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- Gold and silver gained smartly in Asia on Thursday after prospects for a rate hike in September by the Federal Reserve appeared dim after the release of July meeting minutes late on Wednesday. The latest Federal Reserve meeting highlighted concern over the state of the global economy, driving markets to question the likelihood that the Fed will raise rates next month. The minutes showed policymakers continued to express broad concerns about lagging inflation and the weak world economy even as the U.S. job market improved further. Market expectations for a Fed hike in September fell from one in two to roughly one in three after the minutes were published. A delay in the start of the tightening cycle is seen as supportive of equities. However, concern about the strength of the global economy
- Overnight, gold surged amid a weaker dollar and muted U.S. inflationary gains last month. On Wednesday morning, the U.S. Bureau of Labor Statistics (BLS) said its CPI for the month of July ticked up 0.1%, following solid gains of 0.3% and 0.4% in June and May respectively. A modest gain in apparel prices failed to offset declines in electricity and auto prices. Airfare prices also weighed on the July CPI, after plunging 5.6% — its sharpest monthly drop in two decades. Analysts expected the July CPI to increase 0.2% on a monthly basis. The BLS’ headline inflation reading also increased 0.2% on a year-over-year basis, after posting a yearly gain of 0.1% in June. The Core CPI, which strips out food and energy prices, also inched up 0.1% from its June level, below expectations for a 0.2% monthly gain. Over the last 12 months, the core reading has increased 1.8% after remaining unchanged from June. The Federal Reserve has indicated that it could raise short-term interest rates for the first time in nearly a decade when it is “reasonably confident” that long-term inflation is moving toward its targeted goal of 2%. Long-term inflation has failed to reach the Fed’s annual 2% target for every month over the last three years.
- Oil markets opened up weak on Thursday following sharp falls the previous session, with U.S. contracts hovering slightly above $40 per barrel, levels not seen since the credit crunch of 2009, and globally traded Brent tested support at $47. U.S. West Texas Intermediate (WTI) crude oil slumped over 4 percent on Wednesday to hit a 6-1/2-year low as a huge unexpected stockpile build in the United States reinforced concerns about a growing global oil glut. U.S. crude inventories rose 2.6 million barrels last week to 456.21 million barrels, the government’s Energy Information Administration said. Saudi Arabia exported 7.365 million barrels per day (bpd) in June, up from 6.935 million bpd in May, figures published by the Joint Organizations Data Initiative (JODI) showed. Contracts for delivery of crude oil in the future on the big commodities markets such as the New York Mercantile Exchange (CME.O) and the InterContinental Exchange (ICE.N) show the price of oil for delivery in five years’ time has collapsed in recent months, implying that traders do not expect a price recovery any time soon. U.S. crude prices for delivery in 2020 cost only about $20 more than they do now, a price difference that falls further when adjusted to expected inflation and interest rates.