
(source: Reuters)