Gold skyrockets to record close, Bitcoin above $67k

Headlines

* Gold reached a record high $2,115 building on Friday’s gains

* Stocks subdued as megacaps struggle, Tesla sinks

* Fed’s Powell may double down on “no rush to cut” message

* UK traders are wary that Hunt’s Budget risks revving inflation

FX: USD edged loweras wekicked off a busy week full of risk events. This follows two straight weeks of losses after the cycle highs in mid-February. A softer than expected ISM Manufacturing print on Friday was notable as weakness in new orders saw them drop into contractionary territory. The 200-day SMA sits at 103.73 on the dollar index. Focus is on today’s ISM services data.

EUR pushed above its 200-day SMA at 1.0829 to start ECB week. Prices need to climb above a major Fib retracement level at 1.0875 and then the swing spike high at 1.0888 to continue the momentum higher. The ECB will stand pat on rates but hints on a June rate cut are key. A dovish hold will see 1.0793 support tested.

GBP advanced closer to February highs just above 1.27. Attention is on Wednesday’s UK Budget after much speculation about the Chancellor delivering a smaller fiscal package than he would have liked. Excessive loosening of fiscal policy could see rates kept higher for longer and complicate the BoE’s monetary policy easing.

USD/JPY moved higher as US yields tried to claw back last week’s dip. Initial resistance sits at 150.88, the recent high. Above here is intervention territory with the October 2022 peak at 151.94. Today’s Tokyo CPI may point to an inflation rebound.

Both AUD and NZD underperformed on muted risk sentiment. USD/CAD held in the range in spite of the soft risk mood. Focus is on the midweek BoC meeting as markets mull rate cut timing risks. Near-term support is 1.3538 with last week’s high above at 1.3606.

Stocks: US equities fell after making fresh intraday record highs again in the broad S&P 500. The benchmark closed 0.12% lower at 5,130. The Nasdaq 100 lost 0.42% to finish at 18,226. The Dow Jones settled 0.25% down at 38,989. Mixed performance in the “Magnificent Seven” continued. In fact, it really is no longer a Mag 7 group, with only a few stocks now up on the year. Tesla closed 7.16% lower after China sales slumped last month, Google lost 2.81% and Apple was down 2.54%. The latter was hit with a €1.8bn fine for breaking EU law over music streaming. All three closed below their 200-day SMAs. Meanwhile Nvidia topped $850 as its incredible advance showed no signs of stopping. That extended its y-t-d gains to 74%.

Asian futures are pointing lower. APAC stocks traded ahead of an event-packed week. The ASX 200 initially printed a record high before pulling back. The Nikkei 225 advanced beyond 40,000 of the first time. Notably, bullish semiconductor momentum extended to Japan with numerous chipmaking manufacturers riding the AI wave. An influx of foreign investors, weaker yen and an alternative to China’s depressed markets are also strong drivers.

Gold surged above $2,100 as bugs built on Friday’s initial strong advance. The record intraday high, made at the start of December, is the spike top at $2,148.

Day Ahead – Tokyo CPI, US ISM Services

Tokyo inflation data is seen as a leading indicator for national price trends. We will be watching to see if there is a further slowdown after core CPI cooled for a third month in a row in January to its lowest in nearly two years. Energy and utility costs were to blame. We’ve had mixed comments from BoJ officials recently with hopes for policy normalisation slightly dashed by Governor Ueda’s more dovish stance at the end of last week. An April BoJ rate hike is still heavily priced in.

The US ISM services print is predicted to ease modestly to 53.3. But we note the recent PMI data fell to three-month lows reflecting the pullback in rate cut bets. Eyes will also be on the prices paid element which has been falling in the PMI figures and at a level consistent with the Fed hitting its 2% inflation target.

Chart of the Day – Gold powers to higher

Gold closed at another record high yesterday after a mildly softer dollar triggered further strong technical buying. Interestingly, Treasury yields found some support after rolling over on Friday. The 10-year Treasury has bounced off its 200-day SMA at 4.22%

We have previously said gold headwinds like lower rate cut expectations, dollar and yield strength should have pushed the metal lower. We’ve also seen continued selling from investors in ETFs. However, strong physical demand and low short-selling appetite at a time of heightened geopolitical tensions have supported bugs. Prices are now overbought after two big days of buying so some consolidation should be expected. Initial support sits at $2,098 with major retracement at $2,066.

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