Gold prices break the 4,000 mark, and Fed reserves continue to decline, U.S. government shutdown drives risk aversion demand

Basic news

On Wednesday (October 8, Beijing time), spot gold was trading around US$3,990 per ounce. Spot gold hit a record high of US$3,990.90 per ounce on Wednesday, and U.S. gold futures for December delivery once rose to 4 US$014.6 per ounce, helped by expectations of a rate cut by the Federal Reserve later this month and continued safe-haven demand driven by the U.S. government shutdown; U.S. crude oil traded around US$62.15 per barrel, with oil prices steady on Tuesday as investors weighed OPEC+'s decision to only modestly increase production in November and signs that global supply may be oversupplied.

Focus during the day

Reminder: The non-agricultural data in the fiscal calendar has not yet determined a specific release date. Due to the uncertainty of the US government shutdown negotiations, it will be updated daily for the time being. The specific release date and time need to be paid attention to at any time

Stock Market

US stocks closed lower on Tuesday. The continued US government shutdown prevented the release of economic data. Investors turned to secondary indicators and xmmarkets.cnments from Federal Reserve officials to look for clues about economic weakness and monetary policy.

The three major indexes ended lower after a report released by the Federal Reserve Bank of New York on Tuesday showed that the American people became increasingly worried about the prospects of the job market in September, and recent inflation expectations have also increased. The report received increased attention amid a federal data void as the government shutdown enters its seventh day due to partisan gridlock.

Investors currently have to rely on secondary data released by independent agencies and xmmarkets.cnments from monetary policymakers to judge whether the Federal Reserve will cut interest rates for the second time this year at this month’s policy meeting.

CFRARSam Stovall, chief investment strategist at esearch in New York, said that the New York Fed's report may give traders an excuse to take profits. After all, the S&P 500 Index has risen for seven consecutive trading days. The longer the government shutdown lasts, the greater the uncertainty caused by the lack of economic data.

Economically sensitive sectors performed poorly, including residential construction, real estate, aviation and transportation sectors all underperformed the market.

Paul Nolte, senior wealth advisor and market strategist at Elmhurst Murphy & Sylvest in Illinois, said that the market is still very concerned about artificial intelligence driving everything, but I think this craze is gradually receding.

Fed Governor Milan reiterated his support for continuing to cut interest rates and emphasized the risks of excessive tightening policy.

The Dow Jones Industrial Average fell 0.20% to 46602.98 points; the S&P 500 Index fell 0.38% to 6714.59 points; the Nasdaq Index fell 0.67% to 22788.36 points.

Among the 11 major sectors of the S&P 500 Index, the consumer discretionary sector suffered the largest decline; while the consumer staples and utilities sectors were among the top gainers.

Tesla shares continued their decline, falling 4.5%, after the electric vehicle manufacturer released a lower-priced version of Model Y. AMD rose 3.8% after Jefferies upgraded its rating to "buy" and multiple brokerages also raised their target prices after the xmmarkets.cnpany reached a supply agreement with OpenAI, driving a rebound in technology stocks.

IBM announced a partnership with artificial intelligence startup Anthropic, and its stock price rose 1.5%.

Gold Market

U.S. gold futures surpassed the $4,000 per ounce milestone for the first time on Tuesday, helped by expectations of an interest rate cut by the Federal Reserve later this month and continued safe-haven demand driven by the U.S. government shutdown.

U.S. gold futures for December delivery closed up 0.7%, with a settlement price of $4,004.4, after reaching a high of $4,014.6. Spot gold rose 0.6% to $3,985.82 an ounce, having earlier hit a record high of $3,990.90. The main market for spot gold is the London over-the-counter (OTC) market, which is an indicator of global pricing.

Peter Grant, vice president and senior metals strategist at Zaner Metals, said: "The current safe-haven capital flows are partly due to the government shutdown, and there is no sign that this will be resolved in the short term. So gold is still quite good to buy."

So far this year, gold prices have climbed 51%. Gold's rally has been driven by a variety of factors, including expectations of interest rate cuts, continued political and economic uncertainty, solid central bank buying, gold exchange-traded fund (ETF) inflows and a weaker U.S. dollar.

On Tuesday, the US government shutdown entered its seventh day. This has delayed the release of key economic indicators, forcing investors to rely onLevel and non-governmental data to determine the timing and amplitude of the Federal Reserve's interest rate cut. Meanwhile, political turmoil in France and Japan has shrouded foreign exchange and bond markets for the second consecutive day.

Investors currently expect the Fed to cut interest rates by 25 basis points at this month's meeting and expect another 25 basis points in December.

The People's Bank of China shows that the People's Bank of China has increased its gold reserves for the 11th consecutive month in September.

Spot silver was $47.86 per ounce, down 1.4%; platinum was $1,617.41, down 0.5%; palladium was $1,347.52, up 2.1%. Oil market

Oil prices remained stable on Tuesday, with investors weighing the trade-off between OPEC+'s decision to only moderately increase in production in November and signs of possible oversupply global supply.

The settlement price of Brent crude oil futures fell 0.03% to $65.45 per barrel. The settlement price of U.S. crude oil futures rose 0.06% to $61.73.

The previous trading day, both major contracts rose by more than 1%, as OPEC+ decided to collectively increase production by 137,000 barrels per day from November, a growth rate lower than market expectations.

Economics of the Netherlands International Group (ING) said the move showed that the organization remained cautious in the face of forecasts for the fourth quarter and next year's global supply surplus.

StoneX analyst Alex Hodes pointed out in a report on Tuesday that market sentiment remains sluggish, especially after Saudi Arabia decided to keep its main crude oil official selling price unchanged to Asia, which has not been raised as analysts expected.

At the same time, Abu Dhabi National Oil Corporation said on Tuesday that its indicator Murban crude oil was officially priced at $70.22 per barrel in November, up from $70.10 in October.

In terms of demand, data from the Petroleum Planning and Analysis Team under the Ministry of Petroleum showed that India's fuel demand increased by 7% year-on-year in September.

In terms of supply, the U.S. Energy Information Administration (EIA) said on Tuesday that U.S. crude oil production is expected to reach a record 13.53 million barrels per day this year, up from the previous forecast of 13.44 million barrels per day.

JPMorgan said global oil inventories, including offshore oil storage, increased weekly in September, with a cumulative increase of 123 million barrels per month.

Foreign exchange market

The yen fell to a more than seven-month low against the dollar on Tuesday as market concerns over Japan's fiscal outlook increased. The uncertainty of France's political situation also puts pressure on the euro, and traders are also paying attention to signs of when the U.S. federal government will reopen.

The yen has continued to weaken since Takashi Saemi was elected president of Japan's ruling Liberal Democratic Party last Saturday. Takashi Saemi, who is expected to serve as prime minister of Japan, promised to boost the economy through active fiscal spending and criticized the Bank of Japan's interest rate hike policy.

DRWTrading's Chicago-based strategist Lou Brien said investors will go through a while to try to figure out her policyHow will it affect the exchange rate.

Money market traders currently estimate that the probability of the Bank of Japan raising interest rates at its policy meeting on October 30 is 26%, which is much lower than the approximately 60% chance before Sanae's election victory.

The U.S. dollar rose 1% against the yen in late trading to 151.86 yen. It once hit 151.93 during the session, the highest since February 19.

Nevertheless, some analysts believe the Bank of Japan may continue to raise interest rates to xmmarkets.cnbat relatively high inflation.

Mohamad Al-Saraf, a foreign exchange researcher at Danske Bank, said that the Bank of Japan may stay on hold this month to remain cautious, but in December, they will get more data. I think they will raise interest rates again by then. Inflation is still high, interest rates are still low, and the possibility of another interest rate increase this year still exists. ”

Japan’s Finance Minister said authorities are paying close attention to excessive fluctuations in currency markets. The euro remains fragile after the French Prime Minister resigned on Monday, increasing pressure on President Macron and clouding the prospects for fiscal consolidation.

France may The inability to submit the 2026 budget on time means that parliament needs to pass a temporary bill to authorize government funding from January 1 next year until the full budget is approved.

The euro fell 0.43% in late trading to $1.1659. .46% to 98.57.

The U.S. dollar has weakened overall this year as concerns over worsening U.S. fiscal conditions, rising expectations for a slowdown in economic growth, and President Trump's tariff policies may keep investors away from U.S. assets.

However, this trend has been paused since the end of June, and the U.S. dollar has basically maintained a consolidation trend against most major currencies. DRW’s Brien said that he expects U.S. dollar weakness to resume due to the weakening of the U.S. labor market. The U.S. labor market is weaker than generally expected, and not only next year. Until Powell is replaced by a very dovish Fed chair, I think Fed policy will also be looser than the market currently expects. The current market reaction to the government shutdown is limited, but if the shutdown lasts too long, it may also drag down the dollar, because it will lead to weaker economic performance.

President Trump said on Tuesday that the government plans to cancel several projects due to the ongoing shutdown and will announce details of the layoffs in the next four to five days.

The shutdown has led to the postponement of the closely watched September employment report last Friday, and other related Key data will also be delayed until the government reopens.

A survey released by the New York Fed on Tuesday showed that Americans became more worried about the outlook for the job market in September and also raised their expectations for the short-term path of inflation.

Federal Reserve Governor Milan said on Tuesday that he was more optimistic about the outlook for inflation than others and said the current relative calm in the U.S. bond market supported a rapid rate cut.

International News

Trump met with Carney and once again hinted that he would annex Canada

In ChinaCanadian Prime Minister Carney, who was visiting Washington, held his second meeting with U.S. President Trump at the White House on October 7, local time, since Carney became prime minister. During the two-and-a-half-hour meeting, Canada hopes to reach some important consensus on trade and tariff issues, paving the way for the two countries to eventually reach a new economic and security agreement. In an interview with reporters in the Oval Office, Carney listed some of Trump's achievements during his second term. When Carney said "the most important among many aspects," Trump took advantage of Carney's pause to interject: "And the merger of Canada and the United States." Carney immediately said: "I didn't think about that much." In the past few months, Trump has repeatedly raised the idea of ​​"annexing Canada" and expressed his willingness to achieve this goal through "economic power."

Hamas: Hope to get a concrete xmmarkets.cnmitment from Israel not to restart the conflict

On the evening of October 7, local time, Hamas chief negotiator Khalil Haya said after concluding the second day of negotiations with Israel that the talks with Israel in Sharm el-Sheikh, Egypt "were for responsible negotiations to achieve a ceasefire." Haya appreciated the efforts made by Arab and Islamic countries and other parties to promote the ceasefire in the Gaza Strip. Haya pointed out that the current goal is to end the conflict, exchange prisoners of war, and release Israeli detainees. Hamas hopes to establish a mechanism to ensure a permanent ceasefire and "obtain a concrete xmmarkets.cnmitment from Israel not to restart the conflict."

U.S. consumer credit growth was the slowest in six months

Affected by declining credit card balances, U.S. consumer borrowing grew at the slowest pace in six months in August. Data released by the Federal Reserve on Tuesday showed that total outstanding consumer credit increased by $363 million in August, after July's data was revised to an increase of $18.1 billion. The previous median estimate was for an increase of $14 billion. Revolving credit card and other credit card balances fell by about $6 billion, giving back some of July's strong growth. Non-revolving credit for things like car purchases and tuition increased by $6.3 billion. The report does not include mortgage loans.

Sources said that the current round of ceasefire negotiations in Gaza is still "difficult and xmmarkets.cnplicated"

On the 7th, indirect negotiations between the Palestinian Islamic Resistance Movement (Hamas) and Israel entered the second day. Sources close to Hamas said the current round of ceasefire negotiations in Gaza remain "difficult and xmmarkets.cnplex." The 7th marks the second anniversary of the outbreak of a new round of Palestinian-Israeli conflict. Hamas issued a statement on the same day stating that the organization is xmmarkets.cnmitted to achieving a xmmarkets.cnprehensive and permanent ceasefire and the withdrawal of Israeli troops from the Gaza Strip. However, the following conditions must be met in the ceasefire agreement: ensuring the smooth delivery of humanitarian and relief supplies, ensuring the return of displaced persons to their homes, immediately launching a xmmarkets.cnprehensive reconstruction process under the supervision of the Palestinian agency xmmarkets.cnposed of independent technocrats, and reaching a fair agreement on the exchange of detained persons. Sources said Hamas has yet to respond to several conditions that Israel considers necessary for a xmmarkets.cnprehensive ceasefire, particularly those related to the disarmament of Hamas and the future governance of Gaza. The source added that the technical group is currently discussing the Israeli delegation’s proposalA detailed map of the Israeli evacuation area handed over, as well as a list of Palestinian prisoners planned to be released by Israel. In addition, Hamas introduced the concept of mechanisms to release Israeli detained personnel.

Putin: It is necessary to ensure that all goals set by special military operations are achieved unconditionally

Russian President Putin said when meeting with the Russian Ministry of Defense, General Staff and xmmarkets.cnmander of the Special Military Operations Force on the 7th that the strategic initiative is currently fully in the hands of the armed forces of the Russian Federation. National defense enterprises deliver various high-precision weapons, missiles, ammunition and military equipment as planned. At the same time, the research and development of the latest xmmarkets.cnbat weapons and their fleet installation are advancing at an advanced speed. Putin pointed out that the Ukrainian army continued to retreat throughout the contact line. Ukraine has launched a crackdown on pure civil facilities in deep areas of Russia in order to show its achievements to its Western "sponsors". Russia's mission is to ensure the safety of Russian citizens and the security of strategic facilities and civil infrastructure, including energy facilities. Putin stressed that the overall mission of the Russian army remains unchanged - it is necessary to ensure that all goals set by special military operations are achieved unconditionally.

The continued decline in bank reserves suggests that the Fed may be close to ending balance sheet shrink

The funding pressure in the US currency market remains high, while the Fed's bank reserves are gradually decreasing, which indicates that the central bank may be approaching the end of balance sheet shrink. The overnight financing market for daily lending between banks and asset management xmmarkets.cnpanies has been volatile since early September. Ultra-short-term interest rates, which have steadily risen as the Ministry of Finance replenishes cash reserves, remain stubbornly high. Therefore, the spread between the overnight financing rate (SOFR) and the Federal Reserve benchmark rate—the effective rate for federal funds—is close to the widest since the end of 2024. Meanwhile, the latest data show that bank reserves have dropped to just below $3 trillion, the lowest since January.

The European Parliament passed a resolution that allows the suspension or permanent suspension of visa-free treatment in some countries

On the 7th local time, the European Parliament passed a resolution with 518 votes in favor, 96 votes against and 24 abstentions at a plenary meeting held in Strasbourg. The resolution allows the EU to temporarily or permanently suspend the visa-free system for third countries who are eligible for short-term visits to the Schengen District. Currently, dozens of countries and regions including the United States, Israel, Australia and other countries have visa-free agreements with Schengen countries. The latest changes stipulate that their visa may be suspended if certain threats occur. The new regulations also allow government officials in violation of regulations to be restricted separately from visa-free treatment. The initial suspension of the process may be temporary, but if the violation is not corrected, it may be transferred to permanent suspension. The EU also considers that if Georgia fails to fully xmmarkets.cnply with the standards during the October 26 parliamentary elections, it will temporarily suspend the visa-free system with Georgia.

Federal Daly: AI bubble does not threaten financial stability for the time being

Mary, President of the Federal Reserve Bank of San Francisco? Daly recently said that the potential artificial intelligence (AI) bubble in the stock market may not threaten overall financial stability.Daly stressed: "We should be wary of the idea of ​​classifying all bubbles as financial bubbles. There are currently no signs that AI bubbles fall into this category." She pointed out that from a research and economics perspective, investment in the AI ​​field is more like a "boost bubble" - even if investors do not get all the returns expected by early enthusiasts, they can leave fruitful results rather than gain nothing. Specifically, Daly gave three reasons: First, the AI ​​capital expenditure boom is driven by large financially sound xmmarkets.cnpanies, rather than the high-risk startup wave, which does not pose a threat to financial stability; second, even if investors are too enthusiastic, it can help the development of this transformative technology, similar to the Internet bubble still remains after the bursting of the Internet bubble; third, AI may be transformative like the iPhone, releasing unknown opportunities and improving overall economic productivity.

Domestic News

The People's Bank of China increased its holdings of gold for the 11th consecutive month

The People's Bank of China announced on the 7th that China's gold reserves at the end of September were 74.06 million ounces (about 23.03523 tons), an increase of 40,000 ounces (about 1.24 tons) month-on-month, marking the 11th consecutive month of gold increase. At the end of August, gold reserves were 74.02 million ounces.

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