With markets presently pricing in two quarter-point rate reduction in subsequent meetings, investors’ emphasis will be on the speeches that various Fed officials have set for next week (beginning on September 29).
Commodities React to Fed
Commodities had a very active week (ending September 26), with supply-side worries and mounting anticipation of more rate reduction by the Fed in 2025 driving a strong surge overall.
As traders processed conflicting signals from Federal Reserve officials, the US dollar continued its comeback from its lowest points since March 2022, ending the week above 98. Fed Chair Jerome Powell made it plain he would not pre-commit to any rate decreases without enough supporting evidence, reiterating the need to weigh inflation concerns against a weakening labor market.
Fed Governor Michelle Bowman, on the other hand, advocated for more cuts, pointing to a deteriorating labor market. Raphael Bostic and Austan Goolsbee, on the other hand, continued to express worry about inflation.
Markets Eye Fed Moves
Lower-than-expected US unemployment claims and an upward adjustment to Q2 GDP raised fears that the Fed would be holding off on reducing rates, which caused all three of the main US market indexes to pull back from their record highs earlier in the week. Another factor that affected morale was uncertainty about a possible government shutdown. But after three straight sessions of drops, US markets recovered on Friday, reducing losses. The core PCE data also met forecasts, keeping the Fed on pace for a possible rate decrease at the October meeting.
COMEX As the dollar declined in response to the inflation statistics, gold prices also saw a significant recovery on Friday, rising to $3,814 per troy ounce. Gold reached a new high of $3,824 earlier in the week due to robust ETF inflows, NATO’s warnings to Russia about airspace breaches, and allegations that China is establishing itself as a custodian of foreign sovereign gold assets. Due to safe-haven demand and China’s commitment to increase wind and solar power production to more than six times 2020 levels, silver was the best-performing metal, rising to a 14-year high of $46.9 per troy ounce.
Gold, Oil Surge Higher
MCX Gold The price of December futures jumped significantly to reach a new all-time high of Rs 1,15,139 on Tuesday after beginning the week gap-up and exceeding the previous swing high of Rs 1,11,703 per 10 grams. The price is presently above both the 20 EMA and the Supertrend (7,3), suggesting that the short-term bullish trend is still in place. Prices may rise higher toward Rs 1,16,650 and Rs 1,17,550 if there is a breakthrough and a sustained move above the all-time high of Rs 1,15,139. At Rs 1,13,280, there is immediate support, and then at Rs 1,11,700.
Amid growing supply fears, WTI crude oil jumped 4%, its largest weekly rise since June. WTI jumped beyond $66 per barrel due to a number of factors, including Russia’s restriction on petroleum exports until the end of the year, continuous Ukrainian assaults on Russian energy infrastructure, and Donald Trump’s calls for the EU and Turkey to reduce Russian oil imports. Furthermore, NATO maintained geopolitical risks by announcing that it is ready to react to further Russian airspace incursions.
Copper Leads Base Metals
With copper in the news as it soared to multi-month highs, base metals had a mixed week. Growing supply fears prompted the rise after Freeport-McMoRan announced a force majeure at its Grasberg mine in Indonesia, which produces more than 3% of the world’s mined copper, after a fatal mudflow earlier this month.
Copper had its largest weekly increase in five months as traders watched Beijing’s decision to limit new smelting capacity, despite a stronger US currency and growing Chinese stocks. In the meanwhile, zinc underperformed because of increased Chinese production, and aluminum prices declined despite stable worldwide supply, which the International Aluminium Institute (IAI) estimates at 202,500 tons per day on average.
Markets Watch US Shutdown
Markets are becoming cautious as the US government is on the verge of shutting down due to budget disputes between Democrats and Republicans. A shutdown would probably postpone the publication of important economic statistics, particularly the employment report, which is crucial in determining the Fed’s next course of action.
Markets are already pricing in two quarter-point rate reduction in subsequent meetings, so investors’ attention will also be on the speeches that numerous Fed officials have planned for next week (beginning on September 29). That might change those expectations and lessen the chance of an impending relaxation, however, if the jobs data is issued and reveals noticeably larger employment increases.