- Gold slides nearly 2% on dollar rally, IMF silver lining
Gold fell as much as 1.9% on Tuesday, to below $1,900 an ounce, as the dollar rallied on an impasse over U.S. stimulus and as investors latched onto a slightly less stark economic report card from the International Monetary Fund.
Spot gold fell 1.7% to $1,890.01 per ounce by 1:34 p.m. EDT (1734 GMT). U.S. gold futures settled down 1.8% at $1,894.60.
“The stagnation in Washington over the next stimulus package continues to pressure assets like gold that were relying on the weakness in dollar for the next wave of support,” said David Meger, director of metals trading at High Ridge Futures.
“The IMF and other agencies like the U.S Federal Reserve have also noted that recovery has taken place a little quicker than they originally anticipated, so that would lead us to believe that there could be a need of lesser stimulus worldwide.”
“Gold has been toyed with” during negotiations for the fiscal stimulus deal, with the latest deadlock “taking away some of the short term bullish drivers we anticipated,” said Edward Moya, a senior market analyst at OANDA.
“But all that means is that we’re going to get the stimulus later, probably early next year and that will lead to higher gold prices.”
Gold, considered a hedge against inflation and currency debasement, has risen 25% this year amid unprecedented global levels of stimulus during the pandemic.
Other metals too joined the slide, with silver diving 4.4% to $24.02 per ounce, platinum falling 1% to $864.69, and palladium declining 3.8% to $2,311.34.
- Treasury yields fall as traders weigh U.S. coronavirus stimulus prospects
Treasury yields slipped on Tuesday as traders digest the latest news surrounding a potential U.S. fiscal stimulus package along with muted inflation growth.
The 10-year Treasury yield fell by more than 3 basis points to 0.735%. The 30-year bond rate slid to 1.524%. The 2-year yield also pulled back to 0.137%. Yields move inversely to prices.
House Speaker Nancy Pelosi, D-Calif., said in a letter to colleagues that the proposition from the Trump administration has insufficient offers on healthcare issues.
- Dr. Fauci says U.S. faces ‘a whole lot of trouble’ as coronavirus cases rise heading into winter
- Wall Street has lingering concerns about a contested election, even as Biden leads in the polls
The election is going to be decided, in part, on what will likely be a historic amount of mail-in ballots as states take safety precautions during the coronavirus pandemic.
At first concerned about a Democratic sweep, analysts now see it as a potential positive since it could result in more economic stimulus. A contested election would be a far bigger concern than a big Election Day for Democrats.
Indeed, as Biden edged toward capturing the Democratic nomination this past summer, Wall Street executives were bracing for a Trump loss and for taxes to go back up. Now, there appears to be a shift from being concerned about an increased tax rate to hoping to have some form of certainty after Election Day.
“Investors may have initially feared a Blue Wave, but a delayed or contested election outcome is even more unsettling,” analysts at UBS said in a recent note.
Bank of America’s fund manager survey shows that 61% of investors polled believe the U.S. election result will be contested. The survey was published Tuesday.
- McConnell sets Senate vote on coronavirus aid, Pelosi spurns White House bid
Senate Majority Leader Mitch McConnell said on Tuesday the Republican-led U.S. Senate would vote next week on a targeted, $500 billion coronavirus economic aid bill of the type Democrats already have rejected as they hold out for trillions in relief.
- “We are talking trillions (in stimulus) one day and it’s billions the next day and it will (probably) be millions next. It feels like it is getting smaller coming into the election,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.
The possibility of a smaller U.S. coronavirus stimulus bill is weighing on gold, he added.
“Gold will be higher if Biden wins because he will spend a lot of money,” said Bob Haberkorn, senior market strategist at RJO Futures, adding any unknowns on the election night will also provide support.
- U.S. CPI rose 0.2% on Sept
On the economic data front, consumer prices rose 0.2% last month, matching expectations. However, that print represents a growth slowdown from August.
“After several months of above-trend gains, price pressures are finally normalizing,” Aneta Markowska, chief economist at Jefferies, said in a note. “It is difficult to find any areas of strength in the September CPI data outside of used car pricing, which is unlikely to be sustained. The weakness in the sticky components is particularly worrisome and points to continued disinflation ahead.”
- Pandemic can be overcome quickly with right tools - WHO
The global COVID-19 pandemic can be overcome quickly if countries use the right tools, the head of the World Health Organisation said on Monday, but warned that if those tools were not used it would remain for a long time.
“If we use the tools we have at hand properly, we can end it soon,” WHO Director-General Dr Tedros Adhanom Ghebreyesus said during the Financial Times’ online Africa summit, adding a vaccine was expected late 2020 or early next year.
- World Bank board approves $12 billion for COVID-19 vaccines, treatments in developing countries
The World Bank said its executive board approved on Tuesday $12 billion in new funding for developing countries to finance the purchase and distribution of COVID-19 vaccines, tests and treatments for their citizens.
The financing plan, part of $160 billion in total resources that the multilateral development lender has pledged to provide to developing countries through June 2021 to help them fight the coronavirus pandemic, was first reported by Reuters in late September.
- Johnson & Johnson Covid-19 vaccine study paused due to unexplained illness in participant
The study of Johnson & Johnson’s Covid-19 vaccine has been paused due to an unexplained illness in a study participant.
- IMF warns of ‘sharp adjustment’ in financial markets despite ‘remarkable’ recovery this year
Equity markets could tank in the coming months if the coronavirus crisis persists and the economic recovery takes longer than expected to materialize, the International Monetary Fund warned on Tuesday.
Stock markets have come off their September lows and are broadly higher year-to-date. The S&P 500 is up about 8% since the start of 2020 and the tech-heavy Nasdaq is over 30% higher for the same period. This positive momentum in equities has contrasted with the severe economic shock caused by the coronavirus pandemic.
However, he warned that if the economic recovery was delayed, “investor optimism may wane.”
“As long as investors believe that markets will continue to benefit from policy support, asset valuations may stay elevated for some time. Nonetheless, and especially if the economic recovery is delayed, there is a risk of a sharp adjustment in asset prices or periodic bouts of volatility,” Adrian wrote.
- Global economy's recovery hinges on stimulus, virus battle, officials say
Global finance leaders on Tuesday said the world economy had escaped a coronavirus-triggered collapse so far, but warned that failure to conquer the pandemic, maintain stimulus and tackle mounting debt among poor nations could crush a fragile recovery.
At the start of the annual meetings of the International Monetary Fund and World Bank, the IMF issued slightly improved growth forecasts spurred by unexpectedly stronger rebounds from coronavirus lockdowns in the wealthiest countries and China.
- Kuroda says BOJ ready to ease more, has tools to cushion pandemic pain
Bank of Japan Governor Haruhiko Kuroda stressed on Monday his readiness to take additional monetary easing steps, saying the central bank had not run out of tools to cushion the economic blow from the COVID-19 pandemic.
- Britain will work hard for EU deal by mid-October, says PM's spokesman
Britain will work as hard as it can to secure a post-Brexit agreement with the European Union by Oct. 15 but the country is prepared to move ahead without a free trade deal, a spokesman for Prime Minister Boris Johnson said on Monday.
- EU wins right to place tariffs on $4 bln U.S. goods in aircraft spat
The European Union has won the right to impose tariffs on $4 billion in U.S. goods in retaliation for subsidies granted to planemaker Boeing under a World Trade Organization (WTO) ruling on Tuesday.
- EU makes one billion-euro bet on Gilead's COVID drug before trial results
The European Union agreed to pay more than 1 billion euros ($1.2 billion) to Gilead GILD.O for a six-month supply of its antiviral drug remdesivir, shortly before the publication of final results for the biggest trial of the COVID-19 medication.
- UK PM Johnson to impose further COVID-19 restrictions but pubs angry
British Prime Minister Boris Johnson will on Monday impose a tiered system of further restrictions on parts of England as the COVID-19 outbreak accelerates, though anger is rising at the cost of the stringent curtailment of freedoms.
- Bank of England asks banks how ready they are for sub-zero rates
The Bank of England asked banks on Monday how ready they are for zero or negative interest rates, following up its announcement last month that it was considering how to take rates below zero if necessary.
- Bank of England's Bailey does not see a 'V'-shaped recovery
Bank of England Governor Andrew Bailey said he did not think the economy was undergoing a sharp, ‘V’-shaped recovery, because of headwinds from a second wave of COVID and underlying public caution about spending and socialising after the pandemic.
- A collapse of global tax talks could cost $100 billion, OECD says
The global economy could shed more than 1% of output if international talks to rewrite cross-border tax rules break down and trigger a trade war, the OECD said on Monday, after countries agreed to keep up negotiating to mid-2021.
Nearly 140 countries agreed on Friday to extend talks, after the pandemic outbreak and U.S. hesitation before the presidential election squashed hopes of reaching a deal this year.
- Singapore’s economy contracted by 7% year-on-year in the third quarter, official estimates show
- An escalating labor strike could soon wipe out almost 25% of Norway’s oil and gas production
- UAE says OPEC+ plans to ease oil cuts from January as agreed
The energy minister from the United Arab Emirates (UAE) said on Tuesday that OPEC+ oil producers will stick to their plans to taper oil production cuts from January.
- Venezuelan coal exports rise as U.S. escalates oil sanctions
- OPEC cuts 2021 oil demand forecast again as virus cases rise
World oil demand will rebound more slowly in 2021 than previously thought as coronavirus cases rise, OPEC said on Tuesday, adding to headwinds faced by the group and its allies in balancing the market.
Demand will rise by 6.54 million barrels per day(bpd) next year to 96.84 million bpd, the Organization of the Petroleum Exporting Countries said in a monthly report. The growth forecast is 80,000 bpd less than expected a month ago.
A further weakening of demand could threaten plans by OPEC and allies to taper in 2021 the record oil output cuts they made this year. OPEC is keeping an eye on the situation but currently has no plan to cancel the supply boost.
- ‘Get long’ — Cramer sees coronavirus trends driving stocks higher no matter who wins election
CNBC’s Jim Cramer said Monday there are structural forces exacerbated by the coronavirus pandemic that support continued strength in the stock market, regardless of the presidential election outcome.
“I think there’s a genuine belief that it doesn’t matter who wins. It doesn’t matter about stimulus,” Cramer said on “Squawk on the Street.” “There are enough trends out there, established by Covid, that just say, ’Get long. And the No. 1, of course, is the internet just plowing through.”
Reference: CNBC, Reuters
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