GOLD: Gold Priced In US Shutdown, Senate Vote Fails
Gold reached another record high on Tuesday rising to $3871.72/oz and finished September up almost 12%. Prices rose 0.7% to $3858.96 off the intraday low of $3793.23 as the US dollar weakened further (BBDXY -0.2%) and the 2-year yield was slightly lower. It has found support from the imminent US government shutdown. A senate vote to avoid this has just been held but failed to pass and the administration has told agencies to begin shutdown arrangements. The metal is currently trading around $3861.0.
- A US government shutdown will delay data including payrolls originally scheduled for Friday. It is forecast to show continued lacklustre job gains and is important for Fed easing expectations. Dallas Fed’s Logan (2026 FOMC member) said that rates can’t address all labour market weakness and easing should “proceed cautiously” as uncertainty is higher than “usual”.
- Gold’s bull cycle continues with it breaking above resistance at $3871.7 yesterday. The level to watch now is round number resistance at $3900.0. Moving average studies also highlight the dominant uptrend. Initial support is $3717.6, 24 September low.
- Silver underperformed yesterday falling 0.6% to $46.65 off the intraday low of $45.812. It reached $47.171 earlier. It finished the month up 17.4% boosted by safe haven and ETF flows but also a tight physical market. It is currently trading around $46.68.
- Equities rallied with the S&P up 0.4% and Euro stoxx +0.4% but the S&P e-mini is down 0.2% so far today. Oil prices fell with Brent -1.4% to $66.15/bbl. Copper was down 0.3%.
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JGBS: Futures Up From Recent Lows, Bear Threat Remains, Q2 Capex Today
JGB futures ended Friday trade 137.54, flat relative to settlement levels, post the Tokyo close. This was up from lows last week, 137.22 (recorded on Aug 26). Still, bear threat in JGBs futures remains present and the contract is trading closer to its recent lows. A resumption of weakness would signal scope for an extension towards 136.57, a Fibonacci projection.
- The early bias in US Tsy futures today is slightly softer, which may see negative spill over to JGBs. Dovish rhetoric from the Fed's Daly on Friday did drive some gains though.
- Coming up short we have Q2 Capex. The market expects +6.1%y/y, versus 6.4% prior.
- Note tomorrow that BOJ Deputy Governor Himino speaks in Hokkaido.
- The 10yr JGB yield finished up at 1.60% on Friday.
AUSSIE BONDS: Back End Yields Supported, Q2 GDP/RBA Speeches In Focus This Week
Early bond future moves are modest, with 3yr futures (YM) last unchanged around 96.59, while 10yr futures (XM) are down 1bps to 95.69. This is mirroring US moves from Friday's session to some degree.
- In the Aussie government bond yield space it is a similar theme, with front end yields down a touch, while back end yields are firmer. The 3yr benchmark was last around 3.39%, while the 10yr was close to 4.28%.
- In the US on Friday, there was a ate bounce in Tsy futures on SF Fed Daly comment on LinkedIn: that "it will soon be time to recalibrate policy". Still, the 10yr yield remained above 4.20%, while front end yields finished down a touch (2yr to 3.62%). Futures have re-opened a touch softer today.
- Locally, Q2 GDP on Wednesday will be the focus of the week with inventories printing today and the net export and public demand contributions on Tuesday. Bloomberg consensus expects that growth was stronger in Q2 at 0.5% q/q after Q1’s lacklustre 0.2% q/q increase.
- RBA Governor Bullock speaks on Wednesday at 1800 AEST about “Technology and the Future of Central Banking at the RBA”. Then on Thursday Deputy Governor Hauser gives an interview to Reuters.
- In terms of broader yield moves, the 3yr is anchored fairly closely to 3.40% over recent sessions, while the 10yr is oscillating around the 4.30% region.
JPY: USD/JPY - Trading Sideways Holding Above Support
USDJPY - Struggles To Hold Gains, Testing 145.00 Support
The Friday night range was 146.77-147.41, Asia is currently trading around 147.10. USD/JPY trades sideways holding just above its recent support. The demand towards 146.00 has been pretty solid all of July and August, keeping us for the most part in a 146.00-149.00 range. CFTC data for last week shows leveraged accounts have maintained their recent JPY shorts and will be hoping this support continues to be solid. A sustained break below 145.50/146.00 is needed to to turn the focus back to the year's lows towards 140.00.
- (Bloomberg) - “Japan’s Akazawa Canceled US Trip Over Rice, Nikkei Says. Japan’s top trade negotiator Ryosei Akazawa abruptly canceled his trip to Washington on Thursday because there remains a gap between the two sides on the issue of rice, Nikkei reported."
- “Japan’s wage growth is set to strengthen, lifted by summer bonuses and spring wage agreements. A solid reading would reassure the BOJ it can continue tightening, reinforcing the case for another rate hike in October despite trade headwinds from US tariffs.” - BBG
- Options : Close significant option expiries for NY cut, based on DTCC data: 146.35($310m).Upcoming Close Strikes : 146.50($1.39b Sept 3), 145.50($976m Sept 3) - BBG.
- CFTC data shows last week asset managers again added to their JPY longs after a consistent period of reduction +76761( Last +71379), leveraged funds though again used the dip to add slightly to their newly built short JPY position -52275(Last -50848). One of them is going to be wrong.
- Data/Event : Capital Spending, S&P PMI Mfg
Fig 1 : JPY CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
