Gold touches six-week low as firm dollar dims appeal
· Gold prices hit a six-week low on Wednesday as the dollar strengthened on concerns about rising coronavirus cases in Europe, while doubts emerged over further stimulus from the U.S. Federal Reserve.
· Spot gold fell 1.2% to $1,877.52 per ounce by 801 GMT. Earlier in the session, bullion hit its lowest since Aug. 12 of $1,873.70.
· U.S. gold futures fell more than 2%, settled down $39.2 or at $1,868.40, while the dollar index hit an eight-week high.
· A firmer dollar makes bullion more expensive for holders of other currencies.
· "We are seeing a risk-off environment taking hold, which means that the dollar continues strengthening and there is a lot of pressure on gold prices in the near-term," said Howie Lee, economist at OCBC Bank.
· Also weighing on sentiment were mixed signals from Chicago Federal Reserve President Charles Evans, who on Tuesday said the U.S. economy risks a longer, slower recovery and "recessionary dynamics" if Congress fails to pass an additional fiscal stimulus package.
It is possible for the Fed to raise interest rates before inflation starts to average 2%, Evans added.
· Meanwhile, U.S. economic policymakers opened the door to further aid for small businesses hit by the coronavirus, but provided no quick path.
· "We are also seeing a slight pessimism about U.S. fiscal stimulus and that has probably curbed inflation expectations just a little bit," said IG Markets analyst Kyle Rodda.
· Gold, viewed as a hedge against inflation and currency debasement, has surged about 24% this year, mainly supported by unprecedented stimulus measures by governments and central banks worldwide to revive their coronavirus-battered economies.
· The market is still expecting changes in policy settings that could lead to a stronger gold price overtime but that is a longer-term view, he added.
· Gold Price Analysis: XAU/USD's potential short-term reprieve if USD pulls back
The following is a top-down analysis of where the price is anticipated to travel between resistance and support structures, offering further opportunities to the downside.
The weekly chart is offering prospects of some further room to the downside.
Bears will be looking for a weekly close below the resistance structure to give rise to further downside opportunities.
As it stands, the DXY could be about to correct the recent bullish leg and be set on the completion of a bullish 5-wave pattern:
· Elsewhere, silver slipped 4.5% to $23.31 per ounce, having hit a nearly two-month low of $23.04 earlier in the session.
Platinum and palladium were down 1.1% at $857.17 and $2,196.69, respectively.
· CORONAVIRUS UPDATES:
Global cases: More than 32.08 million
Global deaths: At least 981,219
U.S. cases: More than 7.13 million
U.S. deaths: At least 206,560
India cases: More than 5.73 million
Brazil cases: More than 4.62 million
SECOND WAVE IN EUROPE:
Spain cases: More than 693K (+11,289)
France cases: More than 693K (+13,072)
· Germany declares regions in 11 European countries high coronavirus risk
Germany added regions in 11 European countries to the list of destinations it classifies as coronavirus risk zones, dealing a further blow to hopes for a revival of tourism as many countries brace for a possible second wave of the pandemic.
· IMF official warns coronavirus will weigh on some economies for years
The coronavirus crisis is lasting longer than expected and it will take some countries years to return to growth, the No. 2 official at the International Monetary Fund said on Wednesday.
The Fund has provided some $90 billion in total financing to 79 countries, including 20 in Latin America, since the start of the health crisis, an IMF spokeswoman said.
· Powell: Congress and Fed both need to 'stay with it' to bolster recovery
The U.S. Congress and the Federal Reserve both need to “stay with it” in working to bolster the economic recovery, Federal Reserve Chair Jerome Powell said on Wednesday.
Despite progress in rebounding from the coronavirus economic downturn, “there is a long way to go,” with millions still jobless compared to where the economy was in February, he said.
“We need to stay with it ... The recovery will go faster if there is support coming both from Congress and the Fed.”
· Fed's Quarles sees long recovery, says he'll be 'more patient' on inflation
Federal Reserve Governor Randal Quarles on Wednesday painted a somewhat optimistic picture of a U.S. recovery powered by consumer spending, but said risks are weighted to the downside and the economy still needs further support.
Quarles, who is also the Fed’s vice president of supervision, was among the 8-2 majority at the U.S. central bank that last week voted to promise to keep interest rates low until the economy reaches full employment, and inflation has risen to 2% and is on track to moderately exceed that target for some time.
· Fed's Rosengren says U.S. could face a credit crunch by year end if virus worsens
The U.S. economy could face more foreclosures and business bankruptcies in the fall and winter if there is a rise in infections and no additional fiscal aid, conditions that could make it harder for consumers and businesses to access credit, Boston Federal Reserve President Eric Rosengren said on Wednesday.
· Fed's Daly says inflation will be guide on U.S. full employment
The U.S. central bank’s job is to eliminate employment shortfalls, and it will look to inflation to gauge whether it is meeting that goal, San Francisco Federal Reserve President Mary Daly said on Wednesday.
Reference: CNBC, Reuters, FXStreet , Worldometers
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