US jobs report helps drive Gold to record high ahead of US CPI

European markets are on the rise in early trade today, following on from an upbeat Asian session that benefitted from a 1.45% gain in the Nikkei. The sudden resignation of Prime Minister Shigeru Ishiba over the weekend injected fresh uncertainty into Japanese markets, although the perception that his successor will be more fiscally expansive raises hope that we will see stocks benefit in response. With any successor likely to lean towards a pro-growth strategy, the possibility of additional spending kept the 30-year yield near record highs despite declines elsewhere. This is problematic for a nation with a 250% debt-to-GDP ratio. For the Bank of Japan, the change raises doubts over the pace of normalisation, with political instability potentially delaying a shift away from ultra-loose policy in a bid to keep yields anchored. The yen weakness we saw in response reflects capital outflow concerns and renewed uncertainty about Japan’s monetary and fiscal outlook.

Over the weekend, OPEC+ confirmed its latest production strategy, opting to raise October production by another 137k bpd. This stands in stark contrast to the pace seen in the months prior, with August and September announcements standing at 555k bpd. The question for many is whether there is any capacity left to enact these production increases, with Saudi Arabia and the UAE likely to be the only nations that have the ability to add any more into the market. With oil prices on the rise, this announcement looks to see the expansive period for OPEC+ drawing to a close.

At the same time, global geopolitics have flared up once again, with Russia enacted its largest ever aerial attack on Ukraine that included strikes on the Prime Ministers building In Kyiv. With Donald Trump warning of potential sanctions against Russia if the war persists, the pathway to peace remains far from simple. Unfortunately for the US, their previous sanctions have had little impact on Russian exports, with China and India showing a willingness to side with their BRICS partners rather than curb cheap Russian oil imports.

Friday’s US nonfarm payrolls report underscored the weakness evident within the labour market under Trump, with a dour 22k payrolls figure putting the ball firmly in Powell’s court. With inflation data due later on this week, the lack of any notable surge in price pressures thus far has left markets wondering whether we could in fact see a 50bp cut next week. The gains for gold continue apace, with the precious metal hitting yet another record high in anticipation of a major dovish swing from the Fed this month. Meanwhile, the dollar remains under pressure, although there is some good news in the form of lower 30-year yields after recent record highs.