Gold gains as global growth worries support demand
· Gold edged higher on Monday after weak U.S. data raised concerns over a quick economic rebound from the coronavirus-led slump and cemented hopes that lower interest rates would last longer.
· Spot gold was up 0.2% at $1,935.50 per ounce by 0341 GMT, moving further away from a one-week low of $1,916.24 touched on Friday. U.S. markets are shut for the Labor Day holiday on Monday.
U.S. gold futures rose 0.5% to $1,943.40.
· “The general theme from last week’s U.S. jobs report showed that the recovery is continuing to slow. So really, the payroll gains were weak in the overall context,” said Stephen Innes, chief market strategist at financial services firm AxiCorp.
“Also, the lower for longer interest rates narrative continues to chime well for the gold bulls right now.”
· Federal Reserve Chairman Jerome Powell said the U.S. jobs report for August was “a good one,” but noted that with gains likely to slow, the central bank is planning to keep its foot on the monetary policy gas pedal for years.
· Central banks around the world, including the Fed have rolled out massive stimulus measures and slashed interest rates near zero to mitigate the virus impact on the economy, helping gold climb more than 28% so far this year.
· Lower interest rates decrease the opportunity cost of holding nonyielding bullion.
· Limiting gold’s advance, the dollar index held steady against its rivals after hitting a one-week high in the previous session.
· Investors’ focus for this week will be on European Central Bank’s monetary policy decision on Thursday.
Attention is turning to Thursday’s ECB meeting, where investors are not expecting any major policy changes but will listen closely for anything said about the euro after a blistering rally that has likely unnerved some policymakers.
· Spot gold may bounce to $1,949, as it has cleared a resistance at $1,936 per ounce, said Reuters technical analyst Wang Tao.
· Elsewhere, silver gained 0.4% to $26.99 per ounce, platinum rose 0.8% to $901.77 and palladium climbed 0.5% to $2,308.15.
· Payrolls increase by nearly 1.4 million as the unemployment rate tumbles
Nonfarm payrolls increased by 1.37 million in August and the unemployment rate tumbled to 8.4% as the U.S. economy continued to climb its way out of the pandemic downturn.
The unemployment rate was by far the lowest since the coronavirus shutdown in March, according to Labor Department figures released Friday. An alternative measure that includes discouraged workers and those holding part-time jobs for economic reasons also fell, down to 14.2% from 16.5% in July and 22.8% at the peak in April.
Economists surveyed by Dow Jones had been expecting growth of 1.32 million and the jobless rate to decline to 9.8% from 10.2% in July.
Markets initially reacted positively to the news, but stocks turned lower and continued the aggressive sell-off from Thursday.
· Powell says low interest rates could last for years
Interest rates are likely to stay low for years as the economy fights its way back from the coronavirus pandemic, Federal Reserve Chairman Jerome Powell said in remarks published Friday afternoon.
“We think that the economy’s going to need low interest rates, which support economic activity, for an extended period of time,” Powell told NPR in an interview after the nonfarm payrolls report was released earlier in the day. “It will be measured in years.”
“However long it takes, we’re going to be there. We’re not going to prematurely withdraw the support that we think the economy needs,” he added.
The statement aligns with comments from Powell and other Fed officials over the past week or so.
In a major change to its approach to monetary policy, the central bank now has set a stated directive that inflation will be allowed to float above the Fed’s 2% target for a period time after running below, as has been the case for most of the past decade.
· U.S. is still in a ‘very significant recession’ despite job gains, Fed’s Rosengren says
Job creation in August represents continued improvement in the U.S. economy but a full recovery won’t happen until the coronavirus pandemic is under control, Boston Federal Reserve President Eric Rosengren said Friday.
Unemployment fell to 8.4% as nonfarm payrolls rose by 13.7 million last month, the Labor Department reported, in numbers that were significantly better than Wall Street expectations. The jobless rate decline was particularly pronounced, sliding 1.8 percentage points from its July level as the labor market continues to heal.
While Rosengren acknowledged the “significant improvement,” he said the economy remains under pressure.
“We have a long way to go before we are fully recovered, but I will say this employment report was a very positive one,” he told CNBC’s Steve Liesman during an interview on “The Exchange.”
· Fed's Evans calls for more fiscal aid, signals further monetary easing
The head of the Chicago Federal Reserve on Thursday called on Congress to deliver more fiscal aid and signaled U.S. monetary policy would be eased further and interest rates kept at ultra-low levels for years to help the economy recover its pre-pandemic strength.
Even with further government stimulus, and assuming progress in controlling the coronavirus, Chicago Fed President Charles Evans predicted U.S. output won’t return to pre-crisis levels until late 2022. At that point, he forecast, unemployment will still be between 5% and 5.5%. He added that inflation will likely remain below the Fed’s 2% goal for some time.
Chicago Federal Reserve President Charles Evans on Thursday signaled support for promising to keep interest rates pinned near zero until inflation reaches 2.5%, well above current low levels and modestly above the U.S. central bank’s target of 2% inflation.
· Fed's Bostic says he will watch trajectory of inflation when setting policy
The Federal Reserve’s understanding of the relationship between employment and inflation has shifted and determining when to raise interest rates will depend more on the trajectory of inflation than the exact level, Atlanta Fed President Raphael Bostic said on Thursday.
Bostic said he would not be concerned with inflation going above the Fed’s goal of 2%, reaching up to about 2.4%, if prices remain stable. “As long as we see the trajectory moving in ways that suggest that we are not spiraling too far away from our target, I’m comfortable just letting the economy run and letting it play out,” Bostic said in an interview with the Wall Street Journal.
· CORONAVIRUS UPDATES:
Global cases: More than 27.48 million
Global deaths: At least 896,658
U.S. cases: More than 6.485 million
U.S. deaths: At least 193,534
Coronavirus digest: India caseload surges to second-highest in world
India's COVID-19 cases have risen to 4.2 million, surpassing Brazil. Meanwhile, Australia has announced it expects to receive its first batches of a potential vaccine in January. Follow DW for the latest pandemic news.
India becomes COVID-19 second-worst-hit nation with 90,000 cases in 24 hours
· World must be better prepared for next pandemic, says WHO boss
World Health Organization chief Tedros Adhanom Ghebreyesus said on Monday the world must be better prepared for the next pandemic, as he called on countries to invest in public health.
· Trump again raises idea of decoupling economy from China
With the U.S. election approaching, President Donald Trump on Monday again raised the idea of separating the U.S. and Chinese economies, also known as decoupling, suggesting the United States would not lose money if the world’s two biggest economies no longer did business.
· China says August exports beat expectations, jumping 9.5% from a year ago
China’s dollar-denominated exports beat expectations to rise 9.5% for the month of August from a year ago, data from the country’s General Administration of Customs showed on Monday.
Meanwhile, China’s dollar-denominated imports in August fell 2.1% from a year ago.
Economists polled by Reuters had expected exports to have climbed 7.1% in August from a year ago compared with a 7.2% rise in July, while imports were expected to climb 0.1% in August from a year ago, reversing a1.4% decline in July.
China posted a trade surplus of $58.93 billion for the month of August, beating the $50.50 billion economists had expected. China’s trade surplus was $62.33 billion in July.
· Singapore’s economy could shrink 7.6% on-year in the third quarter, central bank survey shows
Singapore’s economy is expected to shrink by 7.6% in the third quarter compared to a year ago, with the coronavirus pandemic remaining the top economic threat, according to a central bank survey of economists and analysts.
That would be the Southeast Asian economy’s third consecutive quarter of year-over-year contraction. But it will still be an improvement from the second quarter’s 13.2% decline versus a year ago — which is the country’s worst quarterly contraction on record, data by the Singapore Department of Statistics showed.
· Japan's economy shrinks more than expected in second quarter, heightens woes for new leader
Japan’s economy shrank more than initially estimated in the second quarter as capital expenditure took a hit from the coronavirus crisis, highlighting the challenge policymakers face in averting a deeper recession.
Other data put that challenge in perspective, with household spending and wages falling in July as the broadening impact of the COVID-19 pandemic kept consumption frail even after lock-down measures were lifted in May.
The data underscored the daunting task the new prime minister, to be elected in a ruling party leadership race on Sept. 14, faces in seeking to contain the pandemic while avoiding restrictions on business activity.
The world's third-largest economy shrank an annualised 28.1% in April-June, more than a preliminary reading of a 27.8% contraction, revised gross domestic product (GDP) data showed on Tuesday, suffering its worst postwar contraction.
The record drop roughly matched a median market forecast of a 28.6% contraction in a Reuters poll.
Reference: CNBC, Reuters, Worldometers, Euronews, DW.com
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