Gold heads for weekly gain as Middle East tensions spur safe-haven demand
climbed on Friday and were poised for a weekly gain, as
Middle East tensions
boosted demand for
safe-haven assets
, while a weaker dollar and expectations of imminent
interest rate cuts
by the
Federal Reserve
also supported bullion.
FUNDAMENTALS
* Spot gold was up 0.8% at $3,412.29 an ounce, as of 0028 GMT. Bullion has gained 3.1% so far this week. * U.S. gold futures gained 1.2% to $3,384.40.
* Gold prices rose as investors turned to safe-haven assets following reports that Israel has begun carrying out strikes on Iran. Two U.S. officials said on Thursday that the United States had no involvement in the operation.
* U.S. President Donald Trump said on Wednesday that U.S. personnel were being moved out of the region as it could be a "dangerous place" and that the United States would not allow Iran to have a nuclear weapon.
Live Events
* The
U.S. dollar index
fell to its lowest level in more than three years, making dollar-priced gold more affordable for overseas buyers.
* Signaling a cooling labor market and subdued inflation pressures, the number of Americans filing new applications for unemployment benefits held at an eight-month high last week, while slowing domestic demand helped to restrain producer prices in May.
* The data was released a day after the Labor Department reported a moderate rise in consumer prices in May. * Traders are now expecting a 55-basis-point rate cut by the year-end, starting in September rather than October as previously anticipated.
* Meanwhile, The International Monetary Fund said on Thursday that its next global growth forecast in July will take into account both positive and negative trade developments but declined to predict a tariff-driven GDP downgrade similar to that released by the World Bank this week.
* Elsewhere,
spot silver
was up 0.3% at $36.25 per ounce, platinum rose 0.2% to $1,297.72, while palladium gained 0.6% to $1,062.35. All three metals were headed for weekly gain. DATA/EVENTS (GMT) 0600 Germany HICP Final YY May 0645 France CPI YY NSA May 0645 France CPI MM NSA May 0900 EU Total Trade Balance SA April.
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10 minutes ago
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Trump turns up the heat. Fed Chair Jerome Powell tries to keep his cool.
Minutes before his congressional testimony this summer, Jerome Powell sat alone, staring straight ahead in the wood-paneled chamber, appearing deep in thought. The Federal Reserve chair later told an associate he felt locked in, prepared for questions about the central bank's chief roles—keeping inflation low and Americans employed. Powell looked steeled for criticism, and he didn't have to wait long. A Republican ally of President Trump, Ohio Sen. Bernie Moreno, launched into a theatrical beatdown an hour into the hearing. He accused Powell of partisanship for comments linking Trump's tariffs with the potential for higher prices and a slowing economy. 'I don't comment on tariffs at all, actually," Powell said. 'I comment only on inflation." Ignoring him, Moreno said inflation was going down, echoing a Trump talking point. The president has demanded an immediate rate cut and disparaged Powell's integrity and intelligence for failing to comply, calling him a knucklehead and a moron. Trump himself nominated Powell for the job in 2017. 'We got elected by millions of voters," Moreno said as his time expired. 'You got elected by one person, and he doesn't want you to be in that job." Powell raised an eyebrow, clicked off his microphone and turned to face the next senator's questions. It was just another day for the Fed chair, who wakes up every morning under siege by critics, led by Trump, who say inflation has been tamed and the economy is ready for a rate cut. Powell and many others have a wait-and-see view. Fed Chair Jerome Powell waiting to testify at a Senate committee hearing on June. 25. Powell's remarks Friday at the annual economic symposium in Jackson Hole, Wyo., will be closely watched by investors and Washington policymakers. Everyone with skin in the game, which is just about everyone who carries a wallet, has reason to listen for clues about when rates might fall. To Powell, the Fed's survival as a central bank that operates outside of partisan control, which he considers a pillar of national prosperity, will depend on how it navigates the current economic moment. Those who have worked closely with him say he is focused almost exclusively on making the right decisions, relying on lessons gained from steering the Fed in the pandemic and then being slow to tackle the worst inflation spike in decades. 'I think it is no more subtle than he wakes up every day and probably goes to bed every night thinking, 'What can I do to preserve the institution?'" said Richard Clarida, who served as the Fed's No. 2 during the first half of Powell's tenure. The political pressure reached a surreal peak during Trump's surprise visit last month to the renovation project at Fed headquarters. White House advisers had spent weeks heaping blame on Powell for cost overruns. Trump and Powell, each wearing white hard hats and suits, toured the dusty construction site. In front of TV news cameras, Trump motioned Powell to stand closer to him and then declared that costs to renovate two historical buildings had climbed to $3.1 billion from $2.5 billion. Powell shook his head, and Trump handed him a printout prepared by White House staff. Powell easily found what he needed to dispute the president's claim. 'You just added in a third building," he said, one that had been completed years earlier. Trump later smoothed things over and declared that the meeting with Powell went well. 'There was no tension," the president said. On Wednesday, Trump called for the immediate resignation of Fed governor Lisa Cook, who has consistently voted with Powell, over allegations of mortgage fraud before her Fed appointment. The president told aides he is considering firing Cook, according to people familiar with the matter, which would leave a vacancy for him to fill. 'I have no intention of being bullied to step down from my position," Cook said. 'I do intend to take any questions about my financial history seriously as a member of the Federal Reserve and so I am gathering the accurate information to answer any legitimate questions and provide the facts." President Trump handing Fed Chair Jerome Powell a tally sheet last month showing costs for renovations at the Federal Reserve in outside the Marriner S. Eccles Federal Reserve building in Washington last month. The Jesuit-educated Powell leads an institution that is an easy target for politicians because, like the Vatican, the Fed has authority but no army. Powell has told associates that despite looking older, he doesn't feel worn down by the pressure. He has maintained what he calls, at age 72, the best physical shape of his life, swimming three times a week and working out with a personal trainer. The regimen helps Powell manage stress, though the weight of decisions affecting millions of Americans sometimes wakes him in the middle of the night. Powell draws strength from an outpouring of support, voiced privately by lawmakers of both parties, bank executives and the occasional stranger who approaches him at the airport or gym. He keeps letters from people who thank him for his steadiness. 'He has a really strong sense of what he's doing there and why," said Jon Faust, who was a senior adviser to Powell for his first six years as Fed chair. At the congressional hearings this summer, Powell sidestepped a question about political pressure and said he was focused on keeping the economy in good shape with inflation under control. 'I want to turn it over to my successor in that condition," he said. 'That's the only thing I think about." Beyond partisan political pressures, the economic challenge alone would test any Fed chair. The Fed's tool—raising or lowering interest rates—is a blunt instrument for a complex $30 trillion economy: push rates too high and risk recession, lower rates too much and risk higher inflation. Powell must steer through an economy facing the uncertainties of Trump's trade policy and the impact of artificial intelligence. The still unknown fallout from tariffs and AI will shape how businesses hire and set prices. And the Fed's decisions will affect whether Americans can afford a home or see their paychecks keep up with costs. Inflation has been above the Fed's 2% target for four years. Officials worry tariffs will encourage businesses to raise prices and keep inflation elevated. Economic policymakers also worry about the health of the U.S. labor market, which can take years to return to normal after recessions. Postpandemic employment trends have been hard to read. Recent swings in business formation and immigration can make estimates of labor demand difficult to pin down. Monitors at the New York Stock Exchange showing Fed Chair Jerome Powell speak on July 30. 'They're in a no-win situation because they're going to be late on employment no matter what, given the downward revisions we've already seen," said Diane Swonk, chief economist at KPMG. 'And inflation is likely to look worse before it looks better." Recent economic data shows the challenge. After declining gradually last year, a gauge of underlying inflation fell to a low of 2.6% this year and is now creeping toward 3%. Payroll growth slowed sharply over the three months that ended in July with significant downward revisions to May and June figures. Even so, the unemployment rate has held close to 4.2%. The hiring slowdown coincides with Trump administration policy shifts that include immigration crackdowns, tariffs, federal job cuts and reduced spending on government contractors and nonprofits. The Trump administration says its tax cuts and deregulation might offset some of those headwinds. A majority of Fed officials supported holding rates steady last month, though two Fed governors, Christopher Waller and Michelle Bowman, dissented in favor of a rate cut. Waller and Bowman are Trump appointees who are under consideration to become Fed chair when Powell's term ends in May. Waller warned that job growth is weaker than it looks, with some indicators 'flashing red." He has argued that officials shouldn't decide rates based on tariff-related price increases, saying those aren't likely to be repeated. In a swipe at Powell, Bowman said Fed decisions haven't been consistent. She pointed out that housing, consumer spending and the share of working-age people with jobs were weaker now than last year, when the Fed began to cut rates. On the other side of the rate-cut debate are the inflation hawks. Kansas City Fed President Jeff Schmid, a voting member of the rate-setting committee this year, argued in a speech last week that the effect of tariffs on inflation had been limited, in part, because the Fed hadn't eased rates prematurely. He said he expected the uncertainty of its impact on prices would last months. Powell's job is to forge consensus from these competing views and, when needed, guide it in his preferred direction. The path there may be emerging from the economic data itself. The July jobs report provided clearer evidence of labor market softness—potentially giving Powell rationale for a rate cut next month. The labor market 'is not bad right now," San Francisco Fed President Mary Daly said. 'But you know that the direction of change is going the wrong way." She also said tariffs aren't passing through to higher prices as much as some forecasters feared, reducing the risk of a big shock. Minneapolis Fed President Neel Kashkari said the Fed might have to cut rates now to support the labor market and leave open the prospect of reversing those moves if inflation resurges. 'I don't love that path," he said, 'but that might be the best of a limited set of options." Others are undecided. St. Louis Fed President Alberto Musalem and Chicago Fed President Austan Goolsbee flagged an unexpected rise last month in prices for services, which would suggest holding rates steady. Yet Musalem also pointed to slower economic growth, which could favor a future rate cut. Trump's challenge is that Fed independence runs deeper than any single leader. Even if Powell is replaced by someone more sympathetic to the White House next spring, there may still be officials worried about inflation and impervious to political pressure. Powell has served as a shield for some colleagues. His relationships with Fed peers are likely 'stronger than ever because the committee knows the tough spot that both the chair and the institution are in," Faust said. Some see less danger in the blustery attacks by Trump on Powell than the possibility of a White House campaign to weaken the Fed structure, including the 12 reserve banks. Meetings to set interest rates are attended by the 12 bank presidents and a seven-member board of governors, though only five presidents at a time have a vote on policy decisions. Unlike Fed governors, who are nominated by the president, regional bank presidents are chosen by their local boards and have traditionally operated independent of Washington. The Fed presidents serve five-year terms at a time, and the terms run concurrently. The 12 presidents must be reappointed by the governors to new five-year terms before next March. A Fed board could remove a regional bank president by majority vote, but it never has done so. 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A final source of pressure on the Fed came last week from Treasury Secretary Scott Bessent, a former hedge-fund investor with keen knowledge of monetary policy who is overseeing the search for the next Fed chair. Bessent, who had pledged not to comment on rates, said in a TV interview that the Fed should consider a larger half-percentage-point rate cut in September and, after that, to continue to lower its benchmark rate, currently around 4.3%, to less than 3%. Some investors subsequently dialed up expectations for a half-point cut. Bessent did more than just voice an opinion. He appeared to put Powell in a corner. If investors buy or sell assets because the Treasury secretary's comments lead them to believe a sizable rate cut has become more likely, Powell risks disappointing markets and taking the blame for any selloff if the Fed doesn't follow through. When Bessent was asked about his comments during an interview the following day, he said, 'I didn't tell the Fed what to do." 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Indian Express
10 minutes ago
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The affection economy
Any epoch has an underlying currency that determines how power is distributed, partnerships are formed, and international relations are managed. In the distant past, it was fertile land. Then it was mineral resources. More recently, it has been demography, innovation or creativity that determined value, national purpose, and global power. As old orders replace themselves, new economic forms emerge. The emergence of the information age gave us the data economy and the attention economy. In today's world — decoupled, divided, atomistic — another term must receive our consideration: The affection economy. Success today — in trade, in innovation, in the creation of value — depends upon how skillfully you curate a community, how effectively you kindle kinship, how carefully you nurture cohorts. Cohorts, kinships, communities: They are the building blocks of co-operation and economic success. We have already seen glimmerings of this understanding permeate even the most rational, realist spheres of international relations. What, after all, do we mean when we speak of 'like-minded' nations? Like-mindedness creates commonality. It creates a shared purpose and ensures a common direction. It means trust endures even through the temporary turbulence of the sort that the American president is currently inflicting. The affection economy has visible effects on the corporate world as well. Both companies and countries compete for affection; they expand their footprint through a dedication to empathetic engagement and care. The smartest places, like Dubai, have designed entire demographic and growth policies around curated communities. Visas are offered apparently for commercial reasons, but actually to create a golden cohort of affection. The purpose of their national policy is to make people embrace Dubai. Like Dubai, fly Dubai, buy Dubai, live Dubai. The UAE may be the perfect exemplar, but it is not the only one. Other countries are constructing or have constructed soft power strategies around communities of interest. Germany is one; Australia and New Zealand, too — and of course Singapore. Corporations have done it. In India, the stakeholder capitalism that Dhirubhai Ambani fostered — filling stadiums with tens of thousands of co-owners of the Reliance enterprise — offers an analogy. It percolates to the company's thinking even today, with the equity community being succeeded by the data equity community, taking broadband to the bottom of the pyramid. The US is a special case. Companies like Apple have built on that foundation to create global production and consumption networks that look to California for inspiration. The federal government has largely let the American private sector run the affection economy. It is this stored-up affection capital that President Donald Trump is running down so speedily. What differentiates countries and companies today is the networks they lead. It has long been taken for granted that China lacked soft power, that it was respected but not loved. In the 21st century, this placed a hard ceiling on its rise. The US had no such hard ceiling till it constructed one for itself. How has the affection economy come to dominate? The flattening of the world by digital technology has had something to do with it. It replaced organic connections created by neighbourhoods and workplaces with the more diffuse, detached and delicate bonds that are created online. But this and individualisation have been in progress for decades. Political scientist Robert Putnam developed a theory in the 1990s of 'social capital', explaining how person-to-person connections were foundational for modern America. In his book Bowling Alone, he argued that this social capital was on the decline, taking civic consciousness with it. This would cause problems, as the community was the true determinant and differentiator of success. Francis Fukuyama demonstrated in his book Trust (1995) how social capital created trust within nations, and how trust led to stability and economic growth. Putnam is not surprised that the desolation of communities has caused the rise of extreme movements. Political activist Steve Bannon has publicly said that Bowling Alone inspired him and others to identify their political movement as a cure for the social isolation felt by many Americans. This phenomenon is being replicated around the world: Individualistic societies are abandoning their lonely members to such extreme communities. These groups and movements may be only a dark imitation of the true solidarity and fellowship that creates trust, but they are still communities for those who have no other. The final push that transformed global society would have to be a global event. Covid provided that impetus. It was a period when isolation deepened, the workplace became irrelevant, and the appeal of the solo actor was enhanced. Today, the digital nomad and the lone-wolf terrorist are two sides of the same coin. The future will belong to those who best understand that advancements in the technology and economic realms have brought human collectives back a full circle socially. We have indeed returned to a primal state, where communities matter more than anything else. The currency for prosperity, influence and well-being at this time is care and belonging. Prime Minister Narendra Modi read this right when he spoke of vasudhaiva kutumbakam: One Earth, One Family, One Future. It is indeed the time for a return on and to affection. The writer is president, Observer Research Foundation
