Gold at a one-month low, as market adjusts to the Fed's narrative

The Gfk consumer confidence

In Germany, Gfk consumer confidence fell to -26.5 in October, lower than the -26 anticipated. At 1.30 p.m., durable goods orders are anticipated to fall by 0.5% in August compared to July. Let's have a look at the dollar this morning. The USD basket has settled for the past few hours just below 106.

A 10-month high for the greenback as markets have adjusted to the Federal Reserve (Fed)'s 'higher rates for longer' narrative. Spot gold has also fallen just below $1,900, for that very reason. It is a one-month low for the precious metal.

The US GDP

The market now awaits two pieces of data that could shake the dollar and maybe gold. Firstly, the final reading of US gross domestic product (GDP) was on Thursday. Expectations are for growth in the quarter to be reduced to an annualised rate of 2.2% compared to the preliminary figure of 2.4% and the first quarter's expansion of 2.0%. Core PCE data is due on Friday.

The Core Personal Consumption Expenditure (PCE) Price Index is the less volatile measure of the PCE Price Index, which excludes the more volatile and seasonal food and energy prices. It is forecast to come in at 3.9% in August, compared to 4.2% in July.

Costco Wholesale

Costco Wholesale's earnings shares fell nearly 2% in extended trade last night, despite earnings and revenue topping market estimates in its fiscal fourth quarter. Earnings came in at $4.86 per share, beating expectations of $4.79. Total revenue rose 9.5% to $78.94 billion, driven by demand for its ultra-low-priced essential goods. The membership-only retailer also saw a near-8% rise in total paid household members at the end of Q4, while its income from membership fees jumped 13.7% to $1.51 billion.

Micron Technologies

Micron Technology is scheduled to report Q4 earnings after the close this evening. For the past few quarters, the chip maker has gone through difficult times. Demand has drastically dropped after the pandemic-fueled frenzy, and elevated inventories have put pressure on margins. Revenue is forecast to fall for the fifth quarter in a row, by 41% to $3.89 billion. Micron is seen posting a loss for the past three months, the fourth in as many quarters, this time of $1.18.

NVIDIA & DRAM

If Wall Street sees a return to profitability this year, it is unlikely to happen before the second half of the fiscal year. But has Micron turned a corner? Micron's CEO boss, Sanjay Mehrotra, called it the bottom in the memory-chip market. Analysts covering the group seem to agree. Deutsche Bank upgraded the stock to buy last week as DRAM prices have started to improve and thinks that the expansion of Al will benefit Micron. Last July, NVIDIA announced it was using Micron's high-bandwidth memory chips in its data centre products.

Gasoline inventories

The API reported a 1.6-million-barrel increase in crude inventories. Analysts were expecting a fall of 1.6 million barrels. Gasoline inventories fell this week by 70,000 barrels, while distillate inventories fell by 1.7 million barrels. Concerns came from the level of crude stockpiles at the Cushing storage hub in Oklahoma.

Oil storage capacity

Cushing is strategically located to pull in barrels from top US shale fields and Canada. Its hundreds of tanks are tied to pipelines that supply US mid-continent and southern refineries and funnel oil to Gulf Coast export ports. These fell another 800,000 barrels to a 14-month low, just under 23 million barrels.

Why is this important? Cushing has a storage capacity of just under 100 million barrels. Storage capacity is at 24%. If storage falls below 20% of capacity, roughly below 20 million barrels, it can cause operational issues. If the level is too low, crude can get sludgy and cannot be taken out. And whatever comes out cannot be used.