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Gold price takes a step back after Fed speak – Kitco NEWS

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(Kitco News) The gold market’s price action is taking a breather following hawkish commentary from the Federal Reserve speakers, with prices pulling further away from the $1,800 an ounce target.

The gold price jumped to a daily high of $1,805 an ounce Tuesday morning, led by increased geopolitical tensions as House Speaker Nancy Pelosi landed in Taiwan amid China’s threats of “serious consequences” for her visit.

However, gold gave back all of its daily gains following aggressive rhetoric from the Fed, with December Comex gold futures last trading at $1,777.10, down $10 on the day.

“Gold pared gains after Wall Street became optimistic that tensions between the two world’s largest economies would get out-of-hand,” said OANDA’s senior maker analyst Edward Moya. “A strong dollar is also weighing on gold as the greenback’s pullback over the past couple weeks appears to be over.”

Chicago Fed President Charles Evans said Tuesday that the U.S. central bank would likely keep using oversized rate hikes until it sees inflation coming down. Evans added that he is not ruling out a 50-basis-point hike in September.

“If you really thought things weren’t improving…50 (basis points) is a reasonable assessment, but 75 could also be okay. I doubt that more would be called for,” he told reporters Tuesday.

San Francisco Fed President Mary Daly also spoke Tuesday, stating that inflation is still a problem. The Fed has “a long way to go” before it reaches its price stability goals, especially after June’s inflation pace accelerated to 9.1% from a year ago, Daily said during an interview on LinkedIn. “We are still resolute and completely united,” she said.

Everything is data-dependent going forward, Daly added, echoing Fed Chair Jerome Powell’s statements from last week. “I really am looking to see what those data tell us to see if we can downshift a little bit the pace of rate hikes, or if we need to continue” outsize hikes, Daly said.

Evans and Daly are not voting members this year, but their comments reveal some behind-the-scenes thinking.

The hawkish comments come after the U.S. central bank raised rates by 75 basis points last week for the second time in a row. At the time, Powell also stated the U.S. is not in a recession, meaning another “unusually large” rate hike could be in store in September, followed by a slowdown in tightening

“I don’t think the U.S. is currently in a recession. There are too many areas of the economy that are performing too well. I would point to the very strong labor market. [It is] true that growth is slowing … [But generally], GDP numbers [are] revised pretty significantly. You tend to take first GDP reports with a grain of salt,” Powell said, referencing the first reading of the Q2 GDP report.

Data-wise, signs point to still problematic inflation numbers and a slowdown in the economy.

This week, markets are still digesting the Fed’s preferred inflation gauge – the personal consumption expenditures price index – rising 6.8%, the most significant annual increase since the 6.9% posted in January 1982.

Also, the U.S. second quarter GDP shrank 0.9%, marking the second quarterly contraction in a row and meeting the technical definition of a recession.

Going forward, Powell said he wants to make decisions meeting-by-meeting and move away from providing clear guidance regarding the exact magnitude of the rate hikes to come. There are two more inflation and labor data reports to be published before the September Fed meeting.

For gold, a strong U.S. dollar will continue to be an obstacle to higher prices, noted Moya.

“The U.S. dollar got a major boost as the latest round of Fed speak supports the idea that the interest rate differential will widely remain in the dollar’s favor,” he said. “Geopolitical jitters could also draw safe-haven flows mainly into Treasuries and that will support the dollar. Gold is trying to be a safe-haven again and this latest round of international risks to the outlook will let us learn quickly if it becomes one.”

For gold to see a notable change in trend and a sustainable bull rally, the precious metal needs to trade well above the $1,800 an ounce level, according to strategists at TD Securities.

“The prevailing risk-off tone in the market tied to U.S.-China relations has further supported the yellow metal via modest haven flows,” they said Tuesday. “Nonetheless, for further significant short covering from CTA trend followers to take place, gold prices would need to close north of $1,820/oz to spark a change in trend signals … We see risks that Fed speakers can push back against market expectations for an early Fed pivot. In this sense, gold markets are faced with a massive amount of complacent length held by prop traders, which still hold the title as the dominant speculative force in gold.”

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Netflix’s subscriber growth slows as gains from password-sharing crackdown subside

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Netflix on Thursday reported that its subscriber growth slowed dramatically during the summer, a sign the huge gains from the video-streaming service’s crackdown on freeloading viewers is tapering off.

The 5.1 million subscribers that Netflix added during the July-September period represented a 42% decline from the total gained during the same time last year. Even so, the company’s revenue and profit rose at a faster pace than analysts had projected, according to FactSet Research.

Netflix ended September with 282.7 million worldwide subscribers — far more than any other streaming service.

The Los Gatos, California, company earned $2.36 billion, or $5.40 per share, a 41% increase from the same time last year. Revenue climbed 15% from a year ago to $9.82 billion. Netflix management predicted the company’s revenue will rise at the same 15% year-over-year pace during the October-December period, slightly than better than analysts have been expecting.

The strong financial performance in the past quarter coupled with the upbeat forecast eclipsed any worries about slowing subscriber growth. Netflix’s stock price surged nearly 4% in extended trading after the numbers came out, building upon a more than 40% increase in the company’s shares so far this year.

The past quarter’s subscriber gains were the lowest posted in any three-month period since the beginning of last year. That drop-off indicates Netflix is shifting to a new phase after reaping the benefits from a ban on the once-rampant practice of sharing account passwords that enabled an estimated 100 million people watch its popular service without paying for it.

The crackdown, triggered by a rare loss of subscribers coming out of the pandemic in 2022, helped Netflix add 57 million subscribers from June 2022 through this June — an average of more than 7 million per quarter, while many of its industry rivals have been struggling as households curbed their discretionary spending.

Netflix’s gains also were propelled by a low-priced version of its service that included commercials for the first time in its history. The company still is only getting a small fraction of its revenue from the 2-year-old advertising push, but Netflix is intensifying its focus on that segment of its business to help boost its profits.

In a letter to shareholder, Netflix reiterated previous cautionary notes about its expansion into advertising, though the low-priced option including commercials has become its fastest growing segment.

“We have much more work to do improving our offering for advertisers, which will be a priority over the next few years,” Netflix management wrote in the letter.

As part of its evolution, Netflix has been increasingly supplementing its lineup of scripted TV series and movies with live programming, such as a Labor Day spectacle featuring renowned glutton Joey Chestnut setting a world record for gorging on hot dogs in a showdown with his longtime nemesis Takeru Kobayashi.

Netflix will be trying to attract more viewer during the current quarter with a Nov. 15 fight pitting former heavyweight champion Mike Tyson against Jake Paul, a YouTube sensation turned boxer, and two National Football League games on Christmas Day.

The Canadian Press. All rights reserved.

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