Finance
Gold at record high as interest rate cuts beckon, Trump talk hits Taiwanese stocks
By Tom Westbrook
SINGAPORE (Reuters) – Gold hit a record and bonds rose on Wednesday as markets prepared for a fall in global yields, while shares in Taiwan fell after U.S. presidential candidate Donald Trump sounded tepid in his commitment to the island’s defense.
The S&P 500 hit record highs overnight and futures in Asia were steady. MSCI’s broadest index of Asia-Pacific shares outside Japan was flat and Japan’s Nikkei rose 0.1%.
In Taiwan, chipmaker TSMC fell 2%, wiping out nearly $16 billion in market value, after Trump questioned U.S. support in an interview with Bloomberg Businessweek and said Taiwan should pay for U.S. protection.
It was unclear exactly what Trump planned to do, but his choice of trade hawk JD Vance as his running mate had already signaled to markets that China will play an important role in his foreign policy thinking.
Chinese stocks were weak for the second day in a row.
The Taiwan dollar fell slightly to a two-week low. The Chinese yuan remained stable at 7.2676 per dollar.
“It’s becoming increasingly clear to me that Trump needs to be bullish on the USD for at least a while,” said Brent Donnelly, president of analytics firm Spectra Markets, as he is expected to impose tariffs and run a higher budget deficit.
“It’s hard to imagine USDCNH closing below 7.25 in 2024 after a Trump victory in November, but it’s not hard to imagine it closing above 7.50,” he said, referring to the dollar-yuan pair.
Elsewhere in Asia, New Zealand shares hit their highest level since March 2022 as data showed inflation is slowing, although the interest rate market fell and the currency rose on persistent domestically driven inflation.[.AX][NZD/]
Treasuries held on to gains that had pushed US 10-year yields to their lowest level in four months overnight, after Fed Chairman Jerome Powell said the recent cooling in inflation rates is “somewhat adding to the confidence” that the consumer prices come under control.
Fed funds futures have fully priced in a US rate cut before September, followed by two more cuts before the end of January 2025.
The ten-year interest rate remained stable at 4.175% and the two-year interest rate fluctuated at 4.445%. Bond markets in Australia, Japan and South Korea recovered. [JP/][.KS]
Lower yields helped push gold sharply higher overnight, clearing chart resistance around $2,450 an ounce despite a generally firm dollar. It hit a record $2,478 in trading in Asia on Wednesday. [GOL/]
“Gold’s ability to find support in all conditions this year is worth highlighting,” said Commonwealth Bank of Australia commodity strategist Vivek Dhar.
“While we believe gold prices will face uncertainty in the coming months, we believe the uncertainty is positive, increasing the risk that gold will rise above our $2,500/oz forecast by year-end.”
The Japanese yen was slightly weaker at 158.51 per dollar, although after several rounds of suspected yen buying by Japanese authorities last week, it remained far from the 38-year low of 161.96 reached earlier in July.
The euro remained stable at $1.0925. Oil prices fell slightly, driven by signs of weakening demand from China.
Brent crude futures fell 13 cents to $83.60 per barrel and US crude futures also fell 13 cents to $80.63 per barrel. [O/R]
UK inflation figures are due later in the day, with a focus on services inflation, which is expected to reach a still-hot 5.6% in June from a year earlier.
(Editing by Sam Holmes)
