By Rae Wee
Gold Prices Rise Amidst Market Uncertainty
SINGAPORE (Reuters) – Gold prices rose on Monday, attracting some safe haven bids, while oil prices were choppy after Iran’s retaliatory attack on Israel over the weekend stoked fears of a wider regional conflict and kept traders on edge for what comes next.
U.S. stock futures ticked higher after major indexes ended sharply lower on Friday as results from major U.S. banks failed to impress. [.N]
Fears of Escalating Tensions in the Middle East
Iran had, late on Saturday, launched explosive drones and missiles at Israel in retaliation for a suspected Israeli attack on its consulate in Syria on April 1, marking its first direct attack on Israeli territory. The threat of open warfare erupting between the arch Middle East foes and dragging in the United States has left the region on tenterhooks.
U.S. President Joe Biden warned Prime Minister Benjamin Netanyahu the U.S. will not take part in a counter-offensive against Iran. Israel said “the campaign is not over yet.”
Market Response to Geopolitical Tensions
Global markets struggled for direction early in Asia on Monday after the weekend developments in the Middle East. Oil prices edged broadly lower in volatile trade, gold jumped, and the dollar held broadly steady.
Brent crude futures eased 0.25% to $90.21 per barrel, while U.S. West Texas Intermediate crude futures fell 0.35% to $85.36 a barrel. Gold rose 0.7% to $2,359.92 an ounce, after having scaled a record of $2,431.29 on Friday.
“Everything seems pretty well contained,” said Chris Weston, head of research at Pepperstone. “From a very simplistic perspective, the actions from Iran haven’t really surprised anyone, they’re very much in line with what we were pricing late last week.”
What may be causing a slight move up in the gold price is the idea that we could see another counter response from Israel, and if that was to happen, that could cause risk assets to move down.
Market Expectations and U.S. Economic Data
Elsewhere, U.S. 10-year Treasury futures edged slightly lower with an implied yield of 4.53%, while the dollar held near a 34-year high against the yen at 153.27.
The euro and sterling were similarly pinned near five-month lows. A continued run of resilient U.S. economic data, particularly last week’s hotter-than-expected inflation report, has prompted investors to reset their expectations of the pace and scale of rate cuts from the Federal Reserve this year as inflation proves stickier than previously thought.
Futures now point to about 50 basis points worth of easing expected this year, a huge pullback from the 160 bps that was priced in at the start of the year.
Update on U.S. Interest Rates
The U.S. CPI has been stronger than expected over the first three months of 2024. We expect that it will take a string of inflation prints of 0.2%/month or lower to give the Fed confidence that inflation can stay sustainably lower and that interest rates do not need to remain at a restrictive level.
A slew of Fed policymakers are due to speak this week, including Chair Jerome Powell, who could give further clarity on the future path of U.S. interest rates.
Market Volatility and Bitcoin
Bitcoin was last more than 2% lower at $65,547, after falling below $62,000 on Sunday. The world’s largest cryptocurrency scaled a record high last month thanks to flows into new spot bitcoin exchange-traded funds and expectations of imminent Fed rate cuts.
(Editing by Lincoln Feast.)
Additional Insight: Given the current geopolitical tensions in the Middle East, uncertainty in the market is likely to persist, leading to potential fluctuations in various asset classes. Investors should closely monitor developments and be prepared for increased volatility in the coming days.
