XAUUSD hits new record high, crossing above $2500.

• Gold surpasses $2,500 for first time in history
   
• 20% - bullion’s YTD performance
   
• Safe-haven demand up due to global tensions
   
• Jackson Hole speech key to XAUUSD outlook

Gold surged past $2,500 an ounce for the first time, driven by expectations that the US Federal Reserve may soon cut interest rates.

Spot gold rose by 2.2% on Friday, surpassing the previous record, after disappointing US housing data fueled speculation of swift and significant Fed rate cuts.
 

Lower interest rates typically boost gold, as it doesn’t yield interest.

This year, gold has gained over 20% amid optimism about monetary easing and significant purchases by central banks.

It has also benefited from increased demand as a safe-haven asset due to geopolitical tensions.

Despite the uncertainties, gold has continued to climb, with some market participants expecting further gains if the Fed acts aggressively.
 

Going forward, Fed policy will be key and what the interest rate cut cycle looks like. That means Chair Powell’s speech at Jackson Hole this week will be eagerly watched.

Events Watchlist:
 

• Thursday, August 22nd: Global PMIs

The services sectors remain the major engines of growth. Politics has weighed in Europe in general, while weak demand has European manufacturing in dire straits. That points to downside risks to the recovery in the second half of this year.

Conditions in the UK are relatively firmer, with evidence of an upturn in growth. US PMIs should follow the ISM data and point to stronger conditions.

• Friday, August 23rd: BoJ Governor Ueda testimony, Japan CPI

Bank of Japan Governor Ueda will take the podium (Friday, Aug. 23) at the special parliamentary session to talk about the last surprise interest rate hike (July 31).

This decision coincided with heightened fears of a US recession, which led to a sell-off in financial markets, with the Nikkei experiencing its biggest drop since 1987.

Markets will be looking for clues from the BoJ about its interest rate policy in the foreseeable future.

Inflation is expected to reaccelerate in July with the core print rising to 2.7% from 2.6% in June. This move higher has already been signposted by Tokyo’s earlier inflation data, which acts as a precursor for the nationwide figures.

That would register price pressures above the BoJ’s target for the 28th straight month. With markets now calmer after the ructions a few weeks ago, will Governor Ueda be itching to raise rates soon?

• Friday, August 23rd: Fed Chair Powell at Jackson Hole

Money markets have yo-yoed again recently as the rebound from “Manic Monday” continues from a few weeks ago, with the pricing out of some of the jumbo and intra-meeting Fed rate cuts. 

The base case is currently back to a first 25bps rate reduction in September. Fed Chair Powell’s speech at the Jackson Hole symposium on Friday is expected to cement that view.

Crucial to this will be the next US non-farm payrolls data released early in September, which Powell will no doubt remind us of.

Here’s a comprehensive list of other key economic data and events due next week:
 

Monday, 19th Aug

• JP225: Japan core machine orders
   
• US500: US Conference Board leading index
   
• US Democrat National Convention
   

Tuesday, 20th Aug

• CN50: China loan prime rates
   
• CAD: Canada CPI
   
• SEK: Swedish rate decision
   
• EU50: Eurozone CPI
   
• TWN: Taiwan export orders
   

Wednesday 21st Aug

• JP225: Japan trade
   
• ZAR: South Africa CPI
   
• NAS100: US FOMC minutes
   

Thursday, 22nd Aug

• EU50: Eurozone & Germany PMI, consumer confidence
   
• TWN: Taiwan jobless rate
   
• UK100: UK S&P global PMI
   
• US500: US initial jobless claims, S&P Global PMI
   

Friday, 23rd Aug

• CAD: Canada retail sales
   
• JP225: BoJ Governor Ueda testimony, Japan CPI
   
• SG20: Singapore CPI
   
• TWN: Taiwan industrial production
   
• NAS100: Fed Chair Powell speech at Jackson Hole