Gold Surpasses $3,500 with Fed Uncertainty, Political Risks Driving Demand

GLOBAL MOOD: Risk-off
Drivers: Fed rate cut speculation, Political uncertainty over Fed governance

Investors are flocking to safe-haven assets amid US political tensions and expectations of Fed rate cuts.
  

TODAY’S WATCHLIST

• ECB President Lagarde Speech
• Fed Kashkari Speech

THE BIG STORY
Gold surged above $3,500 per ounce on Tuesday, climbing over 1% to an all-time high as investors bet on a potential Federal Reserve rate cut amid lingering political and economic uncertainty. Spot gold rose 1.5% to $3,529.01 per ounce, with December US gold futures settling 2.2% higher at $3,592.20. The metal has gained 34.5% so far this year.

Federal Reserve Governor Lisa Cook reiterated her opposition to President Donald Trump’s attempt to remove her from office, stating in a US District Court filing that disclosures about her mortgage holdings during her 2022 confirmation process cannot justify her dismissal. 

Meanwhile, US Treasury Secretary Scott Bessent is set to conduct interviews this week to select the next Federal Reserve chair, with the process continuing into next week, according to the Wall Street Journal.

Data Spotlight 
US manufacturing contracted for the sixth consecutive month in August as factories struggled with the impact of Trump administration tariffs. The ISM manufacturing PMI rose slightly to 48.7 from 48.0 in July, still below the 50 mark that separates growth from contraction. Some manufacturers described conditions as "much worse than the Great Recession," citing high import duties that complicate domestic production. Factory construction spending fell 6.7% year-on-year in July, while overall US construction spending slipped 0.1% month-on-month, pressured by high mortgage rates. A recent appeals court ruling that most of Trump’s tariffs were illegal adds further uncertainty for businesses.

Takeaway: Tariffs and elevated costs continue to weigh on US manufacturing, with modest improvements overshadowed by broader economic headwinds in construction and industrial investment.

WHAT HAPPENED OVERNIGHT

• Wall Street fell on Tuesday, starting September on a weak note.
  
  • Dow Jones slipped 0.6%, and  S&P 500 posted worst day in over a month.
  • Nvidia dropped ~2% after disputing reports its AI chips were sold out.

• US Treasuries sold off, mirroring weakness in European bonds.
  
  • 30-year yield neared 5% before easing after weak ISM manufacturing data.
  • Surge in post-Labor Day corporate debt issuance weighed (27 firms tapped markets).
  • Global spillover: UK 30-year yield hit highest since 1998. French 30-year yield rose 6 bps to 4.51%.

• Dollar gained ground as traders looked ahead to Friday’s US jobs report.
  
  • Sterling and yen slumped on Tuesday amid growing concerns over government finances.
  • Pressure tied to Britain’s rising borrowing costs, with 30-year yields at 1998 highs.
  • Weighed by dovish remarks from a Bank of Japan official and resignation of a key ruling party figure.

• Oil rose over 1% as US imposed sanctions on Iran’s oil network.
  
  • US Treasury sanctions on Iranian smuggling network.
  • OPEC+ meeting due September 7, likely to keep voluntary cuts in place.
  • Ukrainian drone strikes disrupted ~17% of Russia’s refining capacity.
  • Kazakhstan crude output rose to 1.88m bpd in August (+2%).

Day’s Ledger

Economic Data

• Euro Jul PPI
• India M3 Money Supply
• UK Aug Composite, Services PMI

Corporate Actions

• Galada Finance to consider fund raising 
• IIFL Finance to consider fund raising 
• Sammaan Capital to consider fund raising 
• SC Agrotech to consider fund raising 
• Sejal Glass to consider fund raising 
• Valiant Communications to consider bonus share 

Policy Events

• ECB President Lagarde Speech
• BoE L Mann Speech
• BoE Breeden Speech
• RBA Bullock Speech
• Fed Musalem Speech
• Fed Kashkari Speech
• RBA Hauser Speech

TICKERS TO WATCH

• ADANI ENERGY arm repurchases part of 2031 bonds, balance remains outstanding
• ADANI POWER gets coal ministry approval to start operations at Dhirauli mine
• ASHOK LEYLAND to set up EV battery pack unit with phased investments
• DCM SHRIRAM and AARTI INDUSTRIES sign long-term chlorine supply pipeline pact
• ICRA upgrades GE Vernova long-term rating to AA minus with positive outlook
• India Ratings revises AADHAR HOUSING loan facilities outlook to positive
• INDUS TOWERS plans Africa entry with support from Bharti Airtel
• LEMON TREE HOTELS signs agreements for three properties in Rajasthan
• PNC INFRATECH emerges lowest bidder for airport project in Varanasi
• PTC INDUSTRIES arm commissions furnace and superalloy facilities
• TCS inks seven-year deal with Tryg to deliver digital solutions
• TRIDENT board approves investment in Trident Global Corp
• UPL unit to shift post-harvest business to Advanta under Decco Holdings
• WAAREE ENERGIES to acquire majority stake in Kotson’s

Must Read:

• Indian pharma shifts focus to non-US, domestic markets amid tariff risks
  
• The Courage Boards Need When CEOs Cross the Line
  
• Eggheads, Not Cheerleaders
  
• Setting the Record Straight on Trump’s India Rant
  
• Russia’s Oil Cargoes Flood to China as Tariffs Crimp India Flows
  
• India Tightens Options Rules Again After Jane Street Saga
  
• India Banks Tell RBI They’ve Limited Room to Buy State Bonds
  
• India tax panel calls for steep levies on luxury EVs in blow for Tesla, BMW
  
• US, India Keep Door Open to Trade Talks Despite Tariff Tensions

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See you tomorrow with another edition of The Morning Edge.

Have a great trading day. 

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