Wall Street rises as materials and crypto stocks offset continued bond sell-off
Investing.com -- Gold prices inched up on Friday, as Federal Reserve interest rate hike expectations took another hit after an unexpectedly weak retail sales report. Bullion was also on track for a weekly advance, as inflation data earlier in the week dented rate hike bets as well. Gains were capped by an advance in oil prices amid a diplomatic impasse in the Middle East.
At 16:29 ET (20:29 GMT), spot gold climbed 0.5% to $4,374.30/oz, while gold futures added 0.2% to $4,430.05/oz. Both contracts were up 0.7% for the week.
September Fed rate hike odds further pared
Much of the focus this week was on key U.S. inflation data and on Friday’s retail sales for cues about monetary policy outlook. The indicators have painted a picture of moderating price pressures and a slowdown in consumer spending, and, coupled with an unexpectedly weak jobs report last week, have taken the pressure off the Fed to immediately tighten policy.
Wednesday’s consumer price index (CPI) readings showed a deceleration in annual headline and core figures in July. Thursday’s producer price index (PPI) echoed a similar trend, with annual headline and core indexes ticking up at a slower pace.
On Friday, the U.S. Census Bureau said retail sales in July fell 0.6% M/M to $763.6 billion, compared to a consensus estimate for a rise of 0.1%. Core retail sales decreased 0.3% M/M, versus a forecast of 0.2%.
Interest rate odds have reacted accordingly to the inflation and retail sales data. As per the CME FedWatch tool, the chances of the Fed holding rate steady in September have risen to about 67% from nearly 56% a week ago. The probability of a quarter-point hike has reduced to almost 33% from around 44% a week ago. Lower rate environments tend to boost non-yielding assets such as gold.
"The path to avoiding a 2026 rate hike widened this morning after a pair of reports signaling stressed household budgets re-ignited slowdown angst on Wall Street. A colossal double miss on retail sales and consumer sentiment is worrying investors, who fear that affordability pressures, dwindling savings and reduced hiring could mean the economy’s engine is on its last legs," José Torres, senior economist at Interactive Brokers, said.
Rate-sensitive U.S. Treasury yields slipped on Wednesday and Thursday after the CPI and PPI data as traders snapped up bonds. Yields bounced back on Friday, moving the benchmark 10-year yield into positive territory for the week, but the shorter-end 2-year yield was still set for a weekly loss.
Separately on Friday, the University of Michigan said U.S. consumer sentiment slipped to 51 in August from 55.2 in July, ending two consecutive months of improvement. Year-ahead inflation expectations ticked up to 4.3% from 4.2%.
"Despite the awful numbers, yields are still rising in the session, as Washington’s threats to impose a maximum-isolation program on Tehran are driving oil prices higher, which, together with UMich’s higher-than-anticipated inflation expectations, is battering duration," Torres said.
Oil prices advance for the week
Speaking of Washington and Tehran, the situation in the Middle East remained largely unchanged. The U.S. and Iran remain locked in an impasse over control of the critical Strait of Hormuz. Both sides have independently asserted authority over the vital waterway, with Tehran insisting that Washington meet certain demands including the cessation of hostilities on all fronts and the unfreezing of Iranian assets before the chokepoint can be reopened.
The U.S. is now considering maintaining its naval blockade of Iran indefinitely as efforts to end the conflict and restore normal shipping through the strait remain stalled. Tanker traffic through the corridor has slowed to a trickle, leading to concerns about oil supply disruptions. Those worries have been compounded by attacks on ships in the Bab el-Mandeb Strait - another key Gulf shipping lane - by Iran-backed Houthis in Yemen.
Against this backdrop, Brent crude futures, the global benchmark, were last up 1.5% to $88.40 a barrel, and had added 5.9% for the week. The advance capped gains in gold.
Roushni Nair and Scott Kanowsky contributed to this article
