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Markets cautious ahead of US retail sales, FOMC policy decision

Comex Gold prices pulled back from higher levels and edged lower towards $2600/oz after hitting a record high of $2617.4/oz as markets keenly await the FOMC policy decision wherein the Fed is widely expected to pivot to lower interest rates. According to CME’s FedWatch Tool, Fed fund futures indicate that investors are increasingly betting the Federal Reserve will opt for a 50 basis point cut, with markets pricing in a 67% chance, while the odds for a modest 25 basis point reduction slipped to 33%. Former Federal Reserve Bank of New York President Bill Dudley is among those expecting a 50 basis-point move. “Monetary policy is tight, when it should be neutral or even easy,” he wrote in a Bloomberg column. “And a bigger move now makes it easier for the Fed to align its projections with market expectations, rather than delivering an unpleasant surprise not warranted by the economic outlook.” (Bloomberg) WTI Crude Oil prices slipped below $70 a barrel on limited global risk appetite ahead of widely anticipated interest-rate cut by the Federal Reserve this week. Also, lingering demand concerns from China highlighted by weak economic data and slowing refinery runs weigh on prices. LME base metals are trading mixed as markets keenly await more stimulus from China, the world’s top metals consumer, following a slew of weak economic statistics that’s fueled concerns over the longer-term consumption outlook. Aluminium prices held gains made yesterday after a water storage facility overflowed at a plant in India on Sunday fueled supply disruption concerns for the key raw material, Alumina, although company denied any disruption to current operations. European natural gas attempted a recovery after a 4.4% drop on Monday to €34.61 a megawatt-hour, lowest level since late July, owing to a blast of cold weather as autumn begins in the Northern Hemisphere could boost consumption at a time when the global gas market remains tight. European gas prices have remained under pressure, as regional gas storage sites are more than 93% full, higher than usual for the time of year. For today, investors will be cautiously awaiting US retail sales numbers as a stronger consumer spending continuing into August may again push the bets towards a modest 25 bps cut while softer retail sales figures may boost bets of a 50 bps cut further

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