Pound, gold and oil prices in focus: commodity and currency check
Sterling has pushed higher against the dollar to secure three consecutive months of gains against the US currency as it recaptured the 1.3400 threshold to stay at the highest level since March 2022.
The British pound is on track for additional gains, buoyed by a robust UK economy and the Bank of England’s measured approach to interest rate cuts, according to insights from leading investment banks.
Currently trading at approximately $1.3421, the pound is expected to rise to $1.35 by year-end, as predicted by Bank of America and Barclays. Goldman Sachs has set an even more optimistic target, forecasting a climb to $1.40 over the next 12 months.
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Sterling has emerged as the top performer among the G10 currencies this year, appreciating over 5% against the dollar and 4% against the euro. Its strong rally began in late April, following a brief dip below $1.23.
On a trade-weighted basis, the pound is at its highest level since the UK voted to leave the EU in 2016, now just 2% shy of its value on the referendum’s eve.
The pound has gained from a weaker dollar, which dipped on Friday following the release of US inflation data indicating a decrease in price pressures for August.
Against the euro, the pound (GBPEUR=X) lost momentum, trading slightly lower at the time of writing, at 1.1978.
Gold prices declined on Monday, reversing the strong gains seen last week as increased safe-haven demand prompted a significant rally in the yellow metal. Investors are now closely monitoring developments in the Israel-Hamas conflict, particularly the potential for regional escalation.
Following a surge of over 5% in the previous week, gold experienced some profit-taking. The onset of the Israel-Hamas war had driven investors toward safe-haven assets, but the market appears to be recalibrating.
Spot gold remained dipped 0.34% to $2,654 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 to $2,677 per ounce.
Read more: UK GDP grows less than first thought over spring
The appeal of gold is further constrained by a stronger US interest rate outlook. Last week’s inflation data, which exceeded expectations, reinforced the Federal Reserve’s hawkish stance, suggesting that interest rates may remain elevated for an extended period. This persistent high rate environment has weighed on gold prices over the past year and is likely to limit upward momentum in the metal.
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“The spot gold price fell back on Friday but finished off the lows. The strong rally over the past month has lifted it to new highs, with little sign at present of a more substantial dip emerging.
In the short-term, a drop below $2650.00 might signal the beginning of a move back towards recent trendline support,” Chris Beauchamp, chief market analyst at IG, said.
Oil prices rose for a second consecutive session on Monday as fears over potential supply disruptions in the Middle East intensified. This comes in the wake of Israel’s increased military actions against militant group Hamas and Iranian-backed forces such as Hezbollah in the region.
At the time of writing, Brent crude rose by 0.7% to $72.06 per barrel, while the US West Texas Intermediate (CL=F) climbed 0.6% to $68.61.
Despite rising prices on Monday, Brent crude fell approximately 3% and WTI dropped around 5% over the past week, largely due to concerns about demand in China, even as the country implements fiscal stimulus measures.
“While excessive supplies remain a concern, there is a broader fear that a region-wide conflict could disrupt supplies from key producing areas,” noted Priyanka Sachdeva, senior market analyst at Phillip Nova.
Meanwhile, the FTSE 100 (^FTSE) opened in the red, slipping by 0.1%. For more details check our live coverage here.
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