Pound, gold and oil prices in focus: commodity and currency check

Pedro Goncalves
·Finance Reporter, Yahoo Finance UK
4-min read
In this article:

Sterling has lost momentum against the dollar after a week of gains as the US currency rose following confirmation that the US economic activity expanded by 3% year-on-year in the second quarter of 2024.

“GBP/USD remains side-lined around its $1.3412 September 2022 low around which it ran out of steam, as expected,” Alex Rudolph, market analyst at IG, said.

Read more: FTSE 100 LIVE: European stocks rise as China stocks post best week since 2008

"Were it to be overcome, the $1.3515 December 2019 peak would be eyed next, though. Support remains to be seen at the $1.3267 August high,” he added.

Against the euro, the pound (GBPEUR=X) pushed higher, trading at 1.2009.

Barclays has reaffirmed its bullish stance on the pound, stating it is maintaining its "long GBP exposure versus the EUR" following last week’s Bank of England (BoE) Monetary Policy Committee (MPC) meeting.

The bank highlighted the BoE’s "hawkish hold" as a key factor driving demand for the pound. The central bank opted to keep interest rates unchanged, while signalling the potential for further tightening in the future.

Barclays said this commitment to controlling inflation, even as price growth shows signs of slowing and economic activity remains resilient, sets the BoE apart from other major central banks that are nearing the end of their rate-hiking cycles.

According to Barclays, this stance provides the pound with a "carry advantage", making it an appealing currency for investors seeking higher returns. The bank also anticipates a "slow and relatively shallow cutting cycle" in the future, suggesting that any rate cuts will be gradual, offering continued support for the currency.

Gold prices held firm on Friday after hitting a record high in the previous session, driven by increasing market expectations of another substantial US interest rate cut later this year. Investors are now turning their attention to a crucial inflation report that could provide further guidance for the precious metal's trajectory.

Spot gold remained stable at $2,665 at the time of writing, following a peak of $2,685 on Thursday – the highest price on record. Gold prices have surged by over 29% year-to-date, repeatedly breaking records on the back of US rate-cut anticipation, robust safe-haven demand, and significant central bank purchases.

Meanwhile, US gold futures saw a slight dip, edging 0.4% lower to $2,684 per ounce.

Read more: The top gold funds to invest in as prices soar

The primary catalysts for gold's rally this year include mounting speculation of further interest rate cuts by the US Federal Reserve, as well as increased demand for gold as a safe-haven asset amid economic volatility. Central bank buying has also played a significant role in pushing gold prices to new heights.

With US inflation data to be published later today, market participants will be closely watching for signals that could further influence the Fed’s rate path and, in turn, gold’s price outlook.

Oil prices are down, with Brent crude slipping by 0.2% to $70.94 per barrel, while the US West Texas Intermediate (CL=F) lost 0.3% to $67.50 at the time of writing.

Both benchmarks are poised for weekly declines, as the market grapples with increased output expectations from Libya and OPEC+ against new stimulus measures from China.

Brent crude has shed approximately 3.7% this week, while WTI is set for a steeper drop of nearly 5.7%, reflecting the market's focus on supply-side pressures. "Oil markets are paying more attention to Libya and OPEC this week, despite China's stimulus efforts," said Priyanka Sachdeva, senior market analyst at Phillip Nova.

OPEC+’s recent decision to raise production has added to the bearish sentiment in a market already struggling with weakening demand. However, China’s central bank moved to inject liquidity and lower interest rates in a bid to boost growth towards the government's 5% target for 2023. Further fiscal measures are expected ahead of China's National Day on 1 October, though uncertainty remains over whether these actions will significantly increase fuel demand.

OPEC+ has been cutting output by 5.86 million bpd, but plans to reverse 180,000 bpd of those cuts in December. Reports suggest Saudi Arabia, OPEC’s de facto leader, may have abandoned its $100 price target in favour of regaining market share, causing a 3% price drop earlier in the week. However, Saudi officials have denied targeting a specific price, stating the increase in output does not signal a significant policy shift.

Meanwhile, the FTSE 100 (^FTSE) opened in the green, up by 0.2%. For more details check our live coverage here.

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