Latest news with #safeHaven
Yahoo
an hour ago
- Business
- Yahoo
Gold prices should hit $4,000 as U.S. deficits may overshadow the Israel-Iran conflict, BofA says
Wars and geopolitical conflicts typically aren't long-term growth drivers for gold prices, according to analysts at Bank of America, which sees the precious metal reaching $4,000 an ounce over the next year. Despite the Israel-Iran conflict heating up, the outlook for gold is likely to be swayed more by the U.S. budget deficit. Gold is often seen as a safe-haven asset during times of global turmoil, but wars and geopolitical conflicts typically aren't long-term growth drivers for gold prices, according to analysts at Bank of America. In fact, gold has actually dipped 2% in the week since Israel began its airstrikes on Iran. Meanwhile, tensions are ramping as reports Saturday said B-2 stealth bombers are headed over the Pacific. That's as President Donald Trump weighs involvement in the conflict, potentially with bombers dropping massive 'bunker busters' on heavily fortified Iranian nuclear sites. In a note on Friday, BofA analysts said they expect gold prices to reach $4,000 per ounce in the next year, representing an 18% jump from current levels. 'While the war between Israel and Iran can always escalate, conflicts are not usually a sustained bullish price driver,' they wrote. 'As such, the trajectory of the US budget negotiations will be critical, and if fiscal shortfalls don't decline, the fallout from that plus market volatility may end up attracting more buyers.' The Israel-Iran conflict has drawn attention away from Trump's tax-and-spending bill making its way through Congress. While the House and Senate versions have key differences that need to be reconciled before it can become law, the bill's fiscal impact is still expected to add trillions of dollars to U.S. deficits in the coming years. That's raised fears about the sustainability of U.S. debt and global demand for the flood of Treasury bonds that will be issued to finance all the red ink. And amid Trump's trade war, the U.S. dollar—traditionally viewed as a haven asset—has suffered as well, slumping against other top currencies and providing more upside to gold. Central banks around the world have dumped $48 billion in Treasuries since late March alone. At the same time, central banks keep buying gold, continuing a trend that began years earlier. A recent survey from the World Gold Council found that geopolitical instability and potential trade conflicts are chief reasons why central banks in emerging economies are shifting toward gold at a much faster rate than those in advanced economies. BofA estimated the central banks' gold holdings are now equivalent to just under 18% of outstanding U.S. public debt, up from 13% a decade ago. 'That tally should be a warning for US policymakers. Ongoing apprehension over trade and US fiscal deficits may well divert more central bank purchases away from US Treasuries to gold,' analysts warned. Meanwhile, the market still doesn't appear to be overexposed to gold. BofA estimated that investors have allocated just 3.5% of their portfolios to gold. And regardless of how Congress ends up rewriting the budget bill, analysts said deficits will remain elevated. 'Therefore, market concerns over fiscal sustainability are unlikely to fade no matter the result of Senate negotiations,' BofA predicted. 'Rates volatility and a weaker USD should then keep gold supported, especially if the US Treasury or the Fed are ultimately forced to step in and support markets.' This story was originally featured on
CNA
3 days ago
- Business
- CNA
Dollar trades lower as investors focus on Israel-Iran conflict ahead of Fed decision
NEW YORK/LONDON :The U.S. dollar traded mostly lower against the yen and edged higher against the Swiss franc on Wednesday as fighting between Israel and Iran spurred investors to scoop up safe havens, while a pending Federal Reserve rates decision restrained volatility. Israel has bombarded arch-enemy Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic. The U.S. military is also bolstering its presence in the region, Reuters reported, stirring speculation about U.S. intervention that investors fear could widen the conflict in an area with critical energy resources, supply chains and infrastructure. Iranian Supreme Leader Ayatollah Ali Khamenei said in a statement read by a state television presenter on Wednesday that his country would not accept U.S. President Donald Trump's call for an unconditional surrender. The dollar has resumed its role as a safe haven, having gained around 1 per cent against both the Japanese yen and Swiss franc since last Thursday. On Wednesday, the U.S. currency took a breather, edging fractionally lower against the yen and the franc and more noticeably so against the euro and the pound. "A lot of the (dollar's) safe haven appeal has faded, and that's why the move has been relatively limited so far," said Matt Weller, global head of market research at StoneX. "I think traders are just coming around to that realization and looking ahead to what I expect to be a very dovish hold from the Federal Reserve this afternoon." Against a basket of six other major currencies, the dollar is still down around 8 per cent so far this year, as confidence in the U.S. economy and the reliability of Trump's administration as a trading and diplomatic partner has faded. With the Fed's decision on interest rates just hours away and U.S. markets closed on Thursday for the Juneteenth federal holiday, activity in currencies was muted. Against the yen, the dollar fell 0.27 per cent to 144.88 and was steady against the franc at 0.8169 francs. NO CHANGE FROM THE FED Traders expect the U.S. central bank to leave borrowing costs unchanged and will parse what Chair Jerome Powell says about the outlook for growth and inflation. Uncertainty was already running high and recent data have begun to show the impact of Trump's erratic approach to trade and tariffs. The escalation of conflict in the Middle East, and the surge in crude oil prices to about $75 a barrel, have further complicated the picture for policymakers. "I think everyone had expected they would shift dovish, but just given the CPI report and some of the underlying employment data recently, with the Iran situation kicking off and oil prices higher, we'll see how the Fed threads the needle," said Brad Bechtel, global head of FX, at Jefferies. "But I think most would expect they're going to be keeping their options open, remaining a little more cautious, which probably doesn't impact the dollar too much." The dollar kept to weaker ranges even after data showed the number of Americans filing new applications for unemployment benefits fell, but stayed elevated. Meanwhile, the Swedish central bank cut rates as anticipated, leaving the crown a touch weaker against the euro, which rose 0.57 per cent to 11.0300 crowns. On Thursday, the Swiss National Bank, the Bank of England and the Norges Bank will deliver their respective rate decisions. The pound rose 0.25 per cent to $1.3461, having received an early boost from data showing inflation cooled no more than expected to an annual rate of 3.4 per cent in May, ahead of the BoE decision. The euro was also up 0.26 per cent at $1.151. In the background, an area of frustration for investors was a Group of Seven meeting in Canada that yielded little on the tariff front ahead of Trump's early-July deadline for additional import levies.
Zawya
4 days ago
- Business
- Zawya
Dollar wobbles as investors monitor Israel-Iran conflict ahead of Fed decision
The U.S. dollar wavered against most major currencies on Wednesday, as fighting between Israel and Iran left investors nervous ahead of a keenly awaited Federal Reserve decision on interest rates later in the day. Israel has pounded Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic. The U.S. military is also bolstering its presence in the region, Reuters reported, sparking speculation of U.S. intervention that investors fear could widen the conflict in an area replete with energy resources, supply chains and infrastructure. Against this backdrop, the dollar has found support as a safe haven, firming roughly 1% against the Japanese yen, Swiss franc and euro since Thursday and helping it to shave declines from earlier in the year. The greenback had lost more than 8% so far this year due to eroding confidence in the U.S. economy due to President Donald Trump's trade policies. "The dollar is still a safe haven because of its depth and liquidity, so, yes the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank. "But in a scenario of big risk aversion, the dollar will still gain support but maybe not to the same extent it has managed in the past." The dollar wavered between small gains and losses against the yen and had touched a one-week top in early Asia trading hours. The greenback was last down 0.2% and fetched 144.90 yen. The Swiss franc was flat at 0.816 per dollar and the euro edged up 0.2% at $1.150. A broader index tracking the greenback against six other currencies slipped 0.1% after a 0.6% jump in the previous trading session. An increase in crude oil prices to about $75 a barrel has also weighed on the euro and yen given the European Union and Japan are primarily net crude importers as opposed to the U.S., which is a net exporter. Investors' next point of focus is the Fed, which is set to decide whether to change its interest rates. Recent data showed the U.S. economy was slowing as Trump's erratic policymaking style increased uncertainty. Higher crude prices due to conflict in the Middle East are also complicating the Fed's task. Traders expect the central bank to leave borrowing costs unchanged and will be keen to hear the Fed's outlook for interest rates this year and the overall health of the economy. "The labour market is definitely their key attention," said Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price. "If we see an acceleration of people being fired, that would be (reflected in) weekly jobless claims and that could trigger the threat to reassess. But I would still expect inflation to be more on their radar and the labour market to remain resilient in the short term." A weekly report on jobless claims is expected later in the day out of the U.S., while on the policy front, central bank decisions are also due from Switzerland, Norway and Sweden later in the week. In Britain, sterling firmed 0.26% to $1.346 as markets assessed data that showed inflation cooled as expected to an annual rate of 3.4% in May, ahead of the Bank of England's policy verdict on Thursday. An area of frustration for investors was a Group of Seven meeting in Canada yielding little on the tariff front, ahead of Trump's early July deadline for additional levies. Trump said Japan was being "tough" in trade talks and the European Union had not yet offered what he considered a fair deal. (Reporting by Johann M Cherian in Bengaluru; Editing by Christopher Cushing and Jamie Freed)
CNA
4 days ago
- Business
- CNA
Dollar wobbles as investors monitor Israel-Iran conflict ahead of Fed decision
The U.S. dollar wavered against most major currencies on Wednesday, as fighting between Israel and Iran left investors nervous ahead of a keenly awaited Federal Reserve decision on interest rates later in the day. Israel has pounded Iran over the past six days to halt its nuclear activity and has asserted the need for a change of government in the Islamic Republic. The U.S. military is also bolstering its presence in the region, Reuters reported, sparking speculation of U.S. intervention that investors fear could widen the conflict in an area replete with energy resources, supply chains and infrastructure. Against this backdrop, the dollar has found support as a safe haven, firming roughly 1 per cent against the Japanese yen, Swiss franc and euro since Thursday and helping it to shave declines from earlier in the year. The greenback had lost more than 8 per cent so far this year due to eroding confidence in the U.S. economy due to President Donald Trump's trade policies. "The dollar is still a safe haven because of its depth and liquidity, so, yes the structural forces are diluting the dollar safe-haven activities, but they're not eroding them completely," said currency strategist Rodrigo Catril at National Australia Bank. "But in a scenario of big risk aversion, the dollar will still gain support but maybe not to the same extent it has managed in the past." The dollar wavered between small gains and losses against the yen and had touched a one-week top in early Asia trading hours. The greenback was last down 0.2 per cent and fetched 144.90 yen. The Swiss franc was flat at 0.816 per dollar and the euro edged up 0.2 per cent at $1.150. A broader index tracking the greenback against six other currencies slipped 0.1 per cent after a 0.6 per cent jump in the previous trading session. An increase in crude oil prices to about $75 a barrel has also weighed on the euro and yen given the European Union and Japan are primarily net crude importers as opposed to the U.S., which is a net exporter. Investors' next point of focus is the Fed, which is set to decide whether to change its interest rates. Recent data showed the U.S. economy was slowing as Trump's erratic policymaking style increased uncertainty. Higher crude prices due to conflict in the Middle East are also complicating the Fed's task. Traders expect the central bank to leave borrowing costs unchanged and will be keen to hear the Fed's outlook for interest rates this year and the overall health of the economy. "The labour market is definitely their key attention," said Thomas Poullaouec, head of multi-asset solutions APAC at T. Rowe Price. "If we see an acceleration of people being fired, that would be (reflected in) weekly jobless claims and that could trigger the threat to reassess. But I would still expect inflation to be more on their radar and the labour market to remain resilient in the short term." A weekly report on jobless claims is expected later in the day out of the U.S., while on the policy front, central bank decisions are also due from Switzerland, Norway and Sweden later in the week. In Britain, sterling firmed 0.26 per cent to $1.346 as markets assessed data that showed inflation cooled as expected to an annual rate of 3.4 per cent in May, ahead of the Bank of England's policy verdict on Thursday. An area of frustration for investors was a Group of Seven meeting in Canada yielding little on the tariff front, ahead of Trump's early July deadline for additional levies.
Globe and Mail
5 days ago
- Business
- Globe and Mail
Gold rises as Israel-Iran fighting, Trump's evacuation call sparks demand
Gold rebounded on Tuesday as heightened geopolitical uncertainty stemming from Israel-Iran fighting and U.S. President Donald Trump's call to evacuate Tehran led investors to seek safe-haven assets. Spot gold rose 0.4 per cent at US$3,396.67 an ounce, as of 0239 GMT, after dropping more than 1 per cent on Monday. U.S. gold futures were steady at US$3,416.30. 'Market sentiment continues to swing between escalation and de-escalation regarding events in the Middle East, and these back-and-forth sentiment shifts are what is driving the gold price's moves either side of the US$3400 level,' KCM Trade Chief Market Analyst Tim Waterer said. The fifth consecutive day of fighting between Israel and Iran saw Israel strike Iran's state broadcaster on Monday, while the head of the U.N. nuclear watchdog reported extensive damage to Iran's largest uranium enrichment facility. Trump, returning early from the G7 summit in Canada Monday night, urged Iranians to evacuate Tehran, citing the country's rejection of a nuclear weapons development curb deal. Reports also indicated that Trump had requested the national security council to remain prepared in the situation room. Gold is considered a safe-haven asset during times of geopolitical and economic uncertainty. 'There is enough prevailing uncertainty surrounding both tariff wars and actual wars to buttress the gold price and keep it within sight of a potential return to US$3,500,' Waterer said. Investors are also looking forward to U.S. Federal Reserve meeting scheduled to start later in the day, with decision on Wednesday. The Fed is expected to hold rates steady but the focus yet again will be on the path its Chair Jerome Powell charts out for future rate cuts. Traders are currently pricing in two cuts by this year-end. Elsewhere, spot silver was up 0.3 per cent at US$36.41 per ounce, platinum rose 0.6 per cent to US$1,251.20, while palladium edged up 0.2 per cent to US$1,031.68.
