“A sharp rate hike is now largely priced into markets, but we think it could still keep prices under control next week,” analysts at Capital Economics wrote in a note.
There is a lot to see elsewhere too. Europe’s leaders are making plans to tackle the energy crisis while Germany ponders nationalization. The US will offer the latest insights into meat demand and there are a number of important conferences: on copper in Barcelona, gold in Denver and climate in New York and Pittsburgh. Given the high geopolitical tensions, the United Nations General Assembly could also be the focus.
Gold vs Fed
Pre-Fed tensions are most evident in the bullion market. The upcoming rate decision – along with the bank’s rhetoric on inflation and future hikes – will drive the next steps for the precious metal after a month of steady declines amid a charged greenback. The Fed is expected to hike rates by at least 75 basis points, but a larger hike could trigger even more volatility in currency markets.
Funds are already fleeing gold. Hedge funds and asset managers have been net decliners against the precious metal. Some traders believe things are set to get worse for gold until the Fed’s inflation rhetoric eases, although others point to remaining support for prices from heightened geopolitical and economic risks. The exposure of the remaining longs of precious metals is to be tested.
The coming week will be a historic week for European energy, even by this year’s standards. Germany’s seizure of the local unit of a Russian oil company is likely to trigger a series of measures aimed at reshaping the energy sector for a new era without Russian supplies. The outcome of talks over Berlin’s takeover of three major gas companies could soon be known as politicians across Europe rush to prepare for a winter supply crisis.
The Czech Republic, which holds the EU’s rotating presidency, has called an urgent meeting of energy ministers for Sept. 30 with a view to launching a block-wide contingency plan before the start of the winter heating season. That means the final shape of the proposals could take shape over the coming week: on market intervention, demand management or consumer assistance.
BHP’s copper offering
There is potential for more movement in a push by the world’s largest miner BHP Group to acquire smaller rival OZ Minerals after a failed attempt earlier this year. The target company understands around A$10 billion ($6.7 billion) should be a starting point for talks, people familiar with the matter said.
BHP could make a new takeover bid later this month Bloomberg News reported separately. Any increase in bid will underscore the bullishness of the big miners on copper’s long-term prospects as renewable energy use increases. The metal has held up quite well over the past few months despite all the turbulence in the global economy.
Meat companies have complained that high prices have weighed on demand, prompting consumers to slow down beef and chicken purchases and resort to less expensive options. Thursday’s US Department of Agriculture monthly US Cold Storage report will provide some clues as to how that’s playing out. Stocks of beef, pork and chicken have risen in freezers so far this year, with meat production outpacing demand.
Meanwhile, the drought in the US has prompted ranchers to remove animals from pastures and sell them to feedlots, where they are rounded up for slaughter. Traders will look to the USDA’s monthly Cattle on Feed data for September 23 to see if the cattle drive is showing signs of slowing down after accelerating more than expected in last month’s report. Cattle in the pasture act as a kind of strategic beef reserve, so larger volumes moving to the feedlot sector indicate a tighter supply later.
Gold miner executives, investors, bankers and analysts will gather at the annual Denver Gold Forum in Colorado Springs, Colorado starting this weekend. The 34th annual gathering of the world’s oldest and largest precious metals event comes at an intriguing time for the industry – and not just because of the crucial Fed decision that was due to come on the final day of the forum.
Denver Gold is also likely to be discussing who the next takeover target might be. $13.5 billion in gold deals were announced this year, with the largest being Gold Fields Ltd.’s all-stock offering announced in May. for Yamana Gold Inc. was valued at $7 billion.