Gold remains the Bank's preferred near-term long position, with a maintained price target of $2,700 per ounce by early 2025. Their analysis attributes this bullish outlook to several factors:
Central bank gold purchases have tripled since mid-2022 due to fears of U.S. financial sanctions and sovereign debt concerns, which are expected to continue.
Imminent Federal Reserve rate cuts are likely to bring Western capital back into the gold market.
Gold's value as a hedge against both geopolitical risks and macroeconomic uncertainties is underscored as a compelling reason for maintaining long positions
This is all in context of their underweighting of industrial commodities as their “2024 Deficits Basket is closed with an 8% gain as cyclical support softens.”
Bottom Line. Gold is the only game in town for Commodities the next month or so at least. Context matters a great deal this time of year. We go into that in great detail.
News: MS and Citi differ on Fed Cuts
Morgan Stanley says 25bps
Payrolls unwind temporary weakness in TX (~25k), motor vehicles (~7k), andsome other exaggerated July slowing.We expect the reacceleration in payrolls to leave the Fed cutting 25bps in September.
CITI says 50bps
August employment data will be the pivotal factor determining whether Fed officials are likely to start the rate cutting cycle with a 50bp or 25bp cut in September. We expect a report largely similar to July –We expect this to lead the Fed to cut by 50bp in September
More on this tomorrow
Equity Recap:
US equities sold off sharply on Tuesday after disappointing manufacturing data. ISM's purchasing managers' index missed expectations and stayed in contraction, S&P Global's PMI also remained in contraction, and construction spending fell more than forecast.
Market News:
"The US Justice Department sent subpoenas to Nvidia and other companies as it seeks evidence that the chipmaker violated antitrust laws, an escalation of its investigation into the dominant provider of AI processors. Bloomberg
"U.S. factories remained in slowdown mode in August, fueling fears about where the economy is headed, according to separate manufacturing gauges. CNBC
"Citadel Securities is leading an industry pushback against an effort by exchanges including the New York Stock Exchange and Nasdaq to ask traders to help foot the bill for a new market surveillance system that has already racked up almost $1bn in costs." Source: FT
Politics/Geopolitics:
Ukraine's air defence engaged in repelling the second wave of Russian air attacks on Kyiv overnight, according to the country's military; engaged in repelling a drone attack on the western city of Lviv, near the Polish border.
Poland activated aircraft to ensure airspace security for the third time in eight days after Russia launched strikes on Ukraine, according to Polish armed forces.
Russia's Kremlin said Russia takes into account that Ukraine "will" use US long-range weapons in its attacks deep into Russian territory.
Russia and China are working on President Xi's participation in the BRICS summit in Russia's Kazan, according to Ria.
Some headlines via NewSquawk or DataTrek
Data on Deck:
MONDAY, SEPT. 2 Labor Day
TUESDAY, SEPT. 3 10:00 am ISM manufacturing Aug. 47.9% 46.8%
WEDNESDAY, SEPT. 4 Factory orders
THURSDAY, SEPT. 5 S&P final U.S. services PMI Aug.
FRIDAY, SEPT. 6 8:30 am U.S. employment report Aug U.S. unemployment rate Aug. 4.2% 4.3%1
MONDAY, SEPT. 2 Labor Day holiday, none scheduled TUESDAY, SEPT. 3 9:45 am S&P final U.S. manufacturing PMI Aug. -- 48.0 10:00 am Construction spending July -0.1% -0.3% 10:00 am ISM manufacturing Aug. 47.9% 46.8% WEDNESDAY, SEPT. 4 8:30 am U.S. trade deficit July $79B -$73.1B 10:00 am Job openings July 8.1 million 8.18 million 10:00 am Factory orders July 4.9% -3.3% 2:00 pm Fed Beige Book TBA Auto sales Aug. THURSDAY, SEPT. 5 8:15 am ADP employment July -- 122,000 8:30 am Initial jobless claims Aug. 31 225,000 231,000 8:30 am U.S. productivity (revision) Q2 2.4% 2.3% 9:45 am S&P final U.S. services PMI Aug. -- 55.2 10:00 am ISM services Aug. 51% 51.4% FRIDAY, SEPT. 6 8:30 am U.S. employment report Aug. 162,000 114,000 8:30 am U.S. unemployment rate Aug. 4.2% 4.3% 8:30 am U.S. hourly wages Aug. 0.3% 0.2% 8:30 am Hourly wages year over year 3.8% 3.6% 8:45 am New York Fed President Williams speaks 11:00 am Fed Gov. Christopher Waller speaks
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