Gold Hits New Highs on Dollar Weakness and Mideast Tensions  (30 Sept – 4 Oct)

Gold surged to new highs last week as tensions in the Middle East and a weaker dollar drove a rally in metals, with silver also testing its yearly peak.

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Gold and Silver 

Metals experienced a rally last week as Mideast tensions continued, with gold hitting new highs at 2,685, benefiting from the weaker dollar index. Silver, supported by both the dollar's decline and China's stimulus, its largest importer, tested its yearly peak at 32.50.

The Dollar Index

Last week, a substantial flow of US economic data mostly met expectations. However, the Core PCE Price Index fell short at 0.1%, raising the likelihood of a 50 basis point Fed rate cut on November 7 to 52%. This led the dollar index to drop below its previous low of 100.20, ending the week with losses. While growth and unemployment figures were in line at 3.00% and 218K, and new home sales exceeded expectations at 716K, they didn't offset the dollar's decline.

Forex Market

In Europe, weak Eurozone PMI and national inflation data fueled speculation of a 25 basis point ECB rate cut in October. Despite this, a significantly weaker dollar index helped the EUR/USD pair close the week positively.

The RBA kept rates steady, highlighting the need for tight monetary policy until inflation is controlled. Michele Bullock noted recent economic data did not influence the outlook, allowing the Australian dollar to gain against a weaker dollar.

The Swiss National Bank cut rates by 25 basis points and hinted at further easing due to disinflation concerns driven by weak European demand. The SNB aims to keep the EUR/CHF above 0.9300, leading the USD/CHF to end the week with a pullback.

China responded to disappointing economic data with stimulus measures, including cuts to the seven-day repo rate and reserve requirement ratio, causing a sharp decline in the USD/CNH pair.

In Canada, weak growth data and dovish comments from Governor Macklem, who suggested the possibility of aggressive rate cuts, led the USD/CAD pair to close higher.

Japan’s Tokyo inflation figure dropped to 2.0% from August’s 2.4%, reinforcing the Bank of Japan’s cautious stance on rate hikes. Governor Ueda noted no rush for aggressive hikes, and the USD/JPY pair ended the week down by about 1%.

Stock Market

Indices closed last week positively, with the Nasdaq up 1.33%, the S&P 500 rising 0.73%, and the Dow Jones increasing 0.85%. The weak dollar influenced various sectors, with technology gaining 1%, communication up 2.5%, and transportation rising 1.5%. In contrast, the financial sector fell about 2%, and biotechnology declined by 2.29%.

Notable stock performances included Tesla, up 6%, Nvidia rising 3%, Intel jumping 14%, and UPS gaining 5%. On the downside, Apple dropped 0.77%, Amazon fell 1.3%, Visa declined 3.14%, Bank of America was down 2.5%, and Microsoft decreased by 2%.