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North American News

Emini S&P futures finish down 13.75 points

  • I wouldn’t read too much into that

The US is closed for holiday today but futures markets were — at least until now.

They finished down 13.75 points after a 40-point gain on Friday.

US independence day holiday keep markets in check

  • It’s a holiday in the United States

It’s a holiday in the USA. Happy independence day to all our American readers.

Normally, that would keep global markets very quiet but that hasn’t exactly been the case so far this week. The pound is continuing its rebound from late last week and is near the June 30 highs.


Commodities

Gold Price Forecast: XAU/USD holds in the quiet before the storm

  • Gold is range-bound in a relatively quiet holiday trade on Monday. 
  • A break of Monday’s lows could be the catalyst for a long squeeze and open prospects of a significant move to the downside. 
  • The Fed minutes and Nonfarm Payrolls are eyed as potential catalysts. 

At $1,807.17, the gold price is slightly underwater in the midday North America session and holiday markets. Bond markets have been closed for the US Independence Day holiday but the greenback has seen two-way action which has both supported and sunk gold at the start of the week. 

Despite being down on the day, the gold price remains above its lowest level scored since early February which was made on Friday amid a risk-off environment that had supported the greenback. The yellow metal was also pressured after India unexpectantly increased its import tax after a ballooning trade gap pushed the rupee to a record low. ”This could weaken demand just as outflows from gold-backed ETFs pick up,” analysts at ANZ bank argued. ”Rising inflation has raised the likelihood that central banks will aggressively hike rates, dampening the appeal of the precious metal.”

Despite the yellow metal’s safe-haven allure, gold is a non-interest-bearing asset class which is keeping a lid on advancements in gold at times of risk-off. ”Gold prices have disconnected altogether from market pricing for Fed hikes over the past month, and have instead grown their relationship with the USD, pointing to a smaller magnitude of idiosyncratic flows for the yellow metal,” analysts at TD Securities have argued. 

”Liquidity is being sapped from global markets, and gold flows have not been spared. After all, the massive amount of potentially complacent speculative length from proprietary traders in the yellow metal does not appear to be associated with a Fed narrative nor with a stagflationary view of the world, considering that this length was accumulated as early as 2020,” the analysts explained, saying, ”in turn, while the bias remains to the downside in gold, participants will need a catalyst to shake out the complacent longs in precious metals.”

Meanwhile, the US dollar at the start of the week was weaker until the start of the New York session, bleeding out from the two-week high made on Friday. Reports that the White House will announce an easing of some Chinese tariffs later this week in an attempt to dampen elevated inflation helped inject some optimism back into markets on Monday.

Additionally, we had data on Friday that showed euro zone inflation was surging to another record. This has hardened the case for the European Central Bank to raise interest rates later this month for the first time in a decade. However, moderate action is expected in comparison to the Fed and the divergence between the two central banks could be perceived to be more favourable for the US dollar in the medium term. 

For the week’s calendar, Nonfarm Payrolls is expected to show that Employment likely continued to advance firmly in June but at a more moderate pace after three consecutive job gains of around 400k in March-May, analysts at TD Securities said.

Meanwhile, the minutes of the Federal Reserve’s June meeting will also be eyed. 

”Persistent high CPI inflation and nascent signs of de-anchoring inflation expectations forced the Fed to amp the pace of rate tightening. The meeting minutes are likely to offer further colour around the Fed’s more hawkish reaction function,” the analysts at TD Securities said. 

Silver Price Forecast: XAG/USD steady around $19.95 amidst a mixed mood and a US holiday

  • US Traders are on holiday due to US Independence day, so most assets trade within familiar ranges.
  • Silver price is subdued and remains negative, spurred by depressed precious and base metal prices.
  • Silver Price Forecast (XAGUSD): Positive divergence in the daily chart could open the door for further gains, as buyers target $20.45.

Silver (XAGUSD) is under pressure on Monday, amidst a liquidity-thin trading session, on the observance of the US Independence day. Portraying the aforementioned is XAGUSD which stays within a narrow $19.82-$19.88 range during the North American session. At the time of writing, XAGUSD is trading at $19.95.

Silver price remains below $20.00, influenced by the fall in gold and base metals

The sentiment is mixed, as portrayed by rising equities except for the Dax 40, while safe-haven peers drop in the FX space. The greenback is almost flat, while the US bond market will remain close. That said, US Treasury yields remained parked, while the silver price fell last Friday to a new 2-year low at around $19.38.

Despite that, the XAGUSD formed a hammer last Friday, which means that the silver price might be headed to the upside, and might re-test the May 13 swing low at $20.45. But first, silver buyers must lift the white metal price above the July 1 high at $20.30.

In the meantime, the US Dollar Index, a measure of how the US dollar performs against a basket of six rivals, barely climbs 0.06% and sits at 105.186.

Commerzbank analysts wrote that the gold/silver ratio has risen to nearly 90, meaning that the XAGUSD price is low compared to gold. They added that silver was being dragged down by falling gold prices and stated: “is being additionally depressed by the very weak base metals prices – this is because silver is not only an investment metal but to an equal extent also an industrial metal.”

In the week ahead, the US economic calendar will feature on Wednesday the US ISM Non-Manufacturing PMIs for June, Fed speaking with New York Fed President John Williams, and the FOMC’s last meeting minutes.


EU News

European equity close: UK takes the lead in the new month

  • Closing changes for the main European bourses
  • Stoxx 600 +0.6%
  • UK FTSE 100 +1.0%
  • German DAX -0.1%
  • French CAC +0.5%
  • Italy MIB+0.2%
  • Spain IBEX -0.1%

Other News

ECB’s Nagel: It’s virtually impossible to establish whether widened spread is fundamental

  • Comments from Nagel
  • Cautions against using monetary policy to limit risk premia of indebted states
  • Monetary policy measures to combat fragmentation can be justified only in exceptional circumstances
  • Anti-fragmentation tool must have narrowly-defined conditions and must be strictly temporary
  • De-anchoring of inflation expectations has to be prevented no matter what
  • Our current focus must be on very-high inflation rates

China property developer Shimao did not make offshore payments due (circa $1bn)

Senior notes issued by the firm matured on 3 July 2022.

  • principal amount & accrued and unpaid interest became due and payable

The Company has not made payment (as at the date of this announcement on July 3 in Hong Kong)


Cryptocurrency News

Ethereum climbs more than 5% as crypto tries to fight back

Ethereum is showing some life today as part of a broader crypto rebound to start the week. It traded as low as $1043 early in Europe but is up to $1123 and up 5.2% on the day.

That doesn’t change the ugly decline since the start of April but it’s a sign of life.

The crypto lending space is getting cleaned out at the moment and there are lingering fears that there will be more shoes to drop as a result of the price drop/3AC implosion. The lender Vauld today froze withdrawals and hired a restructuring team.

The hope with any bottoming trade is that all the bad news is out there. The fear is that there will be more troubles to come, especially after Sam Bankman-Fried said other firms are effectively bankrupt.

Given that, it’s a fertile time for rumors and they were spreading quickly on the weekend with social media users urging others to pull their coins from exchanges. I imagine the busiest teams at most firms right now are the ones processing withdrawals.

Despite all that, the price of ETH is up today and at a five-day high. If something can’t go down on bad news and sentiment, then maybe the sellers are exhausted.

US media – “Bill to grant crypto firms access to Federal Reserve “

Washington Post with the report, in brief:

  • a proposal to regulate the crypto industry introduced in June would force the Federal Reserve to grant so-called master accounts to certain crypto firms seeking them from the central bank. The accounts give holders access to the Fed’s payment system, allowing them to settle transactions for clients without involving a separate bank.

WaPo describe the proposal, part of a bill introduced to the US Congress, as “little-noticed”.