Tag: GC00

Oil prices jump after drone attack kills U.S. troops, escalating Mideast crisis

Oil futures popped higher Sunday evening, after a drone attack that killed three U.S. service members in northern Jordan, blamed by the White House on Iran-backed militants, marked a major escalation of tensions in the Middle East.

West Texas Intermediate crude for March delivery
CL00,
+1.22%

CL.1,
+1.22%

CLH24,
+1.22%
was up $1.09, or 1.4%, at $79.10 a barrel on the New York Mercantile Exchange. March Brent crude
BRN00,
+1.15%

BRNH24,
+1.14%,
the global benchmark, gained $1.11, or 1.3%, to trade at $84.66 a barrel on ICE Futures Europe.

Much will ultimately depend on the U.S. response and whether Iran takes action aimed at shutting down the Strait of Hormuz, Tariq Zahir, managing member at Tyche Capital Advisors, told MarketWatch on Sunday afternoon.

“We are on the cusp of this escalating, which could seriously impact the flow of crude oil,” he said.

Three U.S. service members were killed and more than two dozen injured in a drone strike on a U.S. base in northeast Jordan, according to U.S. Central Command. They were the first U.S. fatalities in months of attacks on U.S. bases by Iran-backed militias since the start of the Israel-Hamas war in October.

President Joe Biden attributed the Sunday attack to an Iran-backed militia group and said the U.S. “will hold all those responsible to account at a time and in a manner (of) our choosing.” News reports said U.S. officials were still working to conclusively identify the precise group responsible for the attack, but have assessed that one of several Iranian-backed groups is to blame.

Some congressional Republicans called for direct retaliation on Iran.

“We must respond to these repeated attacks by Iran & its proxies by striking directly against Iranian targets & its leadership. The Biden administration’s responses thus far have only invited more attacks. It is time to act swiftly and decisively for the whole world to see,” wrote Sen. Roger Wicker of Mississippi, the senior Republican on the Senate Armed Services Committee, in a post on X.

Oil futures rallied last week to their highest since November, but with gains attributed in part to production outages in the U.S. and more upbeat expectations around economic growth.

“Crude already has the wind to its back, so this will only offer further upside,” Chris Weston, head of research at Australian brokerage Pepperstone told MarketWatch in an email.

With the U.S. election later this year, “Biden needs to strike a balance between increasing aggression that potentially puts U.S. serviceman lives in danger and could potentially raise the cost of living…while also showing a defiant stance that shows his resolve against terror,” Weston said.

Oil prices have seen short-lived rallies around developments in the Middle East since the start of the Israel-Hamas war, but have failed to build in a lasting geopolitical risk premium. West Texas Intermediate crude
CL00,
+1.22%

CL.1,
+1.22%,
the U.S. benchmark, remains around $15 below its 2023 peak in the mid-$90s set in late September. Brent crude
BRN00,
+1.15%,
the global benchmark, pushed back above $80 a barrel last week.

Attacks by Iran-backed Houthi militants on Red Sea shipping have forced a rerouting of tankers and cargo ships. For crude, that’s had implications for the physical market but hasn’t interrupted the flow of crude from the Middle East.

A move by Iran aimed at closing off the Strait of Hormuz, the world’s biggest oil-transportation chokepoint, remains a top worry.

The strait is a narrow waterway that links the Persian Gulf with the Gulf of Oman and the Arabian Sea. At its narrowest point, the waterway is only 21 miles wide, and the width of the shipping lane in either direction is just two miles, separated by a two-mile buffer zone.

Energy Information Administration

Around 21 million barrels a day of crude moved through the waterway in the first half of 2023, equivalent to around a fifth of daily global consumption, according to the U.S. Energy Information Administration.

The U.S. stock market has largely looked past Middle East tensions, with the S&P 500
SPX
returning to record territory this month, while the Dow Jones Industrial Average
DJIA
has also set a series of records.

Dow futures
YM00,
-0.20%
were off 94 points, or 0.3% as Asian trading got under way, while S&P 500 futures
ES00,
-0.22%
fell 12 points, or 0.2%, and Nasdaq-100 futures
NQ00,
-0.24%
lost 0.3%.

Read: Stock-market rally faces Fed, tech earnings and jobs data in make-or-break week

Away from oil, there were no signs of a significant surge in demand for instruments that traditionally serve as havens during periods of increased geopolitical tension. Futures on U.S. Treasurys
TY00,
+0.21%
saw a modest rise of 0.2%, while the U.S. dollar
DXY
was little changed versus major rivals and gold futures
GC00,
+0.41%
ticked up 0.4%.

Escalating Middle East tensions won’t go unnoticed by traders, but probably doesn’t warrant a “solid derisking,” Weston said, particularly with investors facing a barrage of major market events in the week ahead.

For U.S.-focused investors, the week ahead features a Federal Reserve policy meeting, earnings from tech industry heavyweights and a crucial December jobs report.

The Middle East situation “won’t take us too far off the rates, growth track, but we have an eye on whether this escalates,” Weston said.

—Associated Press contributed.

Source link

January 28, 2024
Gold futures soar to record close. Here’s what’s driving the rally.

Gold futures ended Friday at their highest on record, with prices on the cusp if a so-called golden cross — signaling the potential for further upside in the precious metal.

Gold prices surged as the market reacted to the escalating tensions in the Middle East, said Bas Kooijman, CEO and asset manager of DHF Capital, in market commentary. The end of the truce in the region could “continue to fuel risk aversion and investors’ concerns.”

The escalation has “helped extend gold’s uptrend of the last two months as traders take into account changing expectations regarding monetary policy,” he said. “Traders have been betting on an end to the interest rate hiking cycle and possible rate cuts in the first half of next year, which could continue to support gold’s rise over the medium term.”

On Friday, gold for February delivery
GC00,
+0.10%

GCG24,
+0.10%
climbed by $32.50, or 1.6%, to settle at $2,089.70 an ounce on Comex. Prices based on the most-active contracts, settled at an all-time high, surpassing the Aug. 6, 2020 record-high finish of $2,069.40, according to Dow Jones Market Data.

Prices traded as high as $2,095.70 on an intraday basis on Friday, surpassing the previous record intraday high of $2,089.20 from Aug. 7, 2020.

Gold’s rally started after the release of the October consumer-price index, Edmund Moy, senior IRA strategist for U.S. Money Reserve and a former director of the U.S. Mint, told MarketWatch. The data released Nov. 14 showed that the U.S. cost of living was unchanged in October.

The market viewed that reading as saying the Fed has “tamed inflation and is probably finished raising rates and will, in all probability, start reducing rates sooner and faster than previously predicted,” said Moy.

Lower Fed rates mean lower Treasury yields, and since Treasurys are purchased in dollars, falling demand for Treasurys means falling demand for the dollar, he said, which can boost the price for dollar-denominated gold.

“While gold’s current rally is a bit overheated, both the golden cross and the proximity of an all-time high acting like a magnet for the price means that we’re likely to see further gains in the very immediate term,” Brien Lundin, editor of Gold Newsletter, told MarketWatch.

Most-active gold futures on Friday were close to reaching a bullish indicator known as a golden cross, when an asset’s short-term moving average moves above its long-term moving average. The 50-day moving average was at $1,955.44, pennies below the 200-day moving average of $1,955.51 Friday.

Gold prices around the globe had already rallied to fresh record price highs in other currencies and with the U.S. dollar gold price joining the party, “you can expect another wave of buying momentum to come into the market now,” said Peter Spina, president of GoldSeek.com.

““The end of the stealth phase move of the gold bull market is over. It will finally be acknowledged and recognized by the mainstream.””

— Peter Spina, GoldSeek.com

“I fully expect significantly higher gold prices in the months ahead,” he told MarketWatch. “The end of the stealth phase move of the gold bull market is over. It will finally be acknowledged and recognized by the mainstream.”

Read: Gold rallies toward ‘golden cross’ after defying bearish signal

Spina said it’s important to note that gold prices are “not hitting record highs, but rather the U.S. dollar is hitting record lows against superior money.”

That says the U.S. dollar’s purchasing power is “being eroded even further, more aggressively now,” he said. The ICE U.S. Dollar Index
DXY,
a measure of the currency against a basket of six major rivals, is down 0.3% for the year to date after a November pullback.

The precious metal remains supported by Federal Reserve interest-rate cut bets even after Fed Chairman Jerome Powell signaled that it was too soon for the Fed to claim victory over the inflation beast, said Lukman Otunuga, manager, market analysis at FXTM.

Read: Powell won’t endorse market expectations for quick rate cuts

The Fed’s ability to cut interest rates in March is likely to be influenced by key data including CPI and jobs data, among others,” said Otunuga. “Given how the Relative Strength Index (RSI) on the daily charts remains in overbought regions, gold could experience a technical throwback before pushing higher.”

Lundin, meanwhile, also warned that the all-time high for gold may mark a “quadruple top” unless gold is able to decisively break through a new plateau, probably somewhere over $2,100 an ounce.

Source link

December 1, 2023
Oil falls, markets hold steady as Israel launches Gaza ground offensive

Oil futures dropped Sunday night as markets saw a calm opening following Israel’s launch of a ground offensive in Gaza that drew implied threats from Iran amid market fears of a wider conflict that could disrupt global crude supplies.

Oil declined as Israel “seems to be approaching the situation with caution, which has brought a sense of relief that the worst-case scenarios may not materialize,” said Stephen Innes, managing partner at SPI Asset Management, in a note.

Innes, however, said investors should remember “this is likely to be a long, drawn-out affair with many false dawns.”

West Texas Intermediate crude for December delivery
CL00,
-1.51%

CL.1,
-1.51%

CLZ23,
-1.51%
fell 93 cents, or 1%, to $84.61 a barrel on the New York Mercantile Exchange on Sunday night. December Brent crude
BRNZ23,
-1.34%,
the global benchmark, was off $1, or 1.1%, at $89.48 a barrel on ICE Futures Europe, dipping back below the $90-a-barrel threshold.

Oil futures jumped nearly 3% on Friday, but suffered weekly declines, eroding the modest risk premium priced into the market.

Read: 4 reasons why oil prices have only seen a modest Middle East risk premium

Israeli solders had moved at least two miles deep into the Gaza Strip as of Sunday, the Wall Street Journal reported, after beginning a delayed ground incursion into the enclave aimed at routing Hamas following its Oct, 7 attack on southern Israel that left more than 1,400 dead and saw more than 200 Israelis taken hostage.

A sustained bombardment of the densely populated Gaza Strip by Israel has resulted in more than 8,000 casualties, according to Palestinian authorities. Israel has been under pressure by the U.S. and others to minimize civilian casualties.

U.S. stock-index futures ticked higher, with S&P 500 futures
ES00,
+0.32%
up 0.3%, while futures on the Dow Jones Industrial Average
YM00,
+0.20%
added 68 points, or 0.2%.

The biggest worry among investors is a conflict that sees Iran become more directly involved. Iranian crude exports have rebounded from lows seen after the Trump administration withdrew the U.S. from a nuclear accord with Tehran and reimposed sanctions in 2018.

A renewed crackdown on Iran could take up to 1 million barrels a day of crude off the market, while a spiraling conflict could see Tehran threaten transportation chokepoints, particularly the Strait of Hormuz, or otherwise attack infrastructure in the region, while driving up a fear premium.

Iranian President Ibrahim Raisi, in a post on X written in English, said Saturday that Israel had “crossed the red lines, which may force everyone to take action.”

U.S. warplanes on Friday struck two locations in eastern Syria, which the Pentagon said were linked to Iran’s Revolutionary Guard Corps, following a string of attacks on U.S. air bases in the region that started last week.

U.S. stocks are poised to book another round of monthly losses as October draws to an end, though pressure has been attributed largely to a surge in Treasury yields. The S&P 500
SPX
last week joined the Nasdaq Composite
COMP
in correction territory, while the Dow
DJIA
is down more than 2% year to date.

The rise in yields, which move opposite price, has come as U.S. government debt has failed to attract its usual haven-related buying amid rising Mideast tensions.

See: Israel-Hamas war sees investors shun most traditional havens, except for these two

Source link

October 29, 2023
Dow Jones ekes out gain Friday, stocks mostly advance for the week as Israel-Gaza war escalates

U.S. stocks closed mostly lower Friday, but the Dow Jones and S&P 500 posted weekly gains, as the Israel-Gaza war appeared to escalate heading into the weekend. The Dow Jones Industries
DJIA,
+0.12%
rose about 39 points, or 0.1%, on Friday, ending near 33,670, according to preliminary FactSet data. The S&P 500 index
SPX,
-0.50%
fell 0.5% and the Nasdaq Composite Index
COMP,
-1.23%
closed 1.2% lower. The S&P 500’s energy segment outperformed Friday, gaining 2.3%, as U.S. benchmark crude surged nearly 6% after Israel ordered more than a million people in Gaza to evacuate to the south. Treasury yields fell, with the 10-year Treasury
TMUBMUSD10Y,
4.626%
rate retreating to 4.628% Friday, snapping a 5-week yield climb, according to Dow Jones Market Data. Bond prices and yields move in the opposite direction. Investors bought other haven assets too, including gold
GC00,
+0.23%
and the U.S. dollar
DXY,
+0.07%.
Wall Street’s “fear gauge”
VIX,
+15.76%
also touched its highest level in more than a week. Even so, the Dow Jones booked at 0.8% weekly gain, the S&P 500 advanced 0.5% and the Nasdaq fell 0.2%.

Source link

October 13, 2023
Stock market likely to see 12% retreat ahead of recession, says trader who called ’87 crash

“‘The stock market, typically, right before recession declines about 12%.That’s probably going to happen at some point from some level.’”

— Paul Tudor Jones, founder and CIO, Tudor Investment Corp.

That’s famed hedge-fund manager Paul Tudor Jones in an interview with CNBC Tuesday morning, explaining why he’s not enthusiastic about U.S. stocks and other risky assets as he awaits a recession induced by the Federal Reserve’s aggressive monetary tightening.

Jones said it’s difficult to be positive on equities amid what he described as “the most threatening and challenging geopolitical environment that I’ve ever seen,” which is occurring “at the same time the United States is at its weakest fiscal position since World War II. It’s a really difficult time.”

A 2023 rally in U.S. stocks has stalled, with the S&P 500 index
SPX
pulling back 5.5% from a 2023 high set on July 31, leaving the large-cap benchmark up 12.9% for the year to date through Monday’s close. The Dow Jones Industrial Average
DJIA
is up just 1.4% so far this year.

Jones is widely credited with predicting, and profiting, from the stock-market crash on Oct. 19, 1987, which saw the Dow lose nearly 23% of its value, marking the largest one-day percentage decline for the blue-chip benchmark in its history.

So what does Jones like?

“I would love gold and bitcoin, together,” he said.

“I think [bitcoin and gold] probably take on a larger percentage of your portfolio than historically they would because we’re going to go through a challenging political time here in the United States and…we’ve obviously got a geopolitical situation” in Israel and Ukraine, Jones said.

Bitcoin
BTCUSD,
-0.72%
was off 0.8% near $27,380 Tuesday morning and has rallied around 65% so far in 2023. Gold
GC00,
+0.59%
has retreated from a high above $2,000 an ounce earlier this year, slumping below $1,850 last week as Treasury yields marched higher and the dollar strengthened.

A pullback in U.S. bond yields has seen gold bounce 1.4% this week, trading recently near $1,871 an ounce.

Large, speculative short positions in gold will provide fuel for a rally as a recession takes hold, the investor said.

“In a recession, the market is typically really long assets like bitcoin and gold,” he said. “So there’s probably $40 billion worth of buying that has to come into gold at some point between now and if that recession actually occurs.

“So yeah, I like bitcoin and I like gold right here,” Jones said.

Source link

October 10, 2023
U.S. stocks end higher despite climbing oil prices, Israel-Gaza war

U.S. stocks booked back-to-back gains on Monday, despite rising oil prices and a deadly weekend assault on Israeli by Hamas that left hundreds dead. The Dow Jones Industrial Average
DJIA,
+0.59%
rose about 197 points, or 0.6%, ending near 33,604, shaking off earlier weakness, while the S&P 500 index
SPX,
+0.63%
advanced 0.6% and the Nasdaq Composite Index
COMP,
+0.39%
gained 0.4%, according to preliminary FactSet data. U.S. benchmark oil prices
CL00,
+4.34%
rose 4.3% to $86.38 a barrel as traders gauged potential implications of the Israel-Gaza war on crude supplies from the Middle East. Investors also flocked to haven assets, including gold
GC00,
+1.62%
and the U.S. dollar
DXY,
+0.03%,
while cash trading in the $25 trillion Treasury market was closed for the Columbus Day and Indigenous Peoples Day holiday. Israel on Monday seal off the Gaza Strip from food, fuel and other supplies as the conflict between Israel and Hamas intensified, according to the Associated Press.

Source link

October 9, 2023
‘Fear trade’: What Israel-Hamas war means for oil prices and financial markets

Oil traders on Sunday said crude prices were likely to remain supported in the near term, as investors assessed the fallout from the surprise attack by Hamas on Israel and focused on the role played by Iran and the potential impact on that country’s petroleum exports.

The conflict may also hold market-moving consequences for talks aimed at normalizing relations between Saudi Arabia and Israel.

“While in the short term there is no impact directly on supply, it’s obvious how things play out over the next 24 to 48 hours could change that,” Phil Flynn, an analyst at Price Futures Group in Chicago, told MarketWatch.

Brent crude futures
BRN00,
+4.17%,
the global benchmark, and West Texas Intermediate oil futures
CL00,
+4.35%

CL.1,
+4.35%
jumped more than 3% when the market opened Sunday night. U.S. stock-index futures
ES00,
-0.66%
traded lower, while traditional havens, including gold
GC00,
+0.98%
and the U.S. dollar
DXY
rose.

Movements in oil prices, meanwhile, will also serve as a gauge for broader market worries around the conflict, analysts said.

See: Israeli stocks slump in first day of trade since Gaza attack

Hamas, the Iran-backed, Palestinian militant group that controls the Gaza Strip, staged a sweeping attack on southern Israel early Saturday. News reports put Israeli deaths at more than 700. The Gaza Health Ministry said 413 people, including 78 children and 41 women, were killed in the territory as Israel retaliated, according to the Associated Press. Injuries in Israel and Gaza were both said to be around 2,000.

Israeli troops on Sunday were engaged in fierce fighting in an effort to retake territory in southern Israel as Hamas launched further barrages of missiles. Israeli citizens and soldiers were captured and are being held hostage in Gaza, according to the Israeli military.

Read: Israel declares war, approves ‘significant’ steps to retaliate after surprise attack by Hamas

The Wall Street Journal reported that Iranian security officials helped Hamas plan the attack. U.S. officials said they haven’t seen evidence of Iran’s involvement, the report said.

“Iran remains a very big wild card and we will be watching how strongly [Israeli] Prime Minister Netanyahu blames Tehran for facilitating these attacks by providing Hamas with weapons and logistical support,” said Helima Croft, head of global commodity strategy at RBC Capital Markets, in a Sunday morning note.

Iranian crude exports have risen in recent years, indicating the Biden administration has adopted a soft approach to sanctions enforcement, Croft said. Some analysts have put Iranian crude production at more than 3 million barrels a day and exports above 2 million barrels a day — the highest levels since the Trump administration pulled the U.S. out of the Iranian nuclear accord in 2018, according to the Wall Street Journal. Sales fell to around 400,000 barrels a day in 2020 as the U.S. reimposed sanctions.

RBC Capital Markets

Hedge-fund manager Pierre Andurand, one of the world’s best energy traders, said in a social-media post that a large price spike for oil isn’t likely in coming days, but emphasized the market focus on Iran.

“Now, over the last six months we have seen a very large increase in Iranian supply due to weak enforcement of sanctions. As Iran is also behind Hamas’ attacks on Israel, there is a good probability that the U.S. administration will start enforcing those sanctions on Iranian oil exports more tightly,” he wrote. “That would further tighten the oil market. Also the probability that this will lead to direct conflict with Iran is not zero.”

Meanwhile, the Wall Street Journal late Friday reported that Saudi Arabia had told the White House it would be willing to boost oil production next year if crude prices remained high, as part of an effort aimed at winning goodwill in Congress for a deal that would see the kingdom recognize Israel and in return get a defense agreement with the U.S.

A Saudi production cut of 1 million barrels a day that was implemented in July and recently extended through the end of the year has been given much of the credit for a rally that took global benchmark Brent crude within a few dollars of the $100-a-barrel threshold before retreating this past week. The U.S. benchmark last week briefly topped $95 a barrel for the first time in 13 months.

In a statement, Saudi Arabia’s foreign ministry called on both sides to halt the escalation and exercise restraint, but also recalled its “repeated warnings of the dangers of the explosion of the situation as a result of the continued occupation, the deprivation of the Palestinian people of their legitimate rights, and the repetition of systematic provocations against its sanctities.”

With the Israeli government vowing an unprecedented response, “it is hard to envision how Saudi normalization talks can run on a parallel track to a ferocious military counteroffensive,” said RBC’s Croft.

Beyond oil, much will depend on the potential for the conflict to widen.

Stocks have stumbled, retreating from 2023 highs set in late July, as yields on U.S. Treasurys have jumped. The yield on the 30-year Treasury bond
BX:TMUBMUSD30Y
rose 23.2 basis points last week to end Friday at 4.941%, its highest since Sept. 20, 2007. The 10-year Treasury note yield
BX:TMUBMUSD10Y
topped 4.80% on Oct. 3, its highest since Aug. 8, 2007, and ended the week at 4.783%. Yields and debt prices move opposite each other.

The U.S. bond market will be closed Monday for the Columbus Day and Indigenous People’s Day holiday, while U.S. stock markets will be open.

The S&P 500 index
SPX
rose 0.5% last week, breaking a streak of four straight weekly declines, while the Dow Jones Industrial Average
DJIA
fell 0.3% and the Nasdaq Composite
COMP
gained 1.6%.

“I think there will be a negative reaction. However, I don’t see a meltdown,” Peter Cardillo, chief market economist at Spartan Capital Securities, told MarketWatch.

Traditional haven plays, including gold, the dollar and U.S. Treasurys may see a strong move upward, with price gains for Treasurys pulling yields down.

“Geopolitical crises in the Middle East have usually caused oil prices to rise and stock prices to fall,” said economist Ed Yardeni, president of Yardeni Research Inc., in a note. “More often than not, they’ve also tended to be buying opportunities in the stock market.”

The broader market reaction will depend on whether the crisis turns out to be a short-term flare-up or “something much bigger, like a war between Israel and Iran,” he said. The latter is unlikely, but tensions between the two are likely to escalate.

“The price of oil may be a good way to assess the likelihood of a broader conflict,” he said.

Source link

October 8, 2023
U.S. stock futures little changed after short-lived Wagner mutiny in Russia; oil futures rise

U.S. stock-index futures opened near unchanged and attempted to edge higher Sunday night, as investors reacted to chaotic weekend events that saw a short-lived rebellion that pitted the mercenary Wagner Group against the Russian military leadership. After advancing to within around two hours of Moscow, the mutiny was abruptly halted, with Wagner Group leader Yevgeny Prigozhin reportedly agreeing to depart for Belarus. Analysts said the events, while a potential plus for Ukraine 16 months after Russia’s invasion, appeared to weaken Russian President Vladimir Putin’s hold on the country, That raises concerns about the potential for further internal strife, a recipe for uncertainty that could feed volatility in financial markets. Futures on the Dow Jones Industrial Average
YM00,
+0.09%
rose 20 points, while S&P 500
ES00,
+0.10%
futures ticked up 2.75 points and Nasdaq-100 futures
NQ00,
+0.16%
edged up 11.25 points shortly after the start of electronic trading. Moves for all three contracts amounted to less than 0.1%. Stocks fell last week, with the S&P 500
SPX,
-0.77%
snappng a streak of five straight weekly gains. Oil futures rose, with West Texas Intermediate crude for August delivery
CL.1,
+1.26%

CL00,
+1.26%,
the U.S. benchmark, up 48 cents, or 0.7%, at $69.64 a barrel on the New York Mercantile Exchange.

Source link

June 25, 2023

Could bitcoin and gold be haven buys as debt-ceiling fears mount? Here’s what recent trading patterns suggest.

Welcome back to Distributed Ledger. This is Frances Yue, reporter at MarketWatch.

Fears are brewing in financial markets that the U.S. lawmakers won’t be able to reach an agreement to raise the country’s debt limit by X date, or the date that the U.S. government is unable to meet its debt obligations.

Analysts at JPMorgan Chase & Co.
JPM,
+0.94%
on Wednesday said they see the odds of debt ceiling negotiators failing to reach a deal by early June at “around 25% and rising.”

Concerns around a technical default of U.S. government debt have contributed to volatility across financial markets, sending Treasury bills maturing in the first eight days of June above 6%. Yields on such bills briefly topped 7% on Thursday.

As investors search for havens from such tumult, gold and bitcoin are often cited as potential refuges.

Still, gold futures have been retreating since the most-active contract reached its second-highest settlement on record on May 4.

Bitcoin, which rallied almost 60% so far this year, have also posted lackluster performance for the past few weeks, down 5.8% over the past month.

Are gold and bitcoin effective hedges against a technical default of U.S. government debt? Why are we not seeing a rally as the X date approaches? I caught up with several analysts to ask their views.

Find me on Twitter at @FrancesYue_ to share any thoughts on crypto, gold, or this newsletter.

Is gold the haven?

FactSet

“Generally speaking, gold thrives when there are periods of uncertainty,” said Rhona O’Connell, analyst at StoneX Group. “But if you take that uncertainty too far, then we get to stages where people are sitting on their hands and not really doing very much and that’s what’s happened here.”

Gold futures for June delivery
GC00,
+0.09%
GCM23,
+0.09%
on Thursday declined by $20.90, or 1.1%, to $1,943.70 per ounce on Comex, with prices for the most-active contract posting their lowest finish since March 21, according to FactSet data.

As gold futures price retreat to below $2,000, “I suppose it’s arguable that the bulls might be a bit disappointed,” said O’Connell. But there’s “bound to be a retreat” with gold’s price premium building over the past few weeks, according to O’Connell.

“The fact that gold hasn’t managed to climb any higher given the potential seriousness of the economic consequences should no agreement be reached before the June deadline reflects a prevailing view that ultimately the markets believe some middle ground can be found in time,” Rupert Rowling, analyst at Kinesis Money, wrote in a recent note.

Still, gold’s price stays elevated at levels that were not seen many times in history.

What about bitcoin?

Considering the rally bitcoin had so far this year, it’s “not crazy to see a little bit of pullback, according to Steven Lubka, a managing director at Swan Bitcoin.

Bitcoin gained almost 60% so far this year while still down over 60% from its all-time high in 2021.

Still, if the U.S. ends up defaulting on its debt, and “everyone freaks out, bitcoin could do very well in that scenario,” Lubka said, citing bitcoin’s limited supply, decentralized and non-sovereign properties.

However, not everyone agrees. There is not enough evidence to support the claim that bitcoin could serve as a hedge against the debt ceiling tumult, according to Lapo Guadagnuolo, director at S&P Global Ratings.

“We can’t make that argument because we don’t see that in the data,” Guadagnuolo said.

A rising dollar

The recent strength of the U.S. dollar have also weighed on bitcoin and gold.

On Thursday, the ICE U.S. Dollar Index
DXY,
-0.02%,
which measures the currency’s strength against a basket of six major rivals, climbed above 104 to its highest level since March 17, according to Dow Jones market data.

Although a technical default of U.S. government debt could hurt the dollar’s reputation in the long term, it might have little bearing on the immediate reaction, which would resemble a knee-jerk move higher, as my colleague Joseph Adinolfi elaborated here.

As gold is mostly denominated in U.S. dollar and bitcoin’s main trading pairs are dollar-denominated stablecoins, a strong dollar could weigh on both assets.

Still, the debt ceiling debacle in the long term could strengthen the narrative around bitcoin and gold, as “the governance of the worlds fiat system comes into question,” according to Greg Magadini, director of derivatives at Amberdata.

Crypto in a snap

Bitcoin lost 2.8% in the past week and was trading at around $26,360 on Thursday, according to CoinDesk data. Ether declined 0.9% in the same period to around $1,805

Biggest Gainers	Price	%7-day return
marumaruNFT	$0.26	201%
Render	$2.70	19.5%
Kava	$1.10	14.3%
TRON	$0.08	10.6%
Huobi	$3.12	8.4%
		Source: CoinGecko

Biggest Decliners	Price	%7-day return
GMX	$52.68	-14.6%
Sui	$0.99	-13.3%
Fantom	$0.33	-10.1%
Stacks	$0.59	-9.7%
Optimism	$1.62	-9.7%
		Source: CoinGecko

Must-reads

Crypto payments to Chinese fentanyl suppliers soared 450% over past year: study (MarketWatch)
Crypto Startup Co-Founded by Sam Altman Raises $115 Million (Bloomberg)

Source link

May 26, 2023

The commodity supercycle is still young, these strategists say. Here’s why.

Be careful what you wish for. U.S. job openings dropped below 10 million, a symbolic sign that the Federal Reserve’s efforts to combat inflation by sapping labor-market demand was working — and U.S. stocks promptly fell. Perhaps the bigger issue is that investors were not willing to push stocks out of the 3,800 to 4,200 range the S&P 500
SPX,
-0.48%
has been trading in for months.

It might not be the most obvious time to be discussing a commodity supercycle, with recession talk growing, but then that’s what makes this call more interesting. Strategists at Wells Fargo investment Institute argue it’s year three of a commodity supercycle, which they say has plenty more room to run.

John LaForge, head of real asset strategy, and Mason Mendez, investment strategy analyst, say commodities are like black holes, in that escaping the gravity of a supercycle is difficult for any individual commodity. They point to this chart, looking at commodity momentum since 1800, plotted in 10-year moving averages, which shows that food, energy and the commodity complex as a whole tend to follow each other around.

Right now nearly all the signs, both technical and fundamental, point to a commodity bull market, they say. The early signs are mostly shifting prices and technical indicators, and the latter signs are more fundamental in nature, like restrained supplies. “The bottom line is that the key early technical indicators are confirming to us that a new supercycle likely began in 2020.”

The analysts went further into depth on what they call washed-out sentiment. They say the process goes something like this: near the end of a commodity bull supercycle, prices go so high that oversupplies become rampant and need to be worked off, which results in investment stopping to flow into production. They say that in both corn
C00,
+0.80%
and gold
GC00,
-0.17%
— not commodities with much in common — supply growth rates have turned negative in recent years. Both showed similar conditions at the start of the last supercycle, in 1999.

They advise using commodities as portfolio diversifiers, which certainly would have helped last year, when both stocks and bonds fell but the Bloomberg commodity index rose nearly 16%. They highlight commodity prices typically move differently than stocks or bonds over the long run. And they say that supercycles have historically lasted a decade or longer, and the shortest commodity bull market on record was nine years.

One caveat: the speed of technology advances. Sometimes technology can help fuel demand, but conversely, to the extent technology can make commodities easier to extract, it can also buoy supplies. The obvious example here, not pointed out in the note, is the shale-oil revolution. There’s an interesting article in The Economist (subscription required), how copper has yet to be the beneficiary of a technology boost.

The market

U.S. stock futures
ES00,
-0.36%

NQ00,
-1.08%
edged lower. Oil prices
CL.1,
-0.62%
fell but held over $80 per barrel. The yield on the 10-year Treasury
TMUBMUSD10Y,
3.295%
turned lower after the latest jobs data.

For more market updates plus actionable trade ideas for stocks, options and crypto, subscribe to MarketDiem by Investor’s Business Daily.

The buzz

ADP reported a slowdown in private-payrolls growth to 145,000 jobs in March, as well as a slowing pace of pay growth. Shortly after the open comes the the Institute for Supply Management’s services index. Cleveland Fed President Loretta Mester said interest rates would need to be increased “somewhat” from here.

Overseas, New Zealand’s central bank made a larger-than-expected 50 basis point rate hike, while a joint forecast of Germany’s leading institutes upgraded its view on the eurozone’s largest economy, now expecting a 0.3% advance.

Walmart
WMT,
+1.33%
forecast earnings in a range of $5.90 to $6.05 per share for its fiscal year, below the FactSet-compiled analyst estimate of $6.11.

Johnson & Johnson
JNJ,
+3.44%
proposed to pay up to $8.9 billion over 25 years to settle claims connected with cosmetic-talc litigation.

Alphabet’s
GOOGL,
-0.63%
Google says its chips are faster and more power efficient than comparable chips from Nvidia
NVDA,
-3.41%.

Western Alliance Bancorp
WAL,
-16.47%
shares fell in premarket trade after the regional lender detailed the latest losses in its portfolio of loans and securities.

Brandon Johnson was elected mayor of Chicago, the country’s third-largest city. Former President Donald Trump was defiant in a speech to supporters after his indictment.

Best of the web

A popular Fed program is draining funds from the banking system.

Instant videos could be the next leap in artificial-intelligence technology.

OpenAI, the tech company backed by Microsoft
MSFT,
-1.14%,
is facing what is believed to be its first defamation lawsuit over a claim by its ChatGPT chatbot that an Australian mayor served time in prison for bribery.

Top tickers

These were the most active stock-market tickers as of 6 a.m. Eastern.

Ticker	Security name
TSLA, -3.01%	Tesla
AMC, +2.04%	AMC Entertainment
BBBY, -5.09%	Bed Bath & Beyond
GME, -3.44%	GameStop
BUD, +0.34%	Anheuser-Busch InBev
APE, -0.89%	AMC Entertainment preferreds
MULN, -4.85%	Mullen Automotive
NIO, -4.18%	Nio
AAPL, -1.13%	Apple
AI, -14.35%	C3.ai

The chart

Sure, higher gasoline prices naturally drive demand for electric vehicles. But at what point do high electricity prices make it more cost-effective to buy old gas guzzlers? This chart from Barclays breaks it down — roughly, 10 cents per kilowatt hour equates to $1 per gallon. Right now it’s cheaper to fill a car at the pump than recharge at peak hours.

Random reads

Easter means the annual production of a 15,000-egg omelette.

This man was successful in his marriage proposal, at the cost of a one-year ban from Dodger Stadium.

Need to Know starts early and is updated until the opening bell, but sign up here to get it delivered once to your email box. The emailed version will be sent out at about 7:30 a.m. Eastern.

Listen to the Best New Ideas in Money podcast with MarketWatch reporter Charles Passy and economist Stephanie Kelton.

Source link

April 5, 2023

Dow ends about 200 points lower as economy shows more signs of sputtering

Major U.S. stock indexes fell on Tuesday, with the Dow and S&P 500 both snapping a 4-session win streak, as economic data showed more signs of a sputtering U.S. economy. The Dow Jones Industrial Average
DJIA,
-0.59%
fell about 198 points, or 0.6%, ending near 33,403, while the S&P 500 index
SPX,
-0.58%
shed 0.6% and the Nasdaq Composite Index
COMP,
-0.52%
fell 0.5%, according to preliminary FactSet data. Investors were eyeing less robust economic data out Tuesday. The number of U.S. job openings in February fell to a 21-month low, while orders for manufactured goods fell for the third time in the past four months. Gold prices
GC00,
-0.04%
were flirting with a return to record territory, trading above $2,000 an ounce. The 2-year Treasury rate
TMUBMUSD02Y,
3.854%
stayed below 4% at 3.84%.

Source link

April 4, 2023
GC00 | Gold Continuous Contract Overview | MarketWatch

This is a Real-time headline. These are breaking news, delivered the minute it happens, delivered ticker-tape style. Visit www.marketwatch.com or the quote page for more information about this breaking news.

Source link

November 23, 2022
Dow futures jump 700 points, 10-year Treasury yield drops below 4% on softer-than-expected CPI

U.S. stock futures surged to the upside on Thursday after softer-than-expected consumer price data. Up just 83 points ahead of the data, Dow Jones Industrial Average futures
YM00,
+2.70%
were up 900 points, or 2.7%, to 33,434. S&P 500 futures
ES00,
+3.65%
surged 118 points, or 3.1%, to 3,873.25, with those futures up just 11 points ahead of the data. Nasdaq-100 futures
NQ00,
+4.70%
surged 390.50 points, or 3.6%, to 11,215. Bond yields were tumbling, with that of the 10-year note
TMUBMUSD10Y,
3.907%
plunging 21 basis points to 3.939% and that of the two-year
TMUBMUSD02Y,
4.365%
off 23 basis points to 4,399%. The ICE Dollar Index
DXY,
-1.44%
slid 0.8%, while gold
GC00,
+1.84%
surged $21 to $1,735.90 an ounce. The CPI report showed headline October inflation cooling more than expected to 7.7%, which has encouraged investors hoping the Federal Reserve can begin easing up on interest rate hikes sooner than later.

Source link

November 10, 2022