Rally for 'wrong' reasons? Gold price eyes high levels as Russia-Ukraine tensions get mixed with Fed policy mistake calls - Kitco NEWS | Canada News Media
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Rally for 'wrong' reasons? Gold price eyes high levels as Russia-Ukraine tensions get mixed with Fed policy mistake calls – Kitco NEWS

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(Kitco News) Gold has benefited from its safe-haven appeal as markets assess the Russia-Ukraine risk. And according to MKS PAMP, this geopolitical conflict could have even a more significant impact because of the current macro environment that has investors pricing in a policy mistake by the Federal Reserve.

“The U.S. has the highest inflation since 1982, coinciding with a Fed that is still technically easing (the market incorrectly assumes tapering is tightening, but the Fed is simply adding less liquidity),” said MKS PAMP’s head of metals strategy Nicky Shiels.

With inflation running at new four-decade highs in the U.S., markets are worried that the Federal Reserve has already made another policy mistake by acting too late.

“Markets are shifting from pricing in a past recent Fed mistake (incorrectly reading inflation & calling it transitory) to a potentially new Fed mistake (early recession on aggressive rate hikes or untamable inflation),” Shiels noted.

And considering the flare-up between Russia and Ukraine, the geopolitical situation is looking extra favorable for gold. This is despite geopolitical fears usually being temporary drivers for the precious metal.

“We’ve always noted that geopolitics provides better opportunities to fade gold prices, vs. chasing the buying, but when these headlines occur at a time of 1) such uncertainty around the Fed & inflation, 2) general market angst, and 3) at an advertised technical inflection point, gold could capitalize and find higher ranges for the ‘wrong’ reasons. Higher floors, dip-buying & choppy markets persist,” Shiels explained.



Gold and the Crimea 2014 flare-up vs. now

MKS PAMP also compared gold’s reaction to Russia’s annexation of Crimea in 2014 to how it behaved this time around.

Gold is a war hedge and compared to the climb back in 2014, there is potential for an even more significant move higher following gains of around $80 on this Russia-Ukraine conflict, MKS noted.

“Gold’s recent run-up has been $80 vs. $140 then (during Crimea’s annexation in 2014), on 2.3mn oz of inflows (vs. 8.3mn oz, then). I.E: the ‘price escalation premium’ of $80 is, so far, 4/7th of what it was in 2014, with inflows much more meager, at only 1/4th the size seen back then,” Shiels calculated. “Overall, it’s still too early for bulls to get the poms poms out; prices are constructive with this recent breakup/out (3rd time), but on a historical basis, gold prices are lagging what they can potentially achieve.”

However, a large part of the move higher in gold during the past week was also due to the growing inflation risk, with more investors opting for the safe-haven metal to protect against rising price costs. This adds strength to the geopolitically triggered move higher in the precious metal.

“Gold is likely to put in a fight (vs. de-escalation headlines) given relatively lighter positioning, strong physical demand (or other ‘protection’ currently keeping dips below $1,850 short-lived),” Shiels added.

At the time of writing, April Comex gold futures were trading at $1,870.60, up 0.78% on the day.

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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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