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Gold and stocks drop on political anxiety
The dollar strengthened on Wednesday, as investors dealt with the political turmoil in France and Japan. Meanwhile, a prolonged U.S. shutdown pushed gold spot prices above $4,000 an ounce for the very first time. Gold prices have been driven higher by the prospect of rate cuts in the future from Federal Reserve, and demand for safe havens due to economic and politics worries. Gold spot prices rose by 1%, to $4,021.22 an ounce. This brings the gains this year above 50%. Gold is traditionally seen as a safe haven during times of uncertainty. This rally was also driven by central bank purchases, the inflows of money into gold ETFs, and a weaker dollar. Chris Weston is the head of research for Pepperstone. Thierry Wizman is a global FX & Rates Strategist at Macquarie Group. He said that gold's rally was a collective "hedge" to the potential failure of the American AI driven tech boom. "A collapse in that optimistic 'vision,' could trigger an inflationary solution for the world's overhang of sovereign debt rather than a product-based resolution." MSCI's broadest Asia-Pacific share index outside Japan, which tracks Wall Street's decline, fell 0.8% in stocks. It is now a little lower than the high of 4-1/2 years it reached on Tuesday. China and South Korea closed their markets for a long weekend. Hong Kong's Hang Seng Index has fallen 1%. Japan's Nikkei Index fell 0.35% after reaching a record high in the previous session. FRENCH WORRIES IS BACK The euro was under pressure following the resignation of French Prime Minister Sebastien lecornu on Monday. This signals yet another period in France's political history. The euro fell 0.35% to $1.1617 last week, its lowest level since a month. France's president Emmanuel Macron was under increasing pressure to resign and hold a snap parliamentary elections. Investors are worried about France's fiscal stability due to the political chaos that has engulfed the country. Five prime ministers have resigned in less than two year. The yen has also fallen this week due to political shifts. It is now at its lowest level in eight months as investors wait for fiscal policy signals from Prime Minister-in-waiting Sanae Takayichi. Last time, it was 152.40 dollars per yen. The victory of Takaichi, the fiscal dove, over the weekend sparked concerns about the outlook for fiscal and monetary policies. Traders quickly cut their bets against another hike in this year. The yen has fallen over 3% in the past week. This is on track to be the steepest weekly drop since last year. This raises fears of a possible intervention by Japanese authorities. Hirofumi Suzuki, chief currency strategist of SMBC, stated that if the yen headed towards 160 in one to two weeks "FX interventions by the Japanese Government would be viewed more likely." He said that he expected an impact to be felt on U.S.-Japan's trade relations in the medium and long term. The New Zealand dollar fell nearly 1% following the central bank's 50 basis point cut to its benchmark rate and the fact that it left the door open to further easing. This suggests policymakers are worried about the fragile state of the economy. Investors have relied on independent secondary data and remarks by monetary policymakers to determine the likelihood of the Fed implementing its second rate reduction this year at the policy meeting scheduled for this month. The traders are estimating a 45 basis point easing in this year. The dollar index (which measures the U.S. dollar against six other currencies) hit its highest level in August. However, sentiment was still gloomy as the shutdown entered its eighth day. Investors brushed aside fears of oversupply on Wednesday, after digesting a decision by OPEC+ earlier to limit production increases in the coming month. Brent crude futures rose 0.7% to $65.91 per barrel. U.S. West Texas Intermediate Crude 0.79% to $60.22 (Reporting and editing by Ankur Banerjee, Sam Holmes).
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MORNING BID - EUROPE - Gold at $4K. Be very, very afraid
Ankur Banerjee gives us a look at what the future holds for European and global markets The markets are battling political turmoil in Japan, France, and the U.S. This is pushing gold to record highs, with the metal being used as a safe haven by investors. Spot gold is in a flurry - to say it has been on fire would be an understatement. The eye-watering 50 percent gain this year comes on top of the 27% increase in 2024, and 13% in 2023. Investors' appetite for gold is still insatiable. According to World Gold Council data, global inflows into gold-related ETFs have reached $64 billion for the year. September saw a record-breaking $17.3 billion. Gold has been touted as the preferred hedge due to the expectation that the Federal Reserve will cut rates in the short term, concerns over geopolitical uncertainties and economic uncertainty along with the fear of an AI bubble. This is a sign that you should be concerned. Investors are captivated by the French political scene, where President Emmanuel Macron is under increasing pressure to resign and hold a snap parliamentary elections. France experienced further political turmoil this week, after its fifth Prime Minister in less than two-years resigned. The markets have been frightened, as the risk premium for French government bond rates is near a 9-month high. Even though the U.S. government shutdown is now in its eighth day, the euro has suffered and this has given some relief to the dollar. The Japanese yen continued to fall, extending its losses of over 3% within just three sessions. The Japanese yen has returned to its mid-February level, hovering at 152.50 dollars per yen as whispered-about intervention risks are emerging. Market reaction to Sanae Takaichi’s victory was explosive. The yen collapsed, Nikkei reached record highs, and long-end bonds yields surged due to concerns about fiscal health and declining bets on another rate increase this year. Yet, it is difficult to predict the direction of fiscal policy in the short term. Investors hope that her stance is softer this year than it was last year. The following are key developments that may influence the markets on Wednesday. German Industrial Data for August
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Taiwan private refiners are willing to stop purchasing Russian naphtha
Taiwan's Economy Minister said on Wednesday, that private refiners would be willing to stop purchasing Russian naphtha if the EU asked them. This comes after a group non-governmental organizations criticized the island's continuing business with Russia. Taiwan, along with the United States, major Western allies, and other countries, put broad sanctions against Russia in 2022 after its invasion of Ukraine, but it did not ban explicitly imports, which are a major source of hard currency for Russia. A group of NGOs, including the Centre for Research on Energy and Clean Air(CREA), criticised Taiwan for its continued imports Russian naphtha last week. Taiwan's state-owned companies stopped importing Russian crude oil in 2023. However, private firms are still allowed to do so. Kung Ming Hsin, the Economy Minister, said that his ministry has spoken to Formosa Petrochemical about its continued purchase of Russian naphtha and to the European Union for their opinions. Kung stated that "we will respect and adhere to EU and G7 standards." According to what I have heard, the EU may decide next year not to make any more purchases. When asked if Taiwan would completely stop buying naphtha from Russia, he replied, "We can only talk about this with our own private companies and they're willing to comply." If the EU tells them next year that they can't buy anything, then they won't. K.Y. Lin, spokesperson for Formosa. Lin refused to comment on the government's guidance. The company says that Russian naphtha is the cheapest feedstock in a period when petrochemical producers are suffering losses. However, continued imports have drawn international scrutiny. We simply want to be able to buy at competitive prices. Lin said last week that we buy everywhere. "Russian naphtha, for example, is cheaper than Middle Eastern, Indian, or Middle Eastern naphtha." Formosa is Asia's largest importer and buyer of the petrochemical raw material naphtha. It purchases its supplies via open market tenders. Lin said: "We buy naphtha via open tenders, which means we don't buy from Russia. We go with the lowest price on the open market. Russian naphtha is competitive." He said that "for October delivery we didn't buy anything from Russia because there was no offer." Data from shiptracker Kpler shows that Taiwan imported 75,000 barrels of Russian naphtha per day so far this season, up from the 71,000 barrels per days in 2024. (Reporting from Jeanny Kao in Taipei and Ben Blanchard, Mohi in New Delhi. Editing by Kim Coghill.)
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Oil prices rise as fears of oversupply ease after OPEC+ restricts production increase
Investors brushed aside fears of oversupply on Wednesday, after digesting a decision by OPEC+ earlier to limit production increases in the coming month. Brent crude futures were up 48 cents or 0.7% to $65.93 per barrel at 0400 GMT. U.S. West Texas Intermediate Crude climbed 51 cents or 0.8% to $62.24. The benchmarks settled broadly flat in the previous session as investors weighed signs of a supply glut against a smaller-than-expected increase to November output from the Organization of the Petroleum Exporting Countries and affiliates. The market is stuck in limbo. One side believes there will be a glut of supply, while the other believes that the ramp-up won't happen as quickly as expected," said Emril jamil, a senior researcher at LSEG Oil Research. Jamil said that traders have been betting on the price of crude oil to rise and are currently holding long positions or bets. This is due to continued efforts by Russia's government to reduce its crude exports. OPEC+ chose to increase production by 137,000 barrels a week, the lowest of the options discussed over the weekend. Investors are likely to discount production increases until the physical market softens via increasing inventories. This was the conclusion of ANZ analysts on Wednesday. The analysts at ANZ said that the price gains were capped by the easing of fears about Russian supply disruption. Crude oil shipments have been close to a 16 month high in the last four weeks. Investors will also be waiting for the Energy Information Administration to release U.S. inventories later on Wednesday. According to American Petroleum Institute sources, U.S. crude stockpiles rose by 2.78 millions barrels during the week ending October 3, according to figures released on Tuesday. The API data showed that gasoline and distillate stocks fell. The EIA reported on Tuesday that the U.S. is expected to surpass its previous expectations in terms of oil production this year. (Reporting and editing by Christopher Cushing, Christian Schmollinger, and Jeslyn Lerh)
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How investors buy gold, and what drives market?
Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday. Bullion has increased 52% in value this year. This is due to a number of factors, including central bank purchases, monetary policy ease, and a weaker US dollar. Here are some ways you can invest in gold. SPOT MARKET Big banks are usually the gold buyers for large investors and large 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 another major player on the Asian gold market. 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. According to World Gold Council data, the amount of money invested in gold-backed exchange-traded fund has reached $64 billion this year. September saw a record-breaking $17.3 billion. BARRES 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 EXCHANGE RATE Gold is an excellent hedge against volatility in the 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 TENSIONS Precious metals are widely regarded as a safe haven in times of uncertainty. U.S. President Donald Trump’s trade tariffs, and his imposition on additional duties on Chinese products have sparked an international trade war. This has rattled currency markets and sparked fears of a rise in U.S. Inflation. Trade war escalates, with Trump increasing tariffs against Chinese imports up to 145%. China raised tariffs from 84% to 125% on U.S. products. 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 a new record high. Central banks also increased their buying in the last quarter. The People's Bank of China reported on Tuesday that China's gold reserves totaled 74.06 fine troy-ounces as of the end of September. This is up from 74.02 in the preceding month.
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IEA Cuts Renewables Growth Outlook to 2030
The International Energy Agency on Tuesday cut its global forecast for renewable power growth by 2030 by 248 gigawatts from last year's outlook, citing weaker prospects in the United States and China, even as solar power continues to drive record additions.Global renewable power capacity is now expected to rise by 4,600 GW by 2030 - down from the six-year forecast of 5,500 GW in 2024 - with solar accounting for about 80% of the increase, the data showed.The downward revision is mainly due to an early phase-out of U.S. federal tax incentives and other regulatory changes - lowering the IEA's U.S. growth expectations by almost 50% - while China's shift from fixed tariffs to competitive auctions is squeezing project economics.The downgrade is partly offset by stronger outlooks elsewhere. India is set to become the second-largest growth market after China and is on course to comfortably reach its 2030 target, supported by expanded auctions, faster permitting and a rooftop-solar surge.Europe's prospects have also improved on the back of ambitious policies, larger auction volumes and streamlined approvals, while many emerging economies across Asia, the Middle East and Africa are accelerating build-outs as costs fall and targets rise, the report said.Offshore wind remains a weak spot, with the agency's growth outlook about a quarter lower than last year due to policy resets, supply-chain bottlenecks and higher costs.Pumped‑storage hydropower is expected to grow 80% faster over the next five years than in the previous five as grid‑integration challenges mount and geothermal installations are on track to hit historic highs in the United States, Japan, Indonesia and other emerging markets."The growth in global renewable capacity in the coming years will be dominated by solar," IEA Executive Director Fatih Birol said, urging policymakers to tackle supply-chain security and grid constraints.The agency warned that solar and rare-earth supply chains remain highly concentrated in China, with key segments staying above 90% through 2030.(Reuters - Reporting by Forrest Crellin in Paris; Editing by Matthew Lewis)
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Gold continues historic rally and soars above $4,000/oz.
Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday. By 0213 GMT, spot gold had risen 0.5% to $4,002.53 an ounce. U.S. Gold Futures for December Delivery gained 0.5% at $4,025 an ounce. Gold is traditionally seen as an investment during periods of uncertainty. Gold spot is up 52 percent year-to date after rising 27 percent in 2024. The Fed is likely to continue lowering rates, so the market will be looking for the next round number of 5,000. There will be bumps along the way, such as a lasting ceasefire in the Middle East or Ukraine, but the fundamental drivers for the trade, massive debt and increasing reserves, diversification of reserve assets, and a lower dollar, are unlikely to alter in the medium-term. A cocktail of factors has driven the metal's rally, including expectations for interest rate reductions, political and economic uncertainties, central bank purchases, and inflows to gold exchange-traded fund. Tuesday marked the seventh day of the U.S. Government shutdown. The shutdown has delayed the release of important economic indicators. This forces investors to rely upon secondary, nongovernment data in order to determine the timing and magnitude of Fed rate reductions. Investors now expect a 25 basis-point reduction at the Fed's meeting in this month. An additional 25 bp is expected in December. The political turmoil in France, Japan and other countries has also increased demand for safe-haven gold. Analysts say that a "fear of losing out" also drives the rally. "What we are seeing is that investors continue to buy gold despite its high price, which is amplifying this move even further," said UBS Analyst Giovanni Staunovo. Silver spot rose by 0.5%, to $48.03. Platinum gained 2.2%, to $1653.21, and palladium increased 1.3%, to $1355.32. (Reporting and editing by Sriraj Kalluvila, Christian Schmollinger and Anmol Choubey in Bengaluru)
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Gold cracks $4,000, stocks ease, yen wobbles due to political concerns
Investors were weighed down by the political fallout in France and Japan. Meanwhile, a prolonged U.S. shutdown pushed gold spot prices up to a record level of $4,000 an ounce. The Japanese yen was hovering near its eight-month-low as investors awaited the fiscal policy direction of prime minister-in waiting Sanae Takaichi. Meanwhile, the euro was under stress after French Prime Minister Sebastien lecornu's resignation on Monday. The dollar was a bit more optimistic. The dollar index (which measures the U.S. money against six other currencies) hit its highest level in August. However, sentiment was still gloomy as the shutdown entered its eighth day. MSCI's broadest Asia-Pacific share index outside Japan, which measures the performance of all Asia-Pacific stocks, fell by 1% on Wednesday, slipping away from its 4-1/2-year high. China and South Korea were closed during the long holiday. Nikkei 225 rose by 0.35% in Japan, but fell short of the record high reached the previous session. After a surprising victory for fiscal dove Takaichi over the weekend, traders quickly cut their bets against another hike in the Japanese market this year. Carol Kong, currency analyst at Commonwealth Bank of Australia said that Takaichi's win in the leadership race of the ruling Liberal Democratic Party has changed the risk balance to a rate hike later in 2026. Kong said that option traders have become less bearish about the dollar/yen than they were in September 2022, but she still believes the dollar will continue to fall against the yen over the short term. The yen fell to 152.33 dollars per yen, its lowest rate since mid-February. The yen has fallen over 3% in the past week and is on track to have its steepest weekly drop since last year. This raises concerns about possible intervention by Japanese authorities. The euro dropped 0.26%, to $1.1628. It was at its lowest level for a month. Markets were bracing themselves for more political turmoil in France. France's president Emmanuel Macron was under increasing pressure to resign, or to hold a snap parliamentary elections to end the political chaos which has seen five prime ministers resign in less than two year. The New Zealand dollar fell nearly 1% following the central bank's 50 basis point cut to its benchmark rate and the fact that it left the door open for more easing. This suggests policymakers are worried about the fragile state of the economy. All three U.S. indices finished in the negative after a New York Federal Reserve survey showed that consumer expectations were deteriorating and inflation projections were rising. Investors have relied on independent secondary data and remarks by monetary policymakers to determine the likelihood that the Federal Reserve would implement its second rate reduction of the year during this month's meeting. Traders have priced in 45 basis point of easing for this year. Gold prices have risen due to the prospect of rate cuts in the near future and demand for safe-haven assets. Gold prices rose to $4,000.96 an ounce on Tuesday, extending their gains for the past year above 50%. Thierry Wizman is a global FX & Rates Strategist at Macquarie Group. He said that gold's rally was a collective "hedge" to the potential failure of the U.S. AI-driven tech bubble. "A collapse in that optimistic 'vision,' could trigger an inflationary solution for the world's overhang of sovereign debt rather than a product-based solution." (Editing by Sam Holmes).
What drives the gold market and how investors buy it?
Investors seeking to protect themselves from the increasing economic and geopolitical uncertainties, as well as expectations of future interest rate reductions by the U.S. Federal Reserve, drove gold prices above $4,000 per ounce on Wednesday.
Bullion has increased 52% in value this year. This is due to a number of factors, including central bank purchases, monetary policy ease, and a weaker US dollar.
You can invest in gold using different methods:
SPOT MARKET
Big banks are usually the gold buyers for large investors and institutional 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 trade, 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 another major player on the Asian gold market.
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.
According to World Gold Council data, the amount of money invested in gold-backed exchange-traded fund has reached $64 billion this year. September saw a record-breaking $17.3 billion.
BARRES 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 RATES OF EXCHANGE
Gold is an excellent hedge against volatility in the 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
Precious metals are widely regarded as a safe haven in times of uncertainty.
U.S. President Donald Trump’s trade tariffs, and his imposition on additional duties on Chinese products have sparked an international trade war. This has rattled currency markets and sparked fears of an increase in U.S. Inflation.
Trade war escalates, with Trump increasing tariffs against Chinese imports up to 145%. China raised tariffs from 84% to 125% on U.S. products.
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 a new record high. Central banks also increased their buying in the last quarter.
The People's Bank of China reported on Tuesday that China's gold reserves totaled 74.06 fine troy-ounces as of the end of September. This is up from 74.02 in the preceding month.
(source: Reuters)