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Business Standard
4 days ago
- Business
- Business Standard
Gold may rally to $3,400 on tariff fears; deadline extensions to cap upside
Gold: Caught between trade war and encouraging US data Gold performance: On July 3, traders, anticipating a weak US nonfarm payroll report, as the ADP employment report, released a day earlier, had for the first time since 2023 shown a decline in number of jobs, pushed spot gold to $3365 -- highest since June 24 -- amid subdued US Dollar and US yields. However, the yellow metal tumbled on a surprisingly encouraging US job report. The metal traded between $3,310 and $3,365 during the day. At the time of writing this article, the metal was changing hands at $3329, down 0.9 per cent on the day. The MCX August contract at ₹96,778 was down nearly 0.6 per cent. Data roundup: US nonfarm payroll (June) was largely reassuring as US employers added 1,47,000 jobs versus the expectation of 1,06,000 jobs, which belied the fears of job losses as portrayed by the ADP report released on Wednesday. Two-month payroll net revision stood at 16,000 as the unemployment rate unexpectedly slid from 4.2 per cent to 4.1 per cent versus the estimate of 4.3 per cent. However, the decline in the unemployment rate has been driven by job seekers, especially foreigners, leaving the workforce pool due to deportation, lack of job opportunities, etc. Labour force participation rate edged lower from 62.4 per cent to 62.3 per cent (forecast 62.4 per cent). Average hourly earnings rose 0.2 per cent m-o-m and 3.7 per cent versus the respective forecast of 0.3 per cent and 3.80 per cent. ISM Services Index crept back into an expansion territory after a month as the largest component of the US economy posted a reading of 50.80; thus, beating the estimate of 50.60 as new orders expanded, though services employment contracted more than expected. Tariff developments: US Treasury Secretary Bessent said on July 3 that President Trump will decide whether to extend the July 9 tariff hike deadline. Earlier on July 2, the US and Vietnam finalised a trade deal in principle under which Vietnam will pay 20 per cent tariffs on its US exports, whereas the US will pay 0 per cent tariffs on its exports to Vietnam. In addition, the US imposed a 40 per cent tariff rate on Vietnam's transhipments, which is likely to make Chinese goods exported through Vietnam to the US costlier. It is to be noted that a significant share of Vietnam's exports to the US include goods like AirPods, phones, etc, assembled with Chinese parts in Vietnam's factories. As per the Lowly Institute (Sydney), 28 per cent of Vietnamese exports to the US were made up of Chinese components in 2022. Chinese exports to Southeast Asia have surged this year. China is assessing the US-Vietnam deal and has warned against clauses harming its business interests. China is speeding up the approval rate earth exports to European companies. Trump scores a major economic policy victory: The US House passed Trump's $3.4 trillion tax cut and spending bill, which is positive for the metal on deficit concerns. Dollar Index and yields: The US Dollar Index fell to a fresh cycle low of 96.377, the lowest since February 2022, on July 1, on Fed rate cut notions. The Index, at the time of writing, was hovering around 97.14, up nearly 0.5 per cent on the day as US data boosted the Greenback. US 10-year yields, which slumped to 4.18 per cent on July 1, the lowest since May, rose for the third straight day and were noted at 4.35 per cent, up nearly 2 per cent on the day, as July rate cut hopes faded on stronger than expected US job and ISM services report. ETF: Total known global gold ETF holdings rose to 90.506 MOz on July 2 as holdings remain at nearly 2 high and are up 9.24 per cent YTD. COMEX gold inventory: COMEX gold inventory at 37.048 Moz is down around 17 per cent from the record high of 45.072 Moz in April. UBS survey on gold: As per a UBS Group AG Survey of nearly 40 central banks, the share of central bank reserve managers who see the geopolitical weaponisation of FX Reserves as an investment risk has increased from 32 per cent in 2024 to 49 per cent in 2025. Nearly 52 per cent of central banks intend to add gold over the next year. Upcoming data: The US data calendar is quite light next week; the major attraction will be the FOMC minutes of the June 18 FOMC meeting, which will be released on July 9. China's PPI and CPI data (June) will be released on July 9. Gold outlook: Key US data released this week has allayed fears concerning the nation's economic health to some extent, as the monthly job report and PMIs turned out to be reasonably strong, which has reduced the July Fed rate cut possibility to zero. Rebound in the US Dollar Index and yields will exert downside pressure on the metal, which would be boosted further due to healthy risk appetite as US stock Indices are at record highs. However, traders will closely monitor trade deal developments as the July 9 deadline approaches. Friction arising between the US and its key trading partners during deal negotiations will support the metal. China has already expressed its concerns over the US-Vietnam trade deal. Thus, gold is caught between the impact of strong US data and the possibility of trade friction as trade negotiations continue. In such a scenario, gold is likely to trade between $3292 (₹95,700) and $3370 (₹98,000). The next major resistance is at $3400 (₹98,800). Next support is at $3247 (Rs 94,400)/$3228 (Rs 93,800). Trump extending the July 9 deadline will be heavy on the yellow metal. In that case, a decline to $3200 (Rs 93,000) is possible. The preferred strategy is to sell with a stop loss above $3370.
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Business Standard
4 days ago
- Business
- Business Standard
Silver price outlook: White metal may rise to $40 level; check key levels
Performance: On July 3, spot silver traded between $36.34 and $37.07. At the time of writing, the gray metal was trading at 36.85, up around 0.82 per cent on the day. The MCX September silver contract at ₹1,08,200 was up around 0.6 per cent. Data roundup: US nonfarm payroll (June) was largely reassuring as US employees added 1,47,000 jobs against the expectation of 1,06,000 jobs, which belied the fears of job losses as portrayed by ADP report released on Wednesday. Two-month payroll net revision stood at 16,000 as unemployment rate unexpectedly slid from 4.2 per cent to 4.1 per cent Vs the estimate of 4.3 per cent. However, the decline in unemployment rate has been driven by jobseekers, especially foreigners, leaving the workforce pool due to deportation, lack of job opportunities, etc. Labour force participation rate edged lower from 62.4 per cent to 62.3 per cent (forecast 62.4 per cent). Average hourly earnings rose 0.2 per cent m-o-m and 3.7 per cent against the respective forecasts of 0.3 per cent and 3.80 per cent. ISM Services Index crept back into expansion territory after a month as the largest component of the US economy posted a reading of 50.8; thus, beating the estimate of 50.6 as new orders expanded, though services employment contracted more than expected. The Eurozone's composite PMI data (June final) rose to 50.60, fastest since March, while China's Caixin PMI composite slowed down from 51.10 to 50.60 (forecast 50.90). Tariff developments: US Treasury Secretary Bessent said on July 3 that President Trump will decide whether to extend the July 9 tariff hike deadline. Earlier on July 2, the US and Vietnam finalised a trade deal in principle under which Vietnam will pay 20 per cent tariffs on its US exports, whereas the US will pay 0 per cent tariff on its exports to Vietnam. In addition, the US imposed a 40 per cent tariff rate on Vietnam's transhipments which is likely to make Chinese goods exported through Vietnam to US costlier. It is to be noted that a significant share of Vietnam's exports to the US includes goods like air pods, phones, etc assembled with Chinese parts in Vietnam's factories. As per Lowly Institute (Sydney) 28 per cent of Vietnamese exports to the US were made up of Chinese components in 2022. Chinese exports to Southeast Asia have surged this year. China is assessing the US-Vietnam deal and warned against clauses harming its business interests. China is speeding up approving rate earth exports to European companies. Trump scores a major economic policy victory: The White House passed Trump's $3.4 trillion tax cut and spending bill, which is positive for silver on deficit concerns. Dollar Index and yields: US Dollar Index fell to a fresh cycle low of 96.377, lowest since February 2022, on July 1 on Fed rate cut notions. The index, at the time of writing, was hovering around 97.14, up nearly 0.5 per cent on the day as US data boosted the Greenback. US 10-year yields, which slumped to 4.18 per cent on July 1, lowest since May, rose for the third straight day, and was noted at 4.35 per cent, up nearly 2 per cent on the day, as July rate cut hopes faded on stronger than expected US job and ISM services report. Total known global silver ETF holdings at 773.283 MOz are at nearly 3-year high as holdings are up nearly 8 per cent year-to-date (Y-T-D). Silver Institute's deficit forecast: The Silver Institute sees the silver market registering a deficit of 117.60 MOz in 2025, which will be nearly 21 per cent smaller than the estimated 2024 deficit. Outlook: Positive surprise in the US, European and Chinese PMIs along with a somewhat encouraging US nonfarm payroll report will support the metal. Risk appetite is expected to be healthy unless tariff frictions come to the fore yet again. Positive ETF inflow is a crucial bullish factor. Silver is expected to rise to $40 level (₹117,000) in the coming weeks unless risk appetite gets impaired due to tariff issues.
Forbes
12-06-2025
- Business
- Forbes
Job Growth Sputters
The services sector in the U.S. is dominated by small businesses and has been a source of economic strength since the last recession. But it is starting to show signs of weakness according to the ISM Services Index and, being labor intensive, that weakness is showing up in the employment statistics. May employment came in at 139,000, but revisions in the prior two-month estimates totaled 95,000 lower than previously reported, producing a net gain of only 44,000 jobs. The number of part-time workers wanting a full-time job is at the highest level seen since 2019. Growth was concentrated in the private sector, education, health care, and leisure and hospitality. Government sector growth remained depressed, down by 59,000 jobs since January, after months of leading job growth. According to NFIB's Small Business Economic Trends survey, the percent of firms increasing total employment has languished since 2020. Changes in economic policy have been major drivers of employment. The 2016-2019 period was very different from that of 2020-2025, especially with Covid related business restrictions early on, heavily impacting economic activity. Overall, while hiring plans are positive, there are plenty of job openings, especially in the transportation, construction, and manufacturing industries, small business employment is also losing steam. The hiring pressures of a few years ago have tapered off. Small businesses are more uncertainty about economic conditions going forward and are holding on tighter to their wallets. The number of owners increasing compensation has eased and fewer are planning to increase going forward. And most telling, labor quality is no longer the top problem for small business owners, it's been replaced by taxes. Sixteen percent of small business owners named labor quality as the single biggest problem compared to 24 percent of owners reporting the same two years ago. Job reductions were strongest in retail, along with cuts in services. Most manufacturing firms in the U.S. are 'small' and specialized, and have the lowest level of employment reductions. Job openings remain eleveated (JOLTS, NFIB), and owners continue to complain of too few qualified applicants for the openings they are trying to fill. In May, 55 percent reported hiring or trying to hire in May, down 1 point from April. Eighty-six percent of those hiring or trying to hire reported few or no qualified applicants for the positions they were trying to fill. The impact of DOGE reductions is yet to be felt, as compensation will continue until September for most, and even until the end of the year for others. While labor market pressures are easing, it's not signaling any distress alarms so far.
CNBC
05-05-2025
- Business
- CNBC
Here's why we're not buyers in Monday's session, even as stocks move lower
Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street. Market update: Stocks started the day on a weak note, dropping roughly 0.75% in early trading. However, stocks began to recover as the session went on — first boosted by a stronger-than-expected April ISM Services Index, and later supported by remarks from Treasury Secretary Scott Bessent at the Milken Conference and during an appearance on CNBC. The S & P 500 was off by roughly 0.2% at midday. If the broad-market index closes negatively, it will mark its first loss in two weeks, ending a nine-day winning streak that drove it up by 10%. This rally has also pushed the market further into overbought territory, based on the S & P Oscillator . When the oscillator is this overbought, we're typically cautious about deploying new capital into the market, unless the stock in question has experienced an unwarranted, significant pullback. Sector breakdown : Performance was mixed today, with only a few sectors firmly in positive territory. Industrials led the way, with airlines in particular benefiting from falling oil prices. The other two sectors in the green were communication services and real estate. On the downside, energy was the worst performer as oil prices hit their lowest level of the year. Consumer discretionary also struggled, with Tesla , Starbucks , Chipotle , Nike , and Amazon among the notable laggards. Technology was a mixed picture. Software stocks were mostly positive with cybersecurity having a particularly strong day. Apple extended its post-earnings selloff from last Friday. Semiconductor stocks mostly declined, with On Semiconductor dropping roughly 8% after issuing mixed guidance —reflecting its exposure to automotive and industrial markets, unlike AI-focused peers such as Nvidia and Broadcom . Up next: Coming after the closing bell, Coterra Energy will report its first quarter of earnings. The conference call discussing the results will be held Tuesday. Other companies scheduled to report: Ford , Palantir , Vertex Pharmaceuticals , Mattel , Clorox , Diamondback Energy , and Hims & Hers . Before the opening bell on Tuesday, Marriott , Jacobs , Aramark , Marathon Petroleum , Kontoor Brands , Datadog , Zoetis , Ferrari , and Global Foundries will report earnings. (See here for a full list of the stocks in Jim Cramer's Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED. Traders work on the floor of the New York Stock Exchange on May 1, 2025. Every weekday, the CNBC Investing Club with Jim Cramer releases the Homestretch — an actionable afternoon update, just in time for the last hour of trading on Wall Street.
Forbes
15-04-2025
- Business
- Forbes
The Economy Is Slowing; Tariffs Make It Worse
The tariff file has caused a high level of uncertainty both for consumers and businesses. As a result, all it took was the lifting of that uncertainty, via the 90-day suspension of higher tariffs, for the equity market to surge on Wednesday, April 9th. That day, the DJIA rose +7.9%, Nasdaq +12.2%, the S&P 500 +9.5%, and even the small cap Russell 2000 +8.7%.1 For the week as a whole, all four indexes were positive, led by the tech heavy Nasdaq as shown in the third column of the table. Still, equity markets remain negative for the month and year to date.1 Equity Market In addition, it appears that the markets haven't yet priced in a slowing economy (the latest Atlanta Fed Q1 GDP growth forecast is -2.4%).2 Another quarter of negative growth, as seems likely, will trigger the rule of thumb Recession call (i.e., two negative GDP growth quarters in a row) and would likely cause the National Bureau of Economic Research (NBER) to officially declare that the economy had entered a Recession.2 As further evidence of a slowing economy, the Challenger Gray and Christmas layoff data for March showed up at +275,240, the highest number for any March on record.3 Admittedly, much of this is due to DOGE's layoffs of federal employees. But we also note that Retail lost -57,000 jobs in March (vs. -12,000 in March 2024), and that hiring was down -37.5% from a year ago.3 The ISM Services Index fell in March to 50.8 from 53.5 in February (50 is the demarcation line between expansion and contraction).4 While still showing minimal expansion, the large March pullback does not bode well for the April reading.4 The National Federation of Independent Business' (NFIB) monthly business index fell to 97.4 in March from 100.7 in February.5 As the table shows, this index had a similar level at the beginning of the last six Recessions. NFIB Index Note that the recent 97.4 level fits right into the table. The University of Michigan's (UM) Consumer Sentiment Index fell to 50.8 in April from 57.0 in March, quite the fall.10 Just for comparative purposes, this is the lowest level since June '22 (Covid) and the second lowest reading on record dating back to 1952! Worse, the Trump tariffs have convinced the public that they will usher in more inflation as UM's one-year inflation expectations index soared to 6.7% in April from March's already high 5.0% reading.6The 5-year inflation expectations reading rose to 4.4% (from 4.1% in March), the highest reading for this index since 1991! University of Michigan Consumer Sentiment With such public expectations, the Fed has little choice but to forgo any rate reductions at its upcoming May meeting set. Despite the 90-day 'pause' in the tariff file for most countries, the risk of Recession is rising due to the 145% tariff on imports from China in addition to the high and rising level of uncertainty.7 Tariffs normally have a negative impact on profit margins. When uncertainty rises, business growth expectations fall, and they tend to delay any expansion plans. In addition, consumers become more cautionary and tend to spend less and save more.1 The following chart indicates that this process has already begun. Consumer Expectations With nominal income growth in the U.S. now showing weakness (i.e. the strong possibility of an oncoming Recession), that means either business profit margin compression or lower demand (or some combination of the two).9 During a Recession, the average equity market pullback is nearly -30%, normally over a 6 – 12-month period. And bond market yields fall by about 150 basis points (1.5 percentage points).11 Fed Chair Powell says the Fed is waiting for the softening survey data to translate into hard data before moving toward lower interest rates. This, even though his own Atlanta Fed has pegged Q1 GDP growth at -2.4%.2 (As noted, there already are many economic signs that the economy is cooling both on the business side and on the consumer side.) Because of the long lags between changes in monetary policy and their impact on the economy, it appears that the Fed should be lowering rates now when the soft data show a weakening economy, to adjust for those long lags.11 Despite the timing of policy changes, it is clear that the next move in monetary policy is to continue to lower rates. The Fed has told markets that the 'neutral' rate (known as R*) for the Federal Funds rate, is 3%. Right now, that Federal Funds rate is pegged between 4.25% and 4.50%. So, there's 125 to 150 basis points (i.e., 1.25 to 1.50 percentage points) of rate reduction just to get to neutral.11 But, as noted above, because of the recent rise in inflation expectations, it is unlikely that the Fed will lower rates at its May meeting, and is likely to wait for Powell's 'hard data' requirement (despite the negative growth rate of Q1 GDP).11 If a Recession actually develops, the Fed will have to take that Fed Funds rate below neutral (3%), how far depends on the severity of the economic slowdown. (We note that the major investment banks have significantly increased their odds of a Recession occurring in 2025.) Falling interest rates mean rising bond prices with the prices of longer-term bonds benefitting most. A note of caution here. China's holdings of U.S. Treasury securities peaked at $1.3 trillion in 2014. Today, they stand at $700 billion.12 13 That still is a significant amount. The dumping of those securities could easily cause a spike in interest rates. In fact, we've recently seen a small spike in rates making us wonder if the selling has already begun.14 The 90-day tariff suspension lifted uncertainty (on Wall Street, 90-days is 'long-term') causing large-cap equities to bounce 5% - 7% for the week (small cap stocks were positive too, but to a lesser extent (+1.8%)). Nevertheless, it still appears that markets have not yet priced in a slowing economy and the rising probability of Recession.15 We continue to see evidence of an economic slowdown. Q1 GDP growth will be negative according to the Atlanta Fed (-2.4%). We see no catalyst to turn that around. Layoff data were the highest for any March on record, which will soon translate into a higher unemployment rate.7 Other survey data, like the NFIB's monthly business index and the University of Michigan's Consumer Sentiment Index are also giving Recession signals.5 6 Tariffs, especially the large 145% rate on China, are bound to have negative impacts on business profit margins as well as a reduction in consumer demand as prices rise.7 The sudden rise in consumer inflation expectations, no doubt due to the tariffs, is bound to keep the Fed on the sidelines despite Q1's negative GDP reading. Chair Powell sees the softening survey data but insists that the Fed will wait for the hard data before it acts. In our view, because of the lag time between when the Fed acts and its impact on the economy, that's a mistake.11 (Joshua Barone and Eugene Hoover contributed to this blog.)
