(Kitco News) Gold’s price action once again kept investors on their toes as the yellow metal rallied to a daily high of $1,987 an ounce and then plunged more than $72 to $1,914 an ounce in just under an hour.
All eyes were on the Federal Reserve Chair Jerome Powell’s keynote address at the virtual Jackson Hole Symposium Thursday morning.
Powell did not disappoint in delivering major changes to the central bank’s monetary policy approach, including the highly anticipated flexible form of average inflation targeting.
Under the new approach, the Fed will seek to achieve inflation averaging 2% over time. This means that following periods of inflation below 2%, monetary policy will focus on getting inflation to run above 2% for some time.
“Our longer-run goal continues to be an inflation rate of 2 percent … Our new statement indicates that we will seek to achieve inflation that averages 2 percent over time. Therefore, following periods when inflation has been running below 2 percent, appropriate monetary policy will likely aim to achieve inflation moderately above 2 percent for some time,” Powell explained.
Another major change was regarding the maximum employment goals, which will now be guided by assessment of shortfalls from maximum employment levels rather than deviations. Powell also stressed that robust job market can be sustained without causing an outbreak in inflation.
“The significance of Powell’s speech was that maybe we are past this initial hurdle of pumping money and now onto the next phase where we are focusing on building job growth,” RJO Futures senior commodities broker Daniel Pavilonis told Kitco News. “Initially gold spiked on the idea of flexible 2% inflation and interest rates being kept at zero for a longer time. But then the market started to come off when it sounded like Powell started looking at COVID as being more and more under control and looking at the pandemic as being in the rear-view mirror.”
Powell seemed to have kicked off the second phase of the recovery with his speech. “Now, it is about repairing the damage done to the economy. We went from unlimited printing to let’s get people back to work. This is kind of like a second phase,” Pavilonis said.
The selloff in gold was likely triggered because the precious metals markets wanted to hear more from Powell and did not get it.
“Metals wanted more substance out of this. When Powell started talking, it was very bullish for the metals initially but then prices began to decline,” Pavilonis pointed out. “What the central bank is saying now is that they are not going to pump trillion of dollars anymore, they will instead focus on the real economy.”
As long as COVID-19 stays under control, people are going to continue to adopt and realize that there might be more of a scare factor than necessary, he added.
Another element that contributed to gold’s selloff was the market’s interpretation of Powell’s speech as not being dovish enough, said Blue Line Futures chief market strategist Phillip Streible.
“When Powell first said the Fed would allow inflation to run above 2% if needed, market rallied on it. But when Powell said the Fed would not hesitate to act if inflation pressures build, the market interpreted it as the Fed could reverse easing policy measures and that’s why the metals sold off,” Streible told Kitco News.
Thursday’s close is something to keep an eye on, said Walsh Trading co-director John Weyer, pointing to a lot of new Fed speak confusing the markets.
“The Fed is looking to treat the labor market a little different. It is now about assessing shortfalls rather than deviations. For the Fed, these changes mean a lot,” Weyer said. “Close will be interesting here. Might be a down a bit on the day.”
Weyer added that this pullback might slow down gold’s rally in the near-term.
Despite Thursday’s decline, the overall picture remains very bullish for gold, Pavilonis pointed out.
“The market is overall still bullish because of zero percent interest rates for a long time and the flexible 2% inflation target. This means that even if we hit 2%, it doesn’t mean the Fed will start raising rates. That is still really solid conditions for the metals market,” he said. “We are in a fragile state right now. It would not take much to push rates below zero and push into negative yields. And that will ultimately push the metals higher.”
Pavilonis added that he sees these price drops as buying opportunities before gold heads back to $2,000 an ounce again.
Netflix (NFLX) stock slid as much as 9.6% Friday after the company gave a second quarter revenue forecast that missed estimates and announced it would stop reporting quarterly subscriber metrics closely watched by Wall Street.
On Thursday, Netflix guided to second quarter revenue of $9.49 billion, a miss compared to consensus estimates of $9.51 billion.
The company said it will stop reporting quarterly membership numbers starting next year, along with average revenue per member, or ARM.
“As we’ve evolved our pricing and plans from a single to multiple tiers with different price points depending on the country, each incremental paid membership has a very different business impact,” the company said.
Netflix reported first quarter earnings that beat across the board on Thursday, with another 9 million-plus subscribers added in the quarter.
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Subscriber additions of 9.3 million beat expectations of 4.8 million and followed the 13 million net additions the streamer added in the fourth quarter. The company added 1.7 million paying users in Q1 2023.
Revenue beat Bloomberg consensus estimates of $9.27 billion to hit $9.37 billion in the quarter, an increase of 14.8% compared to the same period last year as the streamer leaned on revenue initiatives like its crackdown on password-sharing and ad-supported tier, in addition to the recent price hikes on certain subscription plans.
Netflix’s stock has been on a tear in recent months, with shares currently trading near the high end of its 52-week range. Wall Street analysts had warned that high expectations heading into the print could serve as an inherent risk to the stock price.
Earnings per share (EPS) beat estimates in the quarter, with the company reporting EPS of $5.28, well above consensus expectations of $4.52 and nearly double the $2.88 EPS figure it reported in the year-ago period. Netflix guided to second quarter EPS of $4.68, ahead of consensus calls for $4.54.
Profitability metrics also came in strong, with operating margins sitting at 28.1% for the first quarter compared to 21% in the same period last year.
The company previously guided to full-year 2024 operating margins of 24% after the metric grew to 21% from 18% in 2023. Netflix expects margins to tick down slightly in Q2 to 26.6%.
Free cash flow came in at $2.14 billion in the quarter, above consensus calls of $1.9 billion.
Meanwhile, ARM ticked up 1% year over year — matching the fourth quarter results. Wall Street analysts expect ARM to pick up later this year as both the ad-tier impact and price hike effects take hold.
On the ads front, ad-tier memberships increased 65% quarter over quarter after rising nearly 70% sequentially in Q3 2023 and Q4 2023. The ads plan now accounts for over 40% of all Netflix sign-ups in the markets it’s offered in.
Netflix reported first quarter earnings after the bell on Thursday. REUTERS/Dado Ruvic/File Photo (REUTERS / Reuters)
Alexandra Canal is a Senior Reporter at Yahoo Finance. Follow her on X @allie_canal, LinkedIn, and email her at alexandra.canal@yahoofinance.com.
Oil prices initially spiked on Friday due to unconfirmed reports of an Israeli missile strike on Iran.
Prices briefly reached above $90 per barrel before falling back as Iran denied the attack.
Iranian media reported activating their air defense systems, not an Israeli strike.
Oil prices gave up nearly all of early Friday’s gains after an Iranian official told Reuters that there hadn’t been a missile attack against Iran.
Oil surged by as much as $3 per barrel in Asian trade early on Friday after a U.S. official told ABC News today that Israel launched missile strikes against Iran in the early morning hours today. After briefly spiking to above $90 per barrel early on Friday in Asian trade, Brent fell back to $87.10 per barrel in the morning in Europe.
The news was later confirmed by Iranian media, which said the country’s air defense system took down three drones over the city of Isfahan, according to Al Jazeera. Flights to three cities including Tehran and Isfahan were suspended, Iranian media also reported.
Israel’s retaliation for Iran’s missile strikes last week was seen by most as a guarantee of escalation of the Middle East conflict since Iran had warned Tel Aviv that if it retaliates, so will Tehran in its turn and that retaliation would be on a greater scale than the missile strikes from last week. These developments were naturally seen as strongly bullish for oil prices.
However, hours after unconfirmed reports of an Israeli attack first emerged, Reuters quoted an Iranian official as saying that there was no missile strike carried out against Iran. The explosions that were heard in the large Iranian city of Isfahan were the result of the activation of the air defense systems of Iran, the official told Reuters.
Overall, Iran appears to downplay the event, with most official comments and news reports not mentioning Israel, Reuters notes.
The International Atomic Energy Agency (IAEA) said that “there is no damage to Iran’s nuclear sites,” confirming Iranian reports on the matter.
The Isfahan province is home to Iran’s nuclear site for uranium enrichment.
“Brent briefly soared back above $90 before reversing lower after Iranian media downplayed a retaliatory strike by Israel,” Saxo Bank said in a Friday note.
The $5 a barrel trading range in oil prices over the past week has been driven by traders attempting to “quantify the level of risk premium needed to reflect heightened tensions but with no impact on supply,” the bank said, adding “Expect prices to bid ahead of the weekend.”
At the time of writing Brent was trading at $87.34 and WTI at $83.14.
