Gold slips on renewed hopes of Gaza & Ukraine war ceasefire

·         Wall Street closed mixed as Broadcom boosted NQ-100, while Nvidia and Boeing dragged DJ-30 on the concern of Trump trade war 2.0

·         The market is now expecting an imminent Gaza war ceasefire as both outgoing Biden and incoming Trump intensify their effort in a coordinated manner

Wall Street Futures were in early Santa mode in the December 1st week on hopes of synchronized global easing, Trump 2.0 fiscal stimulus and also Chinese stimulus. The market is now expecting synchronized global easing in 2025-26 by the Fed, PBOC, ECB, BOE, BOC, and even RBI along with Trump 2.0 fiscal stimulus of around $1T. ECB, BOC, SNB and even BOE are cutti8ng rates quite aggressively not only to fight the stagflation or a looing all-out recession; their central banks may be also seeking a lower currency (devaluation) against ‘mighty’ USD to fight a potential Trump trade war 2.0; even China/PBOC is ready to allow the devaluation of CNY as China is the 1st target of Trump trade war tantrum.

But Wall Street also stumbled from Chinese stimulus optimism high on fading hopes of a Fed rate cut 18th of December, amid stalled core disinflation and a stable employment situation in Q3CY24. Gold also jumped as China’s Central Bank PBOC reportedly resumed the buying of the precious yellow metal after a pause of almost six months.

Fast forward, to mid-Thursday, Gold slips on fading hopes of Fed rate after hotter-than-expected US core PPI data and renewed hopes of an imminent Gaza war ceasefire. The US President Elect said in an interview that Israeli PM Netanyahu knows he wants the Gaza war to end, hinted a war with Iran could be in the cards and refrained from endorsing a two-state solution to the Israeli-Palestinian conflict, even though his ‘deal of the century’ proposed a version of Palestinian statehood in 2020.

Trump said in an interview with Time Magazine on Thursday:

·         The Middle East is going to be solved. I think it’s more complicated than the Russia-Ukraine, but I think it’s easier to solve

·         Asked about the chances of war with Iran, Trump paused before replying, “Anything can happen”

·         Speaking about the war in Gaza, Trump said Netanyahu “knows I want it to end”

·         I informed Netanyahu of my stance during phone calls the two held during the US election campaign

·         Asked if Netanyahu has given him assurances about ending the Gaza war, Trump declined to respond directly, saying, “I don’t want people from either side killed… whether it’s the Palestinians and the Israelis and all of the different entities that we have in the Middle East”

·         When Time asked if he trusted Netanyahu going into the second term, Trump took a second before answering: “I don’t trust anybody”

·         The Times of Israel revealed in October that Trump told Netanyahu during a meeting at his Mar-a-Lago resort that he wants the war wrapped up by the time he enters office.

·         The other thing that’s happening is the hostages. Where are the hostages? Why aren’t they back? Well, they could be gone--I think Hamas is probably saying, Wow, the hostages are gone. That’s what they want.

·         Asked if he still supports his 2020 “deal of the century,” Trump responded: “I support a plan of peace, and it can take different forms.”

·         “I support whatever solution we can do to get peace. There are other ideas other than two-state, but I support whatever is necessary to get not just peace, [but] a lasting peace. It can’t go on where every five years you end up in tragedy. There are other alternatives”

·         Trump unveiled a peace plan that he framed as a “realistic” two-state solution. The “deal of the century,” formally entitled “Peace to Prosperity: A Vision to Improve the Lives of the Palestinian and Israeli People,” offered the Palestinians a state on roughly 70% of the West Bank that wouldn’t include Israel’s settlements, as well as a chunk of the Negev desert and a hefty economic aid package

·         “I want a long-lasting peace. I’m not saying that’s a very likely scenario, but I want a long-lasting peace, a peace where we don’t have an October 7 in another three years.”

·         “There are numerous ways you can do it. You can do it two-state, but there are numerous ways it can be done,”

·          “I’d like to see everybody be happy. Everybody goes about their lives, and people stop dying. That includes on many different fronts.”

On Friday, the US Secretary of State Blinken said:

·         Washington appreciates Ankara’s voice with Hamas (after the terror group reportedly agreed to a temporary IDF presence, and provided a list of hostages to be released)

·         In the past couple of weeks, the US has seen encouraging signs that a ceasefire in the Gaza Strip is possible by December ’24 (before Trump takes charge of WH)

·         The opportunity for an armistice in Gaza and getting the hostages home was discussed during his visit to Ankara (Turkey)

·         We are in discussions with Turkish President Erdogan and  FM Fidan

·         We talked about the imperative of Hamas saying yes to an agreement that is possible, to finally help bring this to an end

·         The US appreciates the role Turkey can play

·         US, Iraq, Turkey, and all other stakeholders  determined to block ISIS revival in Syria (after Assad's regime was overthrown)

·         Washington and Baghdad "had tremendous success in taking away the territorial caliphate that Daesh [Arabic acronym for ISIS] had created years ago, and now, having put Daesh back in its box, we can’t let it out

As per reports, the much-awaited Gaza deal could reportedly be reached within a month. Although no further information was shared, the anonymous Israeli official was quoted as saying that the possibility of reaching a ceasefire deal with Hamas within one month "was not unreasonable." The back channel negotiations are underway and progress is being made every day. On Thursday, the US National Security Advisor Jake Sullivan met with Israeli PM Netanyahu who was said to be ready to agree to a ceasefire deal with Hamas.

As per TOI/Channel 12 report, an unnamed senior Israeli official said to agree with the US assessment that a hostage deal is possible by the end of December An Arab diplomat told The Times of Israel earlier this week that there have been indications that Israel and Hamas are willing to compromise regarding the terms of Israel’s withdrawal from Gaza. However, the diplomat said the main obstacle to the talks — whether the ceasefire will be permanent or temporary — remains unresolved. The diplomat also denied a WSJ report claiming that Hamas had passed along a list of hostages it is prepared to release, including US citizens, to the mediators.

However, another report indicates that Palestinian sources familiar with the negotiations are for the first time expressing cautious optimism regarding Hamas’s willingness to agree to a deal. The sources credit simultaneous pressure that has been placed on the terror group from Qatar, Egypt and Turkey. There is also a report that Hamas is now showing unprecedented flexibility for a hostage deal and a temporary 60-day Gaza war ceasefire, at least initially. In the meantime, there may be also a permanent/official US-Israel MDT (mutual defense treaty) to prevent any future attack by Hamas or Iran.

Now from the Gaza to Ukraine war, on late Friday, there was another report (NBC) indicating Trump's transitional National security team said to be in talks with WH (Biden), Ukraine on ending the war. But Trump's advisers and nominees may have still not presented a specific peace plan to Ukraine. During his presidential campaign, Trump vowed to end the war even before his inauguration.

Despite Trump not presenting any actual plan yet, both Russian President Putin and his Ukrainian counterpart Zelensky have expressed confidence he could bring peace closer. However, Zelensky has recently warned that Putin is trying to prevent Trump from ending the war by escalating the situation. Trump reportedly asked Zelensky to accept some Ukrainian land grab by Russia for an imminent ceasefire, while the US will not allow Ukraine to be a member of NATO, which was Putin’s main demand before starting the Ukraine war. Trump may have also told Zelensky that lost lands to Russia may be recovered in the future through systematic negotiations with Russia.

Meanwhile, on Friday Russia launched another massive Strike on Ukraine's fuel & energy in response to later’ US made ATACMS missed strike the attack on the Russian military airfield earlier in the week: “In response to the use of American long-range weapons, the Armed Forces of the Russian Federation launched a massive strike with high-precision long-range air and sea-based weapons and strike unmanned aerial vehicles on critical fuel and energy infrastructure facilities in Ukraine that ensure the operation of the military-industrial complex”.

Ukrainian armed forces launched six US-supplied missiles to strike a Russian military airfield in Taganrog on Wednesday. Earlier Friday, Ukrainian President Zelensky said that his country intercepted 81 out of 93 missiles launched by Russia, including at least one North Korean missile.

On Friday, Kremlin spokesperson Peskov pointed out:

·         What Russia needs in Ukraine is not a temporary ceasefire but rather a full-fledged peace

·         Moscow does not yet see the preconditions for negotiations with Kiev, because Ukraine is avoiding them

·         However, Russia is open to holding talks, as it considers them possible and necessary

·         Mentioning United States President-elect Donald Trump and his comments about the dangers of Ukraine using Western-supplied ATACAMS to strike Russian territory, Peskov remarked that his statement "completely coincides" with Moscow's position.

·         Nonetheless, the Kremlin spokesman shared that it's too early to say whether the incoming US President Trump would revoke the permission for the long-range arms to be used.

Bottom line:

There may be an imminent Gaza war and Ukraine war ceasefire by December’24 or by 25th December (X-Mas holiday) as both outgoing US President Biden and incoming Trump are eager for a temporary/permanent deal for respective political compulsion. Both Israel and Ukraine may not be supported actively further by Trump. Thus both Zelensky and Netanyahu are now may be eager to seal a deal before it gets complicated. Gold was a major beneficiary of the Gaza war and soared almost +75% in the last year since the Gaza war started in Octtober’23.

Thus we may see a significant correction in Gold if the Gaza and Ukraine war stops; oil may also slip again, while stocks should get some boost; German Dax already soared in anticipation of the Ukraine war ceasefire. Germany may be the biggest lower in G7 for Biden/Putin incited Ukraine war. Gold also slips as China’s PBOC makes it quite clear that it will not abandon USD/UST and present Gold buying as a part of a long-term FX asset portfolio diversification strategy.

Market Impact:

On Friday, Wall Street Futures closed mixed as blue chip DJ-30 slips -0.4%, broader SPX-500 edged down -0.2%, while tech-savvy NQ-10 surged +0.5%, led by Broadcom, which soared, hitting a $1 trillion market cap after reporting a 220% increase in AI-related revenue, exceeding expectations. This boost lifted semiconductor stocks, including Marvell and Taiwan Semiconductor (TSMC). Also, TSMC is set to start its Japan plant by December’24. But the China-heavy Dow was under stress on the concern of the Trump trade war tantrum and fading hopes of a Fed rate cut on 18th December amid stalled core disinflation and a stable labor market. Byt Fed may also cut in December for a cumulative 100 bps in 2024 to rectify policy mistakes by not cutting in H1CY24.

On Friday, Wall Street was boosted by techs, consumer discretionary, and utilities, while dragged by communication services, materials, energy, real estate, banks & financials, industrials, and consumer staples. Dow Jones Industrial Average was boosted by United Health (Trump’s moderate stance on healthcare), Home Depot, Boeing, American Express and Merck, while dragged by Nvidia, Goldman Sachs, Amgen, Microsoft, JPM, Walt Disney and IBM.

Weekly-Technical trading levels: DJ-30, NQ-100, SPX-500, and Gold

Looking ahead, whatever the fundamental narrative, technically Dow Future (CMP: 45100) now has to sustain over 45500 for any further rally to 45800/46000-46200/46400 and 46800/47000-47500/48000 in the coming days; otherwise sustaining below 45450/45200, DJ-30 may again fall to 45000/44750-44650/44200, DJ-30 may again fall to 43900/43300-42600/41600 in the coming days.

Similarly, NQ-100 Future (21450) has to sustain over 21200 for a further boost to 21500 and further to 21700/21900-22050/22500 and even 21450 levels in the coming days; otherwise, sustaining below 21150, NQ-100 may again fall to 20950/20850-20500/20300 and 20000/19800-19650/19350 in the coming days.

Technically, SPX-500 (CMP: 6050), now has to sustain over 6100 for any further rally to 6150/6200-6350/6500 in the coming days; otherwise, sustaining below 6075/6050 may again fall to 6000/5950-5900/5850 and 5675/5600-5550/5500 in the coming days.

Also, technically Gold (CMP: 2650) has to sustain over 2680 for a recovery to 2700-2725 and further 2735/2750-2775/2795 and 2815 in the coming days; otherwise sustaining below 2655-2630 may again fall to 2605/2600 and 2590/2565 and further fall to 2550/2500-2470/2450 in the coming days (depending upon Fed rate cuts, Gaza/Ukraine war trajectory); Gold surged almost 75% in the last one year since Gaza war started back in October’23. Now it may retrace to $2100 levels if Trump indeed can mediate both Gaza and Ukraine war ceasefire by early 2025.