Gold nears record peak after Fed flags risks to economic recovery
· Gold prices gained in volatile trade on Wednesday, nearing the last session's record peak at one point, after the U.S. Federal Reserve vowed to keep interest rates near zero as the rapid rise in coronavirus cases dampens hopes for an economic recovery.
· Spot gold was up 0.5% at $1,969.16 per ounce by 4:20 p.m. EDT (2020 GMT), while U.S. gold futures settled 0.5% higher at $1,953.4.
· During Fed Chair Jerome Powell's press conference following the close of the U.S. central bank's two-day policy meeting, gold jumped as much as 1.1% to $1,980.31 an ounce, just below the record high of $1,980.57 scaled on Tuesday, but pared gains soon after.
· "The gold price action around the Powell presser - up, down sharply, recovering - when the chair was careful and neutral, suggests a developing plurality of viewpoints at current levels in the market," said Tai Wong, head of base and precious metals derivatives trading at BMO. "That, after a long rally, indicates a higher probability of a short-term correction."
· The current economic downturn is severe and continued fiscal and monetary support will be necessary for a recovery, Powell said, following the release of the U.S. central bank's latest policy statement.
· Fed policymakers said they remain committed to using their "full range of tools" to support the economy and keeping interest rates near zero for as long as it takes for the economy to recover.
· Massive stimulus packages to aid economies around the world reeling from pandemic-driven woes and a low interest rate environment have helped drive gold prices up nearly 30% so far this year.
· "The fundamentals for gold have never been better," said Jeffrey Sica, founder of Circle Squared Alternative Investments. But, he said, gold is going to face resistance near the $2,000 level.
"You've a lot of people trading gold short-term now, so we are going to get some pullback just on what I would consider simple profit-taking since it's had such an incredible run year-to-date," Sica said.
· In other metals, silver dropped 1.5% to $24.19 per ounce, platinum fell 1.6% to $932.69, and palladium slid 5.9% to $2,148.78.
· U.S. housing market pushes ahead, trade flows improve
Contracts to buy U.S. previously owned homes rose to a nearly 14-1/2-year high in June, the latest indication that the housing market was weathering the COVID-19 pandemic far better than the broader economy.
Other data on Wednesday showed a sharp decline in the goods trade deficit last month, with trade boosted by a rebound in exports after three straight monthly decreases as the coronavirus upended global demand. The upbeat reports, however, did not change expectations that the economy contracted at its steepest pace since the Great Depression in the second quarter.
The National Association of Realtors said its Pending Home Sales Index, based on contracts signed last month, rose 16.6% to 116.1 in June. That was the highest level since January 2006.
· Historic second-quarter GDP report will show how hard the economy crashed in virus shutdowns
When the government releases gross domestic product data on Thursday, it is expected to show an unprecedented contraction of nearly 35% in the second quarter when America shut down to stop the spread of the coronavirus.
Economists forecast a 34.7% decline in gross domestic product during the second quarter, following a 5% decline in the first quarter, according to Dow Jones consensus forecast. The report is expected at 8:30 a.m. ET.
The decline was led by a sharp drop in consumption as consumers stayed home, businesses closed and schools taught children remotely.
“This is the largest decline in 70 years of quarterly data,” said Diane Swonk, chief economist at Grant Thornton. Aside from the Great Depression, when there was no quarterly data, other sharp quarterly drops were 10%in 1958; 8% in 1980′s first quarter, and the 8.4% drop in the financial crisis in the fourth quarter of 2008.
· U.S. jobless benefit at risk as Congress coronavirus talks stalled
U.S. congressional Republicans and Democrats, struggling to reach a deal to provide more aid to those hurt by the coronavirus pandemic, slid on Wednesday toward letting a $600-per-week unemployment benefit lapse when it expires this week.
Despite the day of meetings, there was little apparent progress on legislation to ease the impact of a pandemic that has killed 150,000 Americans and thrown tens of millions out of work.
· U.S. deaths from the novel coronavirus surpassed 150,000 on Wednesday, a number higher than in any other country and nearly a quarter of the world’s total, according to a Reuters tally.
· The number of new coronavirus infections in France rose by 1,392 on Wednesday, the highest daily tally in a month and a figure likely to fuel fears of a second wave of the disease despite officials downplaying such a scenario.
· EU executive signs remdesivir deal with Gilead
The European Union’s executive said on Wednesday it has signed a contract with Gilead for its COVID-19 medicine remdesivir that would cover 30,000 patients in the bloc from early August.
The contract was worth 63 million euros ($73.99 million) and would provide treatment to 30,000 patients with severe COVID-19 symptoms.
· U.S. Treasury to make recommendation on TikTok to Trump this week: Mnuchin
U.S. Treasury Secretary Steve Mnuchin said on Wednesday that TikTok was under a national security review and that his agency would make a recommendation to the president about the popular Chinese-owned video-sharing app this week.
The comments marked the first time the U.S. government has acknowledged that TikTok was under review by the Committee on Foreign Investment in the United States (CFIUS), which scrutinizes deals by foreign acquirers for potential national security risks and is led by Treasury.
“TikTok is under CFIUS review. We will be making a recommendation to the president this week so we have lots of alternatives,” Mnuchin said.
· Iran fires missiles at mock U.S. Navy ship in drill, American bases go on alert
Iran launched underground ballistic missiles at a mock U.S. Navy vessel in the Strait of Hormuz on Wednesday morning, according to state TV, following a series of drills that had prompted two nearby U.S. military bases to go on heightened alert the previous day.
“Using new tactics and equipment, the IRGC Air Force demonstrated some of its extensive capabilities in the face of hypothetical enemy threats,” Iranian state TV network IRIB wrote on its website.
″An important achievement of the IRGC’s airspace at this stage of the exercise, the successful firing of ballistic missiles from the depths of the ground was completely camouflaged, which could pose serious challenges to the enemy intelligence agencies,” the website wrote.
Reference: CNBC, Reuters
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