Gold steadies near 7-month peak on Fed rate cut bets

Gold steadied near its highest in about seven months on Wednesday as expectations that the U.S. Federal Reserve may cut interest rates by the first half of next year boosted the outlook for zero-yield precious metal.

Spot gold was up 0.2% to $2,044.18 per ounce, after hitting its highest since May 5.

https://www.cnbc.com/2023/11/29/gold-near-7-month-peak-as-dollar-yields-weaken-on-fed-rate-cut-bets.html

U.S. gold futures rose 0.3% $2,045.80.

“Our belief is that there could be some pullback in gold next week, but in general, we believe this trend of sideways to higher momentum will continue in the near future,” said David Meger, director of metals trading at High Ridge Futures.

“The current belief is that the Fed is done hiking rates and rate cuts will come by 2024, if data supports or undermines that argument, we will see the gold market trade accordingly.”

Lower rates boost demand for non-yielding gold.

Traders are now pricing in a more than a 70% chance of rates easing in May, up from 50% on Tuesday, CME’s FedWatch Tool showed.

Fed Governor Christopher Waller on Tuesday flagged a possible rate cut in the months ahead.

The dollar index (.DXY) rose 0.2% for the day but was poised to mark its worst monthly performance in a year. A weaker dollar makes gold cheaper for overseas buyers.

Also helping gold, benchmark 10-year Treasury yields fell to an over two-month low.

Investors will monitor the U.S. Personal Consumption Expenditures (PCE) data on Thursday, the Fed’s preferred inflation indicator, for further insights into the rate outlook.

Beyond near-term economic, interest rate, and geopolitical concerns, U.S. gold investors’ focus is likely to shift towards the state of financial markets, said Ryan McIntyre, senior portfolio manager at Sprott Asset Management.

Silver rose 0.6% to $25.14 per ounce and platinum lost 0.8% to $932.78. Palladium dropped 2.9% to $1,023.84 per ounce.

South Korea stocks rise as central bank holds rates, China manufacturing contracts further

South Korea stock markets were up on Thursday after the country’s central bank held lending rates for the seventh straight time, while China and Hong Kong equities fell as manufacturing activity in China contracted further.

South Korea’s central bank has held its benchmark policy rate at 3.5%, saying that although inflation in the country has been elevated, its is still projected to slow down.

Asia-Pacific markets were mixed as investors assessed economic data from the region.

China’s factory activity shrank for a second straight month in November, while non-manufacturing activity hit yet another new low for the year.

South Korea’s industrial output numbers surprised the market, registering a 3.5% fall compared to expectations of a 0.5% rise from economists polled by Reuters. The country will also see its central bank announce its rate decision today.

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China’s CSI 300 index dipped marginally, while Hong Kong’s Hang Seng index also fell 0.14%.

Japan’s Nikkei 225 reversed losses to rise 0.33%, with the Topix also up by 0.30%.

South Korea’s Kospi rose 0.12%, while the small-cap Kosdaq gained 0.52% after the monetary policy decision.

In Australia, the S&P/ASX 200 climbed 0.74% and closed at 7,087.3, marking three straight days of gains.

U.S. dollar gains; shrugging off inflation, jobless claims as euro slips

The dollar gained on Thursday as investors took profits on bets it would weaken further and it shrugged off data showing signs of a slowing U.S. economy that suggested the Federal Reserve may be done raising interest rates.

Euro weakness after a soft euro zone inflation report also partly helped boost the greenback, analysts said.

The dollar index, which measures its value against six major currencies, rose 0.5% to 103.38 and was on track to post its best daily gain in more than a month. On a monthly basis, the dollar has posted losses of 3%, on pace for its worst monthly showing in a year.

Some analysts said the dollar may have benefited from month-end demand, as investors squared up positions for November, a period that featured a sharp sell-off in the U.S. currency with the market pricing in rate cuts next year.

Others, however, expected a dollar sell-off at month-end, given how equities posted sharp gains for November. There were sell dollar signals at some of the biggest U.S. banks, analysts said.

“We were expecting dollar selling at month-end given how much U.S. equities rallied. That typically means foreign asset managers would have sold dollars forward,” said Vassili Serebriakov, FX strategist, at UBS in New York.

“But it’s possible that some of the selling happened earlier in the month. So maybe there’s less dollar selling at month end.”

Dollar gains persisted despite reports that showed U.S. inflation continued to moderate in October and jobless claims rose in the latest week suggesting a slowing labor market.

Inflation as measured by the personal consumption expenditures (PCE) price index was unchanged in October after climbing 0.4% in September. In the 12 months through October, the PCE price index increased 3.0%. That was the smallest year-on-year gain since March 2021 and followed a 3.4% advance in September.

Meanwhile, initial claims for state unemployment benefits increased 7,000 to a seasonally-adjusted 218,000 for the week ended Nov. 25. Economists had forecast 226,000 claims.

In other currencies, the euro fell after euro zone inflation eased by more than forecast this month, fuelling bets of early European Central Bank rate cuts.

Consumer price growth in the 20 countries that share the euro currency dropped to 2.4% in November from 2.9% in October, well below expectations for a fall to 2.7%.

The euro last changed hands at $1.0897 against the dollar, down 0.7%. It is still poised to show a monthly gain of 3%, the largest since November 2022.

Against the yen, the dollar rose 0.6% to 148.12 yen. For November, the greenback was down 2.4%, on pace for its largest monthly fall since December last year.

“The broader picture is that the dollar has weakened quite substantially in November. It’s still probably a two-way risk from here in terms of the Fed December meeting,” Serebriakov of UBS said.

“The U.S. data hasn’t slowed significantly. Inflation has but activity data remains relatively resilient,” he added.

Oil rises more than 1% with all eyes on OPEC+ meeting outcome

Oil prices were higher on Thursday as investors eagerly awaited the outcome of an anticipated OPEC+ meeting that could lead to deeper supply cuts in 2024.

Brent crude futures for January climbed 90 cents, or 1.08%, to $84 a barrel, on subdued volumes given the contract is meant to expire today. Meanwhile, U.S. West Texas Intermediate crude futures crept up 87 cents, 1.12%, at $78.73 a barrel.

The OPEC+ group, which includes the Organization of Petroleum Exporting Countries and allies including Russia, is expected to hold virtual meetings on Thursday to discuss additional production cuts that could range between 1 million to 2 million barrels per day (bpd) in early 2024.

The meeting, being held on the same day as global leaders gather in Dubai for the U.N. climate conference, was originally scheduled for last week but was deferred due to disagreements over output quotas for African producers.

Implementing additional cuts will send prices higher in the immediate future but long-term, their impact will be “dubious”, said Tamas Varga of oil broker PVM.

Compliance will be an issue, and the global oil balance is probably much less tight than OPEC estimates, he said, citing the latest commercial inventory data out of the United States and the stubbornly high interest rates in many major economies that are likely to dampen oil demand.

The U.S. Energy Information Administration on Wednesday reported a surprise build in U.S. crude oil stocks last week, with inventories up by 1.6 million barrels, compared with analysts’ expectations in a Reuters poll for a 933,000-barrel drop.

But oil prices on Wednesday shrugged off the data with all eyes on the OPEC+ meeting, analysts said.

Adding to the pessimism on the demand side are China’s persisting economic troubles, embodied in the latest factory data published on Thursday, which showed contraction for second straight month in November.

European stocks close out best month since January as inflation eases

European markets closed higher Thursday, rounding off a bumper month as investors assessed euro zone inflation data that suggests pressures from rising prices are easing.

The regional Stoxx 600 closed up 0.5% at a 10-week high.

It takes gains for the index to 5.87% for November, according to LSEG data, its best performance since January and a sharp reversal from three consecutive monthly losses.

EUROPEAN MARKETS

TICKER COMPANY PRICE CHANGE %CHANGE 
.FTSEFTSE 1007554.4740.750.54
.GDAXIDAX16759.2200
.FCHICAC 40 Index7526.5500
.FTMIBFTSE MIB30403.9282.130.94
.IBEXIBEX 35 Idx10223.400

U.S. stocks have also seen a turnaround in November, typically a strong month for equity markets, and are heading for their best month of the year.

Market sentiment has been boosted by expectations of interest rate cuts in major economies next year, as inflation continues to fall. Global stocks are set to mark their best month for three years, Reuters reported, citing MSCI’s world stocks index.

Euro zone inflation came in at 2.4% on an annual basis in November, according to preliminary Eurostat data, lower than the 2.7% expected by analysts surveyed by Reuters and a decline from October’s reading of 2.9%.

In the U.S., the personal consumption expenditures price index — the Federal Reserve’s favored gauge — was in line with expectations at 0.2% for the month and 3.5% year-on-year.

Bonds have also marked a turnaround by rallying in November. Yields, which move inversely to prices, have tumbled in the U.S. and Europe amid perceptions of increased dovishness among central bankers and signs of a “soft landing” for the U.S. and global economy.

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Oil and gas stocks were last up by around 1%, as investors await announcements from the OPEC meeting on Thursday. Production cuts are expected at the policy meeting, which is being attended by members of the Organization of Petroleum Exporting Countries and its allies, including Russia.

THU, NOV 30 20239:36 AM EST

U.S. stocks open slightly higher

Here’s how the major indexes opened on Thursday:

— Pia Singh

THU, NOV 30 20239:16 AM EST

Fed’s John Williams sees interest rates high ‘for quite some time’

New York Federal Reserve President John Williams said Thursday he expects the central bank will have to hold interest rates at a “restrictive” level to get inflation back to target.

“I expect it will be appropriate to maintain a restrictive stance for quite some time to fully restore balance and to bring inflation back to our 2 percent longer-run goal on a sustained basis,” Williams said in prepared remarks.

However, he also said he thinks the Fed is “at, or near, the peak level” of where it needs to set the fed funds rate, the central bank’s benchmark for short-term lending. Williams added that he expects inflation to recede to about 2.25% in 2024 before it gets back to target the following year.

—Jeff Cox

THU, NOV 30 20236:38 AM EST

Euro down after euro zone inflation falls more than expected

The euro traded lower against the British pound and the U.S. dollar after euro zone inflation came in at 2.4%, below the 2.7% level predicted by economists polled by Reuters.

The euro was 0.55% down against the greenback at $1.091 at 11:35 a.m. London time, and it stood 0.06% below sterling at 0.863, as investors assessed what the figures mean for potential interest rate cuts from the European Central Bank next year.

Joe Tuckey, head of FX analysis at Argentex Group, said that the most recent central bank forecasts for average inflation of 3.2% in 2024 and 2.1% in 2025 may not be too high, and that the latest reading provides a “challenging landscape for any remaining ECB hawks.”

Fresh outlook are due at the ECB meeting in mid-December.

Markets are now beginning to price for an April cut, and the price action for EURUSD in the coming weeks will be partially driven by the rate cut timing from the ECB vis-a-vis that of the Federal Reserve,” Tuckey said in emailed comments.

Gold notches second straight monthly rise on Fed pause bets

Gold slipped on Thursday but posted a second straight monthly gain as expectations that the Federal Reserve may soon cut interest rates enhanced the appeal of non-yielding bullion.

Spot gold slipped 0.4% to $2,035.79 per ounce after hitting a near seven-month peak in the previous session. Prices have gained around 2.7% in November.

https://www.cnbc.com/2023/11/30/gold-holds-ground-ahead-of-us-inflation-test.html

U.S. gold futures fell 0.5% to $2,036.90.

Contributing to gold’s slight dip, the dollar index rose for the day.

But the currency was headed for its worst month in a year, while 10-year Treasury yields hit a two-and-a-half month low.

“Gold might be a little tired here but it’s had a very nice run. The pullback (in prices) should be limited to $2,015-$2,020 and no concerns will be felt unless we fall back below $2000”, Tai Wong, a New York-based independent metals trader.

Traders have advanced bets for a rate cut from an 80% chance in May to a one-in-two chance in March, according to CME’s FedWatch tool.

“We’re expecting gold prices to break into new highs in the first half of 2024 as we approach the Fed pivot and (with) the economy likely to slow,” said Daniel Ghali, commodity strategist at TD Securities.

Traders took stock of data showing U.S. consumer spending rose moderately in October, while the annual increase in inflation was the smallest since early 2021. Jobless claims rose slightly.

Focus will be on comments from Fed Chair Jerome Powell on Friday.

J.P. Morgan in its 2024 commodities outlook highlighted that across commodities the only structural bullish call they held was on gold and silver.

Silver rose 0.4% to $25.11 per ounce, bound for its second straight monthly gain.

Platinum was down 0.8% at $924.58. Palladium dipped 0.1% to $1,025.85.

Japan November factory activity contracts, October unemployment dips

Japan’s factory activity contracted for a sixth straight month in November amid falling domestic and international demand, according to a private survey.

The final au Jibun Bank Japan manufacturing purchasing managers’ index fell to 48.3 last month from October’s 48.7, but was marginally better than the initial reading of 48.1.

A reading below 50 indicates contraction.

A separate reading showed Japan’s October unemployment rate fell to 2.5% from the prior month’s 2.6%.

The reading was also slightly below Reuters poll forecast of 2.6%.

— Shreyashi Sanyal

THU, NOV 30 20238:07 PM EST

South Korea factory activity unchanged, stops contraction for first time since June 2022

South Korea’s factory activity has stopped a 17-month contraction streak in November, according to private surveys by S&P Global.

The country’s manufacturing purchasing managers index came in at exactly 50, representing unchanged operating conditions for the sector.

S&P said that output levels broadly stabilized in November, leading to manufacturers increasing staffing levels and buying activity.

However, it added that “this masked a more subdued outlook for the coming year as firms signalled the weakest degree of optimism for five months amid concern over sustained economic weakness.”

— Lim Hui Jie

THU, NOV 30 20237:21 PM EST

CNBC Pro: Goldman Sachs loves this sub-sector in China — and names 3 stocks to buy

One corner of the economy in China is one of Goldman’s top preferred sub-sectors — and six key themes will take center stage in 2024.

The bank named three Chinese stocks it says are “well positioned” for those themes.

One of the stocks is on Goldman’s conviction list, which comprises buy-rated names it expects to outperform.

CNBC Pro subscribers can read more here.

— Weizhen Tan

THU, NOV 30 20233:38 PM EST

Market pricing points to five rate cuts following inflation data

As markets got another signal Thursday that inflation is ebbing, they solidified bets that the Fed is done hiking rates and will be cutting substantially in 2024.

Futures pricing suggested only a minimal chance of rate increases at the Federal Open Market Committee’s December and January meetings, according to CME Group data. Moreover, futures pointed to a better-than-even chance that the central bank will cut benchmark rates five times next year, the equivalent of 1.25 percentage points.

The moves followed Thursday morning economic readings showing that core PCE inflation fell to 3.5% and continuing jobless claims rose to a two-year high.

—Jeff Cox

THU, NOV 30 202311:25 AM EST

U.S. crude falls amid skepticism about OPEC cuts

U.S. crude fell nearly 2%, erasing its gains from earlier in the day as traders worry that OPEC and its allies, OPEC+, will not deliver on promised output cuts.

The West Texas Intermediate contract for January fell $2.17, or 2.79%, to $75.75 a barrel, while Brent was was down 26 cent, or .31%, at $82.84 a barrel.

OPEC+ delegates told Reuters that the group has agreed to output cuts approaching 2 million barrels per day next year for early next year.

But traders are worried that the cuts are voluntary and not mandatory, raising the question of whether OPEC+ can really follow through, according to Phil Flynn, an analyst with the Price Futures Group, said

“The proof is going to be in the pudding,” Flynn said. “Instead of having a clear answer to what is going to happen we only have promise — the promise making people nervous,” Flynn said.

— Spencer Kimball

THU, NOV 30 202311:05 AM EST

10-year Treasury yield falls to 4.34% after topping 5% last month

The 10-year Treasury yield has retreated significantly this month on rising hopes that the Federal Reserve may not need to raise interest rates further.

The benchmark rate has fallen 56 basis points in November to trade at 4.324% after the key bond yield topped the 5% threshold in October. On Wednesday, the rate dipped below 4.25% for the first time since September. 

The 30-year Treasury yield has dropped 58 basis points this month to 4.48%. Yields decline when bond prices rise, and one basis point equals 0.01%.

China’s manufacturing activity unexpectedly expands in November: Caixin survey

China’s manufacturing sector unexpectedly expanded in November, according to a survey by Caixin.

The Caixin purchasing managers’ index climbed to 50.7 last month from 49.5 in October, as a rise in new orders helped lift factory production.

The November PMI recorded the fastest expansion in three months and beat Reuters poll estimates of 49.8.

Though modest, the rate of new order growth was the best seen since June, with firms often noting that firmer market conditions had helped to lift sales. However, new work from overseas continued to fall slightly, underscoring a relatively challenging external demand environment,” the survey said.

A reading above the 50-point mark signifies growth.

— Shreyashi Sanyal

Asia markets slide as investors assess factory activity private surveys; China manufacturing clocks surprise growth

Asia-Pacific markets started Friday lower, breaking ranks with Wall Street which mostly advanced on Thursday, amid mixed economic data from across the region.

Most notably, investors assessed China’s Caixin manufacturing purchasing managers’ index for November, which showed that the sector unexpectedly expanded.

The Caixin PMI reading came in at 50.7, compared to 49.5 in October and beating a Reuters poll forecast of 49.8.

This comes after official numbers Thursday showed the country’s manufacturing sector contracted for a second straight month.

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In Australia, the S&P/ASX 200 inched down 0.2% and closed at 7,073.2, ending a three-day winning streak.

South Korea’s Kospi tumbled 1.19%, leading losses in Asia and ending at 2,505.01, while the small cap Kosdaq was down 0.53% at 827.24.

Japan’s Nikkei 225 was ended the day down 0.17% at 33,431.51, but the Topix bucked the wider trend and closed up 0.32% at 2,382.52.

Hong Kong’s Hang Seng index fell 1.1% in its final hour of trade, while China’s CSI 300 index dropped 0.38%, ending at 3,481.88 and hitting its lowest level since Oct. 24.

TICKER COMPANY NAME PRICE CHANGE %CHANGE 
.N225Nikkei 225 Index*NIKKEI32791.8483.941.5
.HSIHang Seng Index*HSI16205.77-128.6-0.79
.AXJOS&P/ASX 200*ASX 20071994.10.06
.SSECShanghai*SHANGHAI2987.5117.950.6
.KS11KOSPI Index*KOSPI2525.117.260.29
.FTFCNBCACNBC 100 ASIA IDX*CNBC 1008345.073.380.04

Overnight in the U.S., the Dow Jones Industrial Average reached a new high for the year, as cooling inflation data and strong Salesforce earnings help the benchmark cap its best month since October 2022.

The S&P 500 added 0.4%, but the Nasdaq Composite was about 0.2% lower as investors took some profits in Big Tech stocks that have led the November comeback.

Separately, the U.S. personal consumption expenditures price index — the Federal Reserve’s favorite inflation gauge — rose 3.5% on a year-over-year basis, slowing from a 3.7% annual gain in prior month.

— CNBC’s Pia Singh and Lisa Kailai Han contributed to this report.

FRI, DEC 1 20231:29 AM EST

India’s November factory activity rebounds slightly off eight-month low

India’s manufacturing activity rebounded off an eight-month low to post a faster rate of expansion in November, according to private surveys by S&P Global.

The country’s manufacturing PMI came in at 56.0 in November, in line with a Reuters forecast and higher than the 55.5 seen in October.

S&P noted that easing price pressures were a main reason behind the increase, pointing out that “although average purchasing costs rose again, the rate of inflation eased to the lowest in the current 40-month sequence of increases and was negligible by historical standards.”

— Lim Hui Jie

Oil prices down 2% on U.S. rig count, underwhelming OPEC+ cuts

Oil prices dropped 2% Friday, adding to losses from the day prior with the market skeptical of the latest round of production cuts by OPEC+ and as U.S. rigs rose week over week.

Brent crude futures for February dropped $2.02, or 2.5%, to $78.84 a barrel by on their first day as the front-month ICE Brent contract.

https://www.cnbc.com/2023/12/01/oil-prices-fall-extend-slide-after-opec-cuts-underwhelm.html

U.S. West Texas Intermediate (WTI) crude futures fell $1.95, or 2.57%, to $74.01 a barrel.

OPEC+ producers agreed on Thursday to remove around 2.2 million barrels per day (bpd) of oil from the global market in the first quarter of next year, which included a rolling over of Saudi Arabia and Russia’s current 1.3 million bpd of voluntary cuts.

Meanwhile, the U.S. oil rigs rose by 5 week over week but have declined by 122 to 505 total year over year, according to data released by Baker Hughes on Friday.

OPEC+, which pumps over 40% of the world’s oil, is focusing on reducing output as prices have fallen from about $98 in late September amid concerns over weaker economic growth in 2024.

But the market received the news with scepticism and confusion, driven by concerns about compliance given the voluntary nature of the reductions, as well as investors’ prior expectations of deeper cuts.

There is probably enough in these cuts to stop a full-blown meltdown of price but it will not stop a billowing cloud of confusion that is going to take the oil market weeks and months to figure out and only if the self-reporting data is indeed reliable,” PVM analyst John Evans said on Friday.

Markets may have been pricing in another larger cut, and it just didn’t meet those expectations,” OANDA analyst Craig Erlam added.

Investors also turned attention to macroeconomic headwinds on the demand side.

“The only real hope for long term balance in the market is for a dramatic improvement in global economic data as we start the new year, that would need to come from a “soft-landing” or even interest rate cuts,” Onyx Capital Group chief executive Greg Newman told Reuters on Friday.

Global factory data remained weak in November on poor demand, surveys showed, as the euro zone kept contracting but mixed signals surfaced on the Chinese economy.