The Role Of Reits In Reshaping Kuala Lumpur

Economic

Summary:

Malaysia should capitalise on its multicultural milieus and multilingual professional workforce as well as its non-aligned geopolitical positioning, and make a concerted effort to make Kuala Lumpur a preferred choice for global and regional businesses to select as a hub.

The Malaysian real estate investment trust (M-REIT) industry kicked off almost two decades ago. Since then, the market capitalisation has quadrupled from RM9 billion in 2010 to RM41 billion as of Dec 31, 2023.

When I think about investment, I don’t subscribe to the idea that investment’s sole purpose is to make profit. Milton Friedman’s idea that a company’s sole purpose is making profits for its shareholders has produced disastrous societal outcomes and resulted in very divided societies in the US and many parts of Europe.

The core idea of a REIT is that real estate development does not have to be transacted through the format of the individual ownership model.

In response, many businesses now talk about stakeholder economy; environmental, social and governance (ESG); and impact investing. I hope the REIT community will be ambitious and imaginative in utilising REITs as a mechanism to create a better Malaysia for all.

The world has entered into a new phase. From the time of China's entry into the World Trade Organization in 2001 to the Covid-19 pandemic in 2020, China was the factory of the world and many other countries experienced premature deindustrialisation, including Malaysia.

This has changed due to two major factors:

The disruptions of various forms, including the pandemic, wars and geopolitical tension such as the Red Sea crisis, as well as the impact of climate change, such as floods and typhoons, have forced manufacturers to move from a “just-in-time” logic to a “just-in-case” mindset. Corporations are now thinking about de-risking through a shorter and more secured supply chain.

Those who are involved in industrial parks would know that there are many new interests in industrial land. The REIT community should do more and quickly devise new ways of group ownership so that industrial land development does not have to be through the model of single-owners.

The key to the next phase of industrial success is not through many individual firms exporting vertically to a global supply chain but to form a very strong cluster and a robust supply chain.

I also hope property developers will take the new-found opportunity to transition from selling land to building supply chains to becoming investors in technology themselves. REITs can be of help here.

The new global setting gives Malaysia a second chance to be a high-end manufacturing and services provider, hopefully emerging as an innovative nation.

For the Malaysian economy to grow, we should not be competing with Vietnam to become a cheap manufacturing hub but we should aspire to be a centre of innovation and a hub for regional and global businesses.

Malaysia is not a “Vietnam+” but a “Singapore at a discount”. With such framing and a different value proposition, Malaysia will be the appropriate meeting place and launch pad for regional and global businesses, as well as regional research and development activities.

Costs in Singapore have risen significantly over the past several years, thus justifying a “Singapore at a discount approach” for corporations. A recent Knight Frank report showed that rents for office buildings in Kuala Lumpur are 15% of Singapore's.

As many of Singapore’s establishments are populated with Malaysian workers, a rule of thumb is that if a Malaysian is paid two-thirds of Singapore’s pay, he or she would likely be ready to work in Malaysia instead of Singapore.

Yet the relationship between Malaysia and Singapore is more of a complimentary one as the relocation of the supply chain into Southeast Asia is huge for any country to take all.

The global economy is now seeing “the rise of the rest” and is no longer dominated by just Western money. Kuala Lumpur is well-poised to be a great meeting point and regional headquarters for businesses from China, India, Arab countries, Southeast Asia and even South American countries such as Brazil.

However, Kuala Lumpur is not without its challenges.

First, after nearly 50 years of urban sprawling, Kuala Lumpur’s suburbs have reached Shah Alam or even Klang to the west and Seremban to the south, basically in all directions. Yet, the Kuala Lumpur inner city has hollowed out.

Second, the sprawling and financialisation of housing (the government-linked investment companies [GLICs] and government-linked companies [GLCs] have a hand in exacerbating both trends) have resulted in younger workers residing in faraway suburbs while leaving the abundant space and buildings in the Kuala Lumpur inner city empty. The newly built TRX and Merdeka 118 will exacerbate the situation.

Since many of those vacant buildings are owned by GLICs and GLCs, they need to repopulate the Kuala Lumpur inner city to generate sufficient yield for these buildings and also to prevent these buildings from rotting away.

Third, due to the lack of bus-based public transport, aggravated by urban sprawl, most commutes are done by privately owned single-passenger cars, which is a huge financial burden on the working population. It is also bad in terms of carbon emissions.

However, we have an extensive network of public transport infrastructure within a 3km radius of Kuala Lumpur's inner city. The inner city is also walkable. This makes a convincing case for the working population to move back into Kuala Lumpur inner city, nearer to their workplaces.

Fourth, at some point the government will have to remove petrol subsidies, which will make travelling from the sprawled suburbs with private cars a lot more expensive than it is now.

Fifth, wages for the general population are still low in Malaysia, and one of the ways to raise disposable income quickly is to reduce the burden of the cost of living, especially housing and transport costs that usually make up a big part of their expenditure.

The Kuala Lumpur inner city should be given a lot of attention by the government so that the city plays the following roles:

•The new regional headquarters for corporations from the developed world and, importantly, the Global South;

• The new centre of research and development;

•Creation of rental housing stock through repurposing older buildings, especially those owned by GLICs and GLCs; and

•A city where the population can work, live, learn and play.

To achieve all these, a major paradigm shift is needed. Just like Melbourne was hollowed out until the 1990s, it took the city around 30 years to repopulate the inner city. It is time for Kuala Lumpur to bring the people back to the inner city and make Kuala Lumpur a major regional city.

A rejuvenated inner city powered by REITs will also allow current building owners — many of the buildings are owned by GLICs and GLCs — to generate income from their old assets and create new asset classes for the GLICs and other funds to invest in, while solving the problems of housing the young, climate, and the current hollow state of our city.

Source: Theedgemarkets

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Warren Takunda

Economic

Having all but tamed inflation, the Federal Reserve is poised to do something Wednesday it hasn’t done in more than four years: Cut its benchmark interest rate, a step that should lead to lower borrowing costs for consumers and businesses just weeks before the presidential election.

And yet an unusual air of uncertainty overhangs this week’s meeting: It’s unclear just how large the Fed’s rate cut will be. Wall Street traders and some economists foresee a growing likelihood that the central bank will announce a larger-than-usual half-point cut. Many analysts foresee a more typical quarter-point rate cut.

With inflation barely above their target level, Fed officials have been shifting their focus toward supporting a weakening job market and achieving a rare “soft landing,” whereby it curbs inflation without causing a sharp recession. A half-point rate cut would signal that the Fed is as determined to sustain healthy economic growth as it is to conquer high inflation. This week’s move is expected to be only the first in a series of Fed rate cuts that will extend into 2025.

High interest rates and elevated prices for everything from groceries to gas to rent have fanned widespread public disillusionment with the economy and provided a line of attack for former President Donald Trump’s campaign. Vice President Kamala Harris, in turn, has charged that Trump’s promise to slap tariffs on all imports would raise prices for consumers much further.

Over time, Fed rate cuts should lower borrowing costs for mortgages, auto loans and credit cards, as well as for business loans. Business spending could grow, and so could stock prices. Companies and consumers could refinance loans into lower-rate debt.

Chair Jerome Powell made clear last month in a high-profile speech in Jackson Hole, Wyoming, that Fed officials feel confident that inflation has largely been defeated. It has plummeted from a peak of 9.1% in June 2022 to 2.5% last month, not far above the Fed’s 2% target. Central bank officials fought against spiking prices by raising their key interest rate 11 times in 2022 and 2023 to a two-decade high of 5.3% to try to slow borrowing and spending, ultimately cooling the economy.

Wage growth has since slowed, removing a potential source of inflationary pressure. And oil and gas prices are falling, a sign that inflation should continue to cool in the months ahead. Consumers are also pushing back against high prices, forcing such companies as Target and McDonald’s to dangle deals and discounts.

Yet after several years of strong job growth, employers have slowed hiring, and the unemployment rate has risen nearly a full percentage point from its half-century low in April 2023 to a still-low 4.2%. Once unemployment rises that much, it tends to keep climbing. But Fed officials and many economists note that the rise in unemployment largely reflects an increase in new workers seeking jobs — notably new immigrants and recent college graduates — rather than layoffs.

Still, Powell said in Jackson Hole that “we will do everything we can to support a strong labor market.” He added that any “further weakening” in the job market would be “unwelcome.”

Some analysts have said that such a sweeping declaration suggests that Powell would favor a half-point rate cut. Other economists still think a quarter-point reduction is more likely.

At issue is how fast the Fed wants to lower interest rates to a point where they’re no longer acting as a brake on the economy — nor as an accelerant. Where that so-called “neutral” level falls isn’t clear, though many analysts peg it at 3% to 3.5%. Economists who favor a half-point reduction argue that the Fed’s key rate is much higher than necessary now that inflation is in retreat.

But others note that the Fed typically cuts its rate by a half-point or more only in an emergency. The last time it made an equivalent cut was in March 2020, when the pandemic paralyzed the economy. With consumers still spending and the economy likely to grow at a healthy pace in the July-September quarter, more cautious Fed officials can argue that there’s no rush to cut.

One hopeful sign is that as Powell and other Fed officials have signaled that rate cuts are coming, many borrowing rates have already fallen in anticipation. The average 30-year mortgage rate, for example, dropped to 6.2% last week — the lowest level in about 18 months and down from a peak of nearly 7.8%, according to the mortgage giant Freddie Mac. Other rates, like the yield on the five-year Treasury note, which influences auto loan rates, have also tumbled.

Source: AP

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SAXO

Economic

Political

US Election Countdown: A Very Divided America_1

This week: Election outcome as uncertain as ever, pivotal FOMC meeting dead ahead, and America: the land of inequality.

A steady performance from Harris at last week’s first (and likely only!) presidential debate moved the oddsmakers’ assessment of the situation back to a virtual 50-50 tie after they had tilted up to 6-7 points in favour of Trump the previous week. This keeps election outcome uncertainty at maximum. This week, markets are awaiting the critical first rate cut of a new cycle from the US Federal Reserve and whether it will be large or small, as we discuss below.If the polls and odds are still this close on Election Day, the market reaction to the outcome will likely be quite powerful. You can find our thoughts on how various election outcomes can shape markets and specific stock sectors at our US Election hub.

US Election Countdown: A Very Divided America_2

The chart above is inspired by a similar one produced by Bloomberg and Bank of America. It shows the stock price of Dollar General, a low-end US grocery- and general merchandise retailer and the Italian sports- and super-car maker Ferrari, whose largest market is the US. The latter has gone from strength to strength, more than doubling its revenues in the last eight years as the wealthy snap up its pricey cars. Dollar General, on the other hand, has stumbled since early 2023, with its top-line revenues far slower than the nominal growth in the US economy.

This is perhaps as lower-income US consumers began to run dry of the extra income from Covid-era stimulus checks and have seen their incomes struggling to keep up with inflation. The company’s stock dropped a massive 32% two weeks ago on its latest earnings report. It noted in the earnings call that, while the number of customers remained steady at its stores, those customers showed signs of distress: ”The majority of them state that they feel worse off financially than they were six months ago as higher prices, softer employment levels and increased borrowing costs have negatively impacted low-income consumer sentiment.” This according to the company’s CEO, who also reported a rise in shoplifting and weak sales at month-end, when customers run short of cash before their paychecks are due. Of course, no story has a single dimension, and Walmart may be stealing some of Dollar General’s market share, but the point remains: America is extremely inequal and getting more so.

Theme of the week: America is the land of inequality

We all know that the US is plagued by high levels of inequality, but a look at the numbers is truly staggering. According to the US’ St. Louis Fed, the wealthiest 10% of the country’s population has 67% of the country’s wealth, while the bottom half of American has a mere 2.5%. And even within the top 1%, the inequality is incredible: as the average household wealth of the top 0.1% tops USD 1.5 billion.

These numbers have generally only gone in one direction since the point of maximum American equality in the 60’s and 70’s. This is certainly one of the chief drivers of a very politically divided America, with the two political sides finding very different targets for their dissatisfaction with the status quo. The incredible wealth at the very top is also behind Democratic candidate Kamala Harris’proposal to tax unrealised capital gains among those with USD 100 million or more in wealth. Historians will argue that widening inequality drives social unrest, so with the US society at is most out-of-balance since just before the Great Depression, what path does it take from here? Will policies move the US into more balance by lifting the poor and lower middle class or by taking down the ultra-rich?

The two presidential candidates differ on how they would address the needs of Dollar General’s customers, generally those that make less than USD 35,000 per year and at the bottom fifth of incomes. Trump’s tax cut proposals are irrelevant for the poorest Americans, as he focuses mostly on cutting corporate tax rates further. Harris has proposed that the federal minimum wage be hiked from USD 7.25 to USD 15 per hour, and would like to abolish the “sub-minimum wage” for tipped workers, like restaurant waiters, who are paid virtually nothing by employers and must earn from customer tips. The old minimum wage level is so low that only about a million Americans are paid at this level and many states have far higher minimum wages. A better proposal would be to index the minimum wage to inflation. A higher minimum wage, especially for tipped service workers would certainly be inflationary.

Key to watch this week: The Fed will cut rates this week – but by how much?

Last week, a prominent WSJ reporter, Nick Timiraos wrote a column suggesting it was highly uncertain whether the Fed would cut the interest rate by 0.25% or a larger 0.50% increment at this Wednesday’s FOMC meeting. Timiraos is the designated, if completely unofficial “Fed whisperer”, seen as the journalist the Fed would most likely leak information to if it was afraid that the market was reading its intentions wrongly. The article helped support sentiment in the stock market and shocked the US dollar lower, while gold rose to all-time highs.

Before this article and a similar one from the Financial Times published the same day, the market was nearly certain that, after recent mixed labor market data, the Fed would take things slowly this week with a smaller rate cut. Now markets are leaning in favour of the Fed cutting by a half-percent, but more important will be the Fed’s thoughts on how it sees the likely path of interest rates at future meetings. This meeting will also see the Fed refreshing its quarterly projections on where the US economy and its own policy rate is likely to head in the coming years. This sets up an intense interest in every future US economic data release and whether it agrees or disagrees with the market consensus on where the economy and Fed policy are headed.

Key to watch in the election this week: can anything really shift the odds?

This past weekend we had another apparent assassination attempt on former President Trump foiled by Secret Service agents during a round of golf, fortunately before any active shooting from the would-be assassin. This is unlikely to shift sentiment, and in general, the polls are extraordinarily tight and relatively stable. We are at a loss on what either candidate can do with seven weeks to go to shift voter sentiment.

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Kevin Du

Economic

Japan’s export growth slowed while posting a ninth straight advance, in an outcome underscoring the uneven state of the economic recovery.

Exports increased 5.6 per cent in August from a year ago, decelerating from 10.2 per cent in the previous month, the Ministry of Finance reported on Sep 18. The result, which missed the 10.6 per cent consensus estimate from economists, was driven by a 9.9 per cent decline in auto exports, with shipments of construction and mining machinery also falling.

Imports climbed 2.3 per cent, falling short of the 15 per cent gain forecast by economists. The trade deficit widened to ¥695.3 billion (S$6.35 billion).

The weaker-than-expected data may give officials at the Bank of Japan (BOJ) another reason to hold policy steady when the board gathers this week. Economists responding to a Bloomberg survey were unanimous in forecasting a hold for Sep 20’s decision, with many expecting a rate increase in the fourth quarter.

The data were at odds with the BOJ’s assessment in July. In the outlook report released after the board meeting that month, the bank said, “exports and production are likely to return to an uptrend, mainly due to a pick-up in global demand for IT-related goods, as overseas economies continue to grow moderately.”

Sep 18’s data were also inconsistent with wider trends for trade. The World Trade Organisation said earlier this month that its goods barometer, a gauge for global trade activity, rose to 103 compared with a reading of 100.6 in March, with components of the barometer such as autos, shipping containers and air freight showing at or above-trend levels.

Among products supporting Japan’s export performance in August were semiconductor manufacturing equipment, which posted a 55.2 per cent gain. Japan’s tech sector has benefited from a wave of global demand for artificial intelligence development, which has generated high demand for advanced semiconductors and related machinery in the US and other developed nations.

On a regional basis, exports to the US fell for the first time in almost three years, edging 0.7 per cent lower, and those to Europe fell by 8.1 per cent, while shipments to China rose 5.2 per cent.

Source: Straitstimes

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Alex

The Reserve Bank of Australia (RBA) said it will focus on the possible use cases for a wholesale central bank digital currency given the modest likely benefits and potential complications from a retail variant.

A retail central bank digital currency (CBDC) would create “non-trivial challenges” for financial stability and monetary policy implementation, RBA assistant governor Brad Jones said in the text of a speech due to be delivered in Melbourne on Sept 18.

As an immediate priority, the central bank will start a new project with the industry on wholesale CBDC and tokenised commercial bank deposits, Mr Jones said. A wholesale CBDC “would represent more an evolution than revolution in our monetary arrangements”, he added.

Central banks around the world are assessing blockchain technology, with potential gains in the speed and cost of real-time interbank payments a key area of interest.

Some 134 countries and currency unions – representing 98 per cent of global gross domestic product – are exploring a CBDC, and three nations have fully launched one, according to the Atlantic Council.

Some critics argue modern digital payments are already efficient and that CBDCs bring potential privacy concerns as transactions can be tracked.

Mr Jones said that if a public policy case were to ever emerge in favour of a retail CBDC, the Australian government would be the ultimate decision authority and it would almost certainly require legislative change. For a wholesale CBDC, the decision making and legislative implications would depend on the new arrangement, Mr Jones added.

The assistant governor laid out a road map for a three-year digital money work plan.

An assessment of how wholesale digital money and new settlement methods could support tokenised markets runs from 2024 to the first half of 2025. An evaluation of the merits of and design issues for a retail CBDC is due to begin in 2026 and conclude in 2027.

The Australian government will publish a joint paper with the RBA on CBDC and the future of digital money on Sept 18. ANZ Group Holdings and Commonwealth Bank of Australia are among the local institutions that have already participated in pilot CBDC projects. BLOOMBERG

Source: Straitstimes

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Thomas

Forex

Bond

When U.S. based construction material supplier Wilsonart issued a junk bond to raise $500 million to fund an acquisition this summer, a research firm warned potential investors that the terms of the deal offered them weak protections.

The bond’s covenants would allow the company to potentially move valuable assets to a different entity later and raise even more money, putting the investors in the bond at a disadvantage, the research firm, Covenant Review, wrote in a review seen by Reuters.

The warning came against the backdrop of growing worries in credit markets after an increasing number of companies have used similar weaknesses to borrow more against the same assets, in a practice euphemistically called a liability management exercise.

That has favored some creditors over others, a result that’s come to be known as creditor-on-creditor violence. Things have become so bad this year that some creditors have been banding together to fight back.

So, what did investors do in the case of the Wilsonart offering after the warning? They lapped it up.

Wilsonart did not respond immediately to a request for comment.

Wilsonart’s ability to raise the money highlights a paradoxical trend in U.S. credit markets: while investors are suffering the consequences of weak covenants, they are letting a vast majority of companies sell them new paper with the same flaws without significant pushback, credit market bankers, lawyers and investors said.

The reason, these market sources said, is lack of enough supply of junk-rated bonds and the need to lock in higher yields before the Fed begins to cut interest rates as well as diverging interests between the biggest creditors and small investors.

"Investors have a tough choice to make: Do I sit in cash and not buy a bond or loan because of looser documentation and thereby risk hitting my return hurdles," said Peter Toal, global head of fixed income syndicate at Barclays. Toal said the lack of supply was in part because most of the borrowing now has been to refinance old debt.

Several bankers and analysts estimated 90% of high-yield bonds and loans that are coming to the market now are being sold with weak investor protections despite growing concern that stressed companies were taking advantage of them to raise fresh funds to repay maturing debt or simply remain solvent.

More than 90% of the Morningstar LSTA Leveraged Loan Index is now "covenant-lite" or lacking maintenance covenants, a metric that has increased sharply since the financial crisis of 2008, a Barclays research report shows.

Liability management exercises (LMEs) come in many forms, but the most common tactic is for the company to transfer valuable assets into a subsidiary. That subsidiary then raises debt in a side deal from some old and new investors. The cash is then forwarded back to the parent as an intercompany loan.

The side deal gives the new creditors a priority claim on the company’s assets in case of a bankruptcy, pushing existing investors down the line, increasing their potential losses in the event of default.

High-yield bonds and loans bought by investors make their way into funds that are then sold to retail and large institutional investors who, as a result of weaker covenant protections and covert LMEs, may end up facing losses or underperformance of their investments.

DISTRESSED EXCHANGES

So far in 2024, 28 companies have completed a distressed exchange, totaling $35 billion, the second-largest total on record, according to JPMorgan. Their numbers are expected to only grow.

Moody’s has said some 13.5% or $400 billion of the more than $3 trillion junk-debt rated by it is at a high risk of default over the next 12 months, with a bulk structured with little or no guardrails to prevent liability management exercises.

Investors are being forced to consider ways to improve their claims on a company’s assets. Many creditors have been entering into cooperation agreements, or private legal pacts, to increase their ability to negotiate and keep rivals from signing side deals without their knowledge, bankers and lawyers said.

Steven Oh, global head of credit and fixed income at asset management firm Pinebridge Investments, said investors were caught in a "classic prisoner's dilemma."

“Do the side trade with the company and enhance your own interests or align with others and prevent someone else from doing a deal with the company," Oh said.

In some cases, investors are also pushing back on the documentation, refusing to buy new debt unless the borrower agrees to include clauses that stop it from short-changing existing creditors. Moody’s noted in April that Thryv and two other borrowers faced such pushback.

Nevertheless, the market sources said such pushback was still rare. It was again on display in early September, when Clayton, Dubilier & Rice (CD&R) through Fiesta Purchaser marketed a $400 million junk-rated bond.

Covenant Review again issued a market alert urging investors to reject the legal provisions included in it as it would take the company’s ability to issue debt through a subsidiary to a “nonsensical extreme.”

A few days later it pointed out the same flaw in a new $700 million bond by Focus Financial Partners but after both bonds were subsequently upsized and priced on September 9 and 10, it noted the language may have been changed.

CD&R declined to comment and Focus Financial did not respond to a request for comment.

Scott Josefsberg, Covenant Review’s head of high-yield research, said the changes showed if investors are willing to push back hard, covenant protection can be improved but it was a long road ahead to a major overhaul.

"A vast majority of bonds and loans have no guardrails against LMEs, and they are easily sold," Josefsberg said.

Source: Theedgemarkets

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Warren Takunda

Economic

The dollar ceded some of its overnight gains on Wednesday while Asian stocks struggled as traders weighed the odds of a super-sized Federal Reserve interest rate cut later in the day.

The U.S. currency dropped back sharply against the yen, handing back about half of its rally from Tuesday, when unexpectedly robust U.S. retail sales data was taken as weakening the case for aggressive Fed easing.

However, short-term U.S. bond yields ticked slightly higher.

The chances of the Fed kicking off its easing cycle with a super-sized cut of 50 basis points (bps) oscillated in Asia, retreating to 63% early in the day from 67% around the same time on Tuesday, before stabilising around 65%, according to LSEG data.

Japan's Nikkei stock average climbed as much as 1.3% early on in reaction to overnight weakness in the yen, but pared those gains to just 0.23% as of 0526 GMT as the currency rebounded.

China's blue chips slipped 0.18% after coming back online following a holiday-extended weekend, and Taiwan also returned from a day off to tumble 1%. Australia's benchmark sagged 0.1%.

MSCI's broadest index of Asia-Pacific shares outside Japanslid 0.27%.

Hong Kong and South Korea were among major markets closed for holidays.

Wall Street finished nearly unchanged on Tuesday, failing to sustain early momentum that pushed the S&P 500 and Dow to record intraday highs. S&P 500 futures pointed 0.06% higher on Wednesday.

Pan-European STOXX 50 futures were weaker though, down 0.19%.

"The (U.S.) price action conveys the significant inflection point markets confront," said Kyle Rodda, senior financial market analyst at Capital.com.

"If the Fed nails it at this meeting, the bull market could charge on. If it doesn't, then it could signal a high water mark in this cycle."

The dollar dropped 0.67% to 141.365 yen , although that followed a 1.26% surge overnight.

The euro added 0.05% to $1.1119. Sterling was steady at $1.3158.

At the same time, two-year U.S. Treasury yields rose slightly to stand at 3.5962%, extending Tuesday's advance.

Commonwealth Bank of Australia analyst Kristina Clifton expects a quarter-point rate reduction from the Fed, "because history shows that the FOMC needs a good reason to start their cutting cycle with more than a 25 bps cut."

But in the event of a more aggressive easing, the dollar's reaction could vary dramatically, she said.

"A 50 bps cut that scares markets about U.S. economic prospects could increase the USD because it is a safe haven currency," Clifton said. "However, a 50 bps cut that eases concerns about U.S. economic prospects could undermine the USD."

Meanwhile, gold struggled to find its feet on Wednesday, slipping 0.1% to $2,567 per ounce after retreating from an all-time high in the previous session.

Crude oil also pulled back after gaining about $1 a barrel on Wednesday amid escalating tensions around the Middle East.

Militant group Hezbollah vowed retaliation against Israel after pagers detonated across Lebanon on Tuesday, killing at least eight people and wounding nearly 3,000 others.

Meanwhile, the UN's Libya mission said factions did not reach a final agreement in talks aimed at resolving the central bank crisis, which has slashed oil output and exports.

U.S. crude futures declined 49 cents to $70.70 in the latest session, and Brent crude futures lost 47 cents to $73.23.