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Gold falls as tensions between the US and Iran spark inflation and rate hike concerns
Gold prices fell on Monday, as renewed tensions between the U.S. and Iran?boosted?oil?prices and sparked inflation fears. This boosted expectations for higher interest rates. Spot gold fell 1.5%, to $4.025.83 an ounce at 12:12p.m. ET (1612 GMT), following a fall of more than 2% in the earlier session, and a recent low of more than seven months. U.S. Gold Futures for 'August Delivery' fell by 1.4% to $4 040.70. The market is still adjusting to the Fed's more hawkish stance, said Peter Grant, senior metals analyst at Zaner Metals and vice president. Iran launched drones and missiles on Sunday at U.S. military bases in Kuwait and Bahrain. This came after U.S. president Donald Trump had threatened to eliminate the 'Iranian leadership' if they failed to adhere to the terms of a final peace deal. Brent crude futures have risen following the attacks. Gold is traditionally viewed as a safe-haven metal, but the higher energy costs due to the war has raised fears of inflation and increased interest rates. This would put pressure on the non yielding metal. The U.S. Federal Reserve kept interest rates steady this month. However, policymakers are expecting a rate hike in the second half of this year due to growing concerns over inflation that is above the 2% target set by the U.S. Central Bank. The U.S. Dollar was on its way to the biggest monthly gain it has seen in almost a year. A stronger dollar makes gold expensive for foreign buyers. The market participants are now awaiting ADP's employment data, which will be released on Wednesday, and the U.S. nonfarm payrolls figures on Thursday to get more clues about the Fed's?monetary policy stance. Grant said that "(Gold's) price could drop to new lows, if employment data continues to look strong. This would support the Fed's policy of keeping rates higher for longer." Traders have priced in a 64% chance of an interest rate increase in September. Silver spot fell 1.8%, to $58.11 an ounce, and platinum dropped by 2.3%, to $1,576.90. Palladium rose 0.8% to $1.218.67. Sukanya Mitra in Bengaluru, Joyjeet Das & Chris Reese (Reporting and Editing)
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Short-dated yields are mostly higher, as crude prices rise; the focus now turns to employment data
The yields on short-term U.S. Treasury bonds were mostly higher Monday as crude prices increased following the?attacks? between the U.S. U.S. crude jumped 1.34%, to $70.15 per barrel. Brent went up to $72.77 a barrel, a 1.08% increase on the day, as the attacks threatened to undermine a fragile peace deal. However, expectations of continued energy shipping through Strait of Hormuz held gains in check. A source said on Monday that the Iranian and U.S. teams working on the implementation a interim peace agreement?are likely to meet in Doha within the next few days. This week will bring a series of labor market?data, culminating on Thursday with the Labor Department's June payrolls report. As expectations of inflation pressures easing have increased, yields have been declining in recent days. This has offset what was perceived as a hawkish Federal Reserve announcement and press conference on June 17 by the new?Fed chairman Kevin Warsh. Jim Barnes, Director of Fixed Income at Bryn Mawr Trust, said: "The data this week on the labor market is interesting to me, but now the focus is more on inflation." Because energy prices are down materially, inflation expectations have also dropped. The market, particularly after the Fed's meeting, is not satisfied. They need to see concrete evidence of inflation falling. BENCHMARK YIELDS HIGHER EDGE After falling for three weeks in a row, the yield on the benchmark U.S. Treasury 10-year note increased 0.4 basis points to 4.376%. Several Fed officials said last week they are still worried about high inflation. The yield on 30-year bonds fell 0.3 basis points to 4.862%. According to CME Group’s FedWatch tool the markets are pricing in a 29,4% chance that a rate increase of at least 25 basis points will occur at?the Fed’s July 28-29 Meeting and a 61,9% chance for September 15-16 Meeting. The yield on the two-year U.S. Treasury, which moves typically in line with expectations of interest rates from the Fed, increased 1.9 basis points, to 4.107%, and was on track for its 1st daily gain following 4 straight declines. The gap between the yields on two-year and 10-year Treasury bills, which is seen as an indicator of economic expectation, was positive by 26.7 basis points. The five-year U.S. Treasury inflation-protected securities (TIPS) brokeeven rate was 2.244%, after closing at a 2.223% level on June 26. The 10-year TIPS rate of breakeven was 2.215% last, which means the market expects inflation to average 2.2% per year over the next decade. (Reporting and editing by Paul Simao; Chuck Mikolajczak)
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Slovakia prepares final unit of Mochovce Nuclear Plant for production
Slovenske Elektrarne, the Slovak utility, has begun fuel loading on the fourth 'unit' of the Mochovce Nuclear Power Plant, nearing the?start of production after almost four decades of construction. The fourth unit, a 471 megawatt unit, will be the last unit to go online at the second nuclear power plant in the country after the grid connection of its third unit is completed in 2023. When the project was restarted last in 2008, it was originally planned that the fourth unit would be completed in 2013. The start-up of the nuclear power plant in Slovakia will mean that it has the highest percentage of nuclear energy in Europe's national power mix. Slovenske, which is majority owned by Czech investor Daniel Kretinsky’s EPH, has said that nuclear power will?cover 77.5% the country's need, ahead of France in terms of percentage. The completion of the project comes at a time when global?interest is growing in nuclear power amid a push to reduce carbon?emissions, and to ramp up production to meet the demands of electrified economies. This includes the surging demand for data centres. Branislav Stycek, CEO of Mochovce, said at a live news conference that the fourth unit would supply 13% to Slovakia's demand for electricity and solidify Slovakia's position as an electricity exporter. Officials said that after the fuel loading, a series tests will be conducted before the reactor and the turbine begin supplying fuel to?the power grid. Strycek stated that the unit would reach its full capacity at the end of this year. As with other nuclear power plants in Europe, the completion of Mochovce started in 1980 based on a Soviet design. However, it has run into a number of?delays and cost overruns. Fico stated that the government is interested in increasing the 34% stake it holds in "Slovenske Elektrorne" in a window for talks with the major owner following the commissioning of Mochovce's final unit. Separately, the government plans to build a 1,200 MW power plant with state oversight. (Reporting and editing by Jan Lopatka, Prague)
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Oil and stock prices rise as investors focus on Iran. The yen hits a 40-year low against the dollar
Investors tracked the implementation of the interim peace agreement between the U.S. and?Iran, while oil prices climbed?after tit for tat attacks highlighted the risk of escalation. European stocks edged down, but Wall Street led the gains. Technology shares rebounded after last week's saleoff, driven by concerns about AI spending. After several days of strike activity in the Middle East, both sides have accused each other of violating an interim ceasefire after an Iranian projectile struck a cargo ship in the Strait of Hormuz. The oil prices fluctuated, Brent and WTI both up by more than 1% in a single day but were still down sharply for the entire month. Recent U.S. attacks and Iranian attacks highlighted the fragility of interim agreement, while expectations of a recovery of energy shipments via the Strait of Hormuz cap gains. Mohit Kumar said that the market could benefit from the drop in oil prices, and the impact it has on the global economy. Lower oil prices will lead to diversification of trade, and sectors that are growth-sensitive should perform better. U.S. crude oil rose by 1.7%, to $70.41 per barrel. Brent increased to $72.88 a barrel. The Dow Jones Industrial Average rose by 302.53 or 0.58% to 52,175.22. The S&P 500 gained 37.66 or 0.51% to 7,391.68. And the Nasdaq Composite rose 205.04 or 0.79% to 25,497.22. The MSCI index of global stocks rose by 4.41 points or 0.38% to 1,107.01. There have been a number of false starts with?peace talks. Peter Andersen of Andersen Capital Management said that I expect the majority of market participants to "remain in a 'holding pattern' for the remainder of this week." The pan-European STOXX 600 fell by 0.1% while Europe's FTSEurofirst 300 fell by 2.18 points or 0.09%. The Nikkei 225 rose by 107.23 or 0.15 percent to 69.468.11 while the emerging market stocks gained 1.00 points or 0.06%. WAGE WAGERS FOR RATE INCREASE The dollar has risen as expectations of an upcoming Federal Reserve rate increase have boosted the dollar. Oil prices fell sharply over the past few weeks, but inflation measures have soared in the U.S. The dollar index which measures the U.S. against other currencies was slightly lower last week at 101.25. This is just below the 13-month peak it reached last week. The oil market is still a risky place. Participants still appear to be... focusing their attention on the impact of a continued rise in oil flow on global balance, according to ING analysts in a Monday note. This week, the U.S. economic focus will be on Thursday's June jobs report. Three consecutive months of stronger-than-expected payrolls have reinforced the ?Fed's hawkish shift, though any cooling ?in the labor market could prompt a more dovish reassessment. Investors have priced in at least one Fed rate hike this year. This is a dramatic change from the expectation of two rate reductions before the Iran War. Marc Chandler, Bannockburn Global Forex's chief market strategist, said that the labor market has accelerated. "The doves' concerns about the labor market slowing down seem to be over." The Japanese yen has hit its lowest level in 40 years, 161,97 per dollar. This is the weakest it's been since 1986. The Bank of Japan’s 25bp rate increase to 1.00%, which was long overdue, has not been able to reduce the interest?rate gap with the United States. This is especially true after the Federal Reserve maintained its hawkish stance by signaling that rates will likely remain high for longer. Gold was down by 1.3% to $4,034 an ounce, as the dollar rose. The yellow metal will experience a decline of 13% in the second quarter. This is its largest quarterly drop since 2013. Reporting by Ankur Baerjee from Singapore, Harry Robertson from London and Rodrigo Campos from New York. Karen Brettell, Alex Lawler and Karen Brettell contributed additional reporting. Editing by Aidan Lewis (with Andrew Heavens, Mark Potter and Aidan Lewis).
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Gold falls as tensions between the U.S. and Iran spark inflation and rate hike concerns
Gold prices fell on Monday as fresh tensions between the U.S. and Iran pushed up oil prices, fueling inflation fears. This boosted expectations for higher interest rates. By 8:51 am, spot gold had fallen 1.03% per ounce to $4 045.95 ET (12:51 GMT) while U.S. Gold Futures for August Delivery fell. Prices fell to a seven-month low last week. The market is still adjusting to the Fed's more hawkish stance, said Peter Grant. Iran launched drones and missiles on Sunday at U.S. military bases in Kuwait and Bahrain. This was shortly after U.S. president Donald Trump had threatened to eliminate the Iranian leadership for failing to adhere to the terms of the final agreement. Brent crude futures rose after the attacks. Gold is traditionally a safe-haven metal, but the higher energy costs due to war have led to concerns about inflation and rising interest rates. This would put pressure on gold, a non-yielding material. The U.S. Federal Reserve kept interest rates steady this month. However, policymakers are expecting a rate hike in the second half of this year due to growing concerns over inflation that is above the 2% target set by the U.S. Central Bank. The U.S. dollar is on track to post its largest monthly gain since nearly a year. A stronger dollar makes gold expensive for foreign buyers. The market participants are now awaiting the ADP employment data, which will be released on Wednesday, and the U.S. nonfarm payrolls on Thursday to get more clues about the monetary policy stance of the Fed. Grant said that "(Gold's) price could fall to new lows, if employment data continues to look strong. This would support the Fed's higher-for longer stance." The traders are estimating that there is a 60% chance of a rate increase by September. (Reporting by Sukanya Mitra in Bengaluru; Editing by Joyjeet Das) (Reporting by Sukanya Mitra in Bengaluru; Editing by Joyjeet Das)
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The US is also facing soaring temperatures.
Italy and the Balkans were affected by a record-breaking, heatwave on Monday. The heatwave has been causing hundreds of deaths in excess and disrupting daily life for over a week. There are growing concerns about the spread of wildfires. The National Weather Service in the United States warned of "dangerous temperatures" in central and eastern U.S., with temperatures in the 90s to lower 100s degrees Fahrenheit. This was in the days leading up to the celebrations of July 4, the 250th Anniversary of the Declaration of Independence. The National Weather Service warned that "the combination of prolonged daytime heat and limited nighttime cooling will increase the risk for heat-related illness, especially among vulnerable populations and those who lack adequate cooling." The National Weather Service warned that temperatures in Western Europe have dropped from June's record highs. However, the heat is expected to return next week. On Monday, 22 Italian cities were under a heat warning. These ranged from Bolzano to the north of the country all the way down to Palermo at Sicily's southern tip. On the Feast Saints Peter and Paul in Rome, pilgrims used fans to cool off and umbrellas to provide shade. Pope Leo gave his Angelus from a balcony and the crowd below was able to hear it. WILDFIRES IN WESTERN BALKANS The Croatian weather service issued an alert for the red zone on Monday, including for the capital Zagreb as well as the tourist destinations Split and Dubrovnik. Four aircraft and dozens of firefighters battled a forest fire on the tourist island of Vis, in the Adriatic Sea. This is about 55 km (34 miles) south of Split. The State Hydrometeorological Service of Serbia (RHMZ), a neighbouring country, has warned that temperatures will reach 39 degrees Celsius on Monday. Albania also contained a wildfire that consumed many hectares near the village of Klos in the south over the weekend. The heatwave that began on 20 June set records for the early summer. It damaged infrastructure, disrupted power production, and overwhelmed the healthcare system. France reported that the heatwave was responsible for 1,000 extra deaths. French public health officials said that the majority of heat-related deaths involved older people, and warned that the number would likely rise. The French media reported the funeral homes of Paris and its surrounding areas were overrun by the bodies. Scientists say that the heatwave would be "virtually unavoidable" if it weren't for climate change. CYPRUS: YOUNG BOYS DIE INSIDE CARS Daniele Mocio is a meteorologist for the Italian Air Force. He said that the heatwave would continue in Central and Eastern Europe for a few more days, with temperatures 8-10 degrees Celsius higher than average. The relief that comes further west in Europe is likely to be short-lived. Luca Mercalli is the president of 'Italy Meteorological Society'. He said that temperatures will soar from July 5 or 6 onwards. Mercalli said that the areas affected by the second wave of flooding are similar to the areas that were hit in the first. These include France, Spain and Germany as well as Italy, Switzerland, Britain, and Switzerland. "With the extreme heat, forest fires are more likely to occur, but there are also a lot of storms which mitigate that risk,"? he said, adding that because storms can be localised, rainfall amounts may vary widely. At the weekend, there were reports of more tragedies relating to heat. Police said that two boys, aged 8 and 10, from Bulgaria were discovered dead in a hot vehicle?in Cyprus Sunday afternoon. Cyprus is experiencing temperatures around 38 C. This is not a heatwave for this time of the year. On Sunday, two cyclists, one aged 30 and the other 71, were killed while participating in an event of the Poland Bike Marathon Series in Marki, near Warsaw.
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Volkswagen CEO targets power switch alongside deep cuts
Volkswagen CEO Oliver Blume’s plan to close German factories and 'cut up to 100,000 jobs' is more than just a cost-saving measure. It could also be an attempt to change a corporate structure that has held back progress for years. Sources say that Europe's largest?automaker? is considering its biggest-ever restructuring. This includes doubling the planned job cuts, and closing four German factories. It does this to combat tariffs, rising costs, and increasing competition from Asia. The company is also considering plans to separate passenger cars and parts into separate divisions. This could be a test of the limits of the Volkswagen Law, which entrenches both the influence of workers and Lower Saxony as the second largest shareholder. The law limits the ability of management to "close" plants. The law only applies to VW AG, which controls six of the core German factories in the VW Group. Creating separate entities would allow a way to circumvent these?constraints. Three legal and financial sources have said that spinning off the passenger vehicle division - which is heavily exposed to tariffs and weak European demand, as well as a price battle in China - could be an important step in this process. This would lead to a confrontation with powerful political and union stakeholders. The IG Metall has already said that the carve out plans are an "attack on VW?law", signaling Blume is in for a fight. Investors say that with the crisis in the industry, Volkswagen's share price near 16-year lows, and rising internal tensions, management is forced to change. Ulrich Hocker of shareholder lobby group DSW said that labour's influence is "excessive", and it has its roots in an old era. Volkswagen has a long history of failed compromises, with Lower Saxony and labour holding a majority in the supervisory board. He said: "At some stage, everyone will realise that major changes are needed to ensure this company's survival." SPINNING THE "BAD BANK" In practice, any spinoff would require shareholder approval over 80%, under the VW?law. This effectively gives Lower Saxony, with 20% voting rights, a blocking stake. One of the sources stated that "Lower Saxony will never support a vote aimed to diminish its own power." UBS anticipates a deal, and warns that any restructuring is likely to come with provisions as well as a downgrade in Volkswagen's outlook for 2026. Olaf Lies is the Lower Saxony premier and a member of the supervisory board. He said that the state would not accept measures which would weaken workers' influence, which he described as "an integral part of Volkswagen’s success story". Instead, he has suggested that production of models aimed at China be moved to Germany in order to support underutilized plants -- an idea Blume also floated. Investors, including Porsche SE, have criticized Volkswagen SE's complex structure that spans 10 brands. The company could take a leaf out of Siemens’ playbook and streamline its empire in order to close the gap that has existed for a long time between its market value and what analysts attribute to its assets. Volkswagen's stakes in the truck unit?Traton, and Porsche sports cars are worth more than 50 billion euros (EUR44 billion) - this is over twice as much as the market value of the entire group. Citi analysts believe that carving out core operations could unlock value. They compare this move to creating a "bad-bank" which would isolate weaker businesses and leave behind a holding company with a smaller footprint, less vulnerable to geopolitics or weak growth.
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Aluminum prices fall as Middle East fears about supply ease
Aluminum prices fell on Monday due to a easing in fears that the weekend tit for tat strikes between Iran and the U.S. would escalate and cause a larger conflict and disrupt Middle East shipments, traders reported. The benchmark aluminium price on the??London Metal Exchange was down 0.2% at $3,164 per metric ton. The Strait of Hormuz is a major shipping channel. On Tuesday, Washington and Tehran will resume their talks. Britannia Global Markets stated in a report that "the situation is fluid, and any new disruption could quickly tighten the?availability of... aluminum". The suspension of the trade through the Strait caused a significant disruption to the aluminium market. Middle East is home to 9% of the global aluminum smelting capacities. This month, due to disruptions in supplies, prices reached $3,787.50, their highest level since March 2022. Prices of metals used in construction, transport and packaging have fallen by 16% since then. The premium for the LME cash aluminium contract has fallen from its 19-year-high over the next three months to a discount. Support for aluminum is at the 200-day moving median, which is currently around $3.160. On the upside, resistance is found at the 100-day Moving Average around $3.410. Metals markets in other countries are influenced by the strength of the U.S. dollar, making metals priced in dollars more expensive for those with currencies other than the U.S. dollar. The dollar is on track to?have its biggest monthly gain in over a year. This is due to the growing likelihood of higher interest rates in the United States in order to curb inflationary pressures. Alastair Munro is a senior base metals analyst at broker Marex. He said that the initial sell-off in the energy and precious metals markets was due to a hawkish U.S. rate backdrop. The industrial metals suite then came under pressure the following week. Lead gained 0.2% and tin 1.4%, while nickel fell 0.4%. This week, the manufacturing PMIs of China's top consumer will provide clues about industrial metals demand. Reporting by Pratima Dasai, Editing by Mark Potter & David Goodman
Aluminum prices fall to a four-month low amid Middle East supply concerns
Aluminum prices dropped to a four-month-low on Monday as traders said that fears had eased about the possibility of a larger conflict arising from the weekend's tit-fortat strikes between Iran and the United States. Benchmark aluminium prices on the London Metal Exchange were down 1.9% to $3,119 per metric ton, from $3,104 earlier. The Strait of Hormuz talks between Washington and Tehran, which is a major shipping channel, will be resumed on Tuesday in Qatar.
Britannia Global Markets stated in a report that "the situation is still fluid, and any new disruption could quickly tighten the availability of... aluminum."
The suspension of the trade across the Strait caused a'significant disruption to the aluminium market.
The Middle East is home to 9% of the global aluminum smelting capacities. This month, due to disruptions in supplies, prices reached $3,787.50, their highest level since March 2022. Prices of metals used in construction, transport and packaging have fallen by 16% since then.
The 'premium' for the LME cash aluminium contract has fallen from its 19-year-high over the 3-month forward.
Support for aluminum is at the 200-day moving median, which is currently around $3.160. On the upside, resistance is found at the 100-day Moving Average around $3.410.
Metals prices in other markets are more expensive because of the dollar strength.
The dollar is on track to achieve its biggest monthly gain in over a year. This is due to the growing likelihood of higher interest rates in the United States in order to curb inflationary pressures.
Alastair Munro is a senior base metals analyst at broker Marex. He said that a hawkish U.S. rate backdrop first drove the selloff in energy and precious metal markets, before the industrial metals suite was under pressure last week. Lead?retreated by 0.1% to 1,901 while tin was little changed at $50540. Nickel lost 1.3%.
This week, the manufacturing PMIs of China's top consumer will provide clues about demand for industrial metals. Reporting by Pratima Dasai, Editing by Mark Potter and David Goodman. Shreya biswas is the editor.
(source: Reuters)