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Gold reverses gains as investors look past weak U.S. jobs data

·         Gold eased on Thursday as a failure to significantly breach the $1,850 per ounce resistance level prompted technical selling, with persistent overall vaccine-driven optimism also prompting investors to look past weak U.S. jobs data.

 

·         Spot gold fell 0.4% to $1,832.20 per ounce. U.S. gold futures settled down 0.1% at $1,837.40.

 

·         “The technical failure above $1,850 has buyers less aggressive. The tourists have mostly gotten out and it feels more like real money re-allocating,” said Tai Wong, head of base and precious metals derivatives trading at BMO. “Looking ahead, gold is searching for a comfortable range with prospects for a gentler rise overall.”

 

 

·         Further proof of a stalling labor market recovery, data showed that the number of Americans filing first-time claims for unemployment benefits surged last week with the United States in the throes of a fresh wave of infections and resultant lockdowns.

 

·         Gold initially rose after the jobs data and a further accommodative stance from the European Central Bank.

 

 

·         In an attempt to aid an euro zone economy suffering due to the second wave of the pandemic, the ECB eased policy again and kept government, corporate borrowing costs at record lows.

 

But “there was some disappointment with the expectations that they (ECB) were going to extend the programme (by) not nine, but 12 months,” said Edward Moya, senior market analyst at OANDA.

 

“A lot of investors are more cautious heading into the holidays, you’ll see more erratic moves because we’re not going to have steady volumes,” Moya added.

 

·         Gold, regarded as a hedge against inflation has risen over 21% so far this year underpinned by unprecedented stimulus unleashed across the globe in 2020.

 

·         Among other precious metals, silver was up 0.2% at $23.96 per ounce and platinum rose 2.4% to $1,024.87.   Palladium gained 3% to $2,333.00.

·         McConnell rejects bipartisan Covid relief plan while House adjourns until next week

Few signs of progress toward a coronavirus relief deal emerged Thursday as Congress inches closer to letting millions of Americans fall deeper into financial peril.

 

·         CORONAVIRUS UPDATED:

Global Cases: 70.67M (+654,465)

Global Deaths: 1.58M (12,475)

 

U.S. Cases: 16.01 (+198,325)

U.S. Cases: 299,571 (+2,852)

 

·         FDA panel recommends approval of Pfizer’s Covid vaccine for emergency use

A key Food and Drug Administration advisory panel on Thursday recommended the approval of Pfizer and BioNTech’s coronavirus vaccine for emergency use in people over 16 years old, the last step before the FDA gives the final OK to broadly distribute the first doses throughout the United States.

 

If the FDA accepts the nonbinding recommendation from the Vaccines and Related Biological Products Advisory Committee — which is expected — it would mark a pivotal moment in the Covid-19 pandemic, which has infected more than 15.4 million people and killed roughly 290,000 in the U.S. in less than a year.

 

·         ECB expands its bond-buying program as coronavirus resurgence weighs on the economic recovery

The European Central Bank on Thursday expanded its massive monetary stimulus program by 500 billion euros ($605 billion), as a second wave of lockdown measures weigh on the euro area’s economic recovery.

Markets had largely expected the central bank to add to its bond buying, having vowed back in October to “recalibrate its instruments” as a resurgence in coronavirus cases across the continent led to further national shutdowns.

The ECB held interest rates on its main refinancing operations, marginal lending facility and deposit facility at 0.00%, 0.25% and -0.50%, respectively.

The central bank launched its Pandemic Emergency Purchase Programme (PEPP) in a bid to shore up the bloc’s economy in the wake of the pandemic.

The central bank launched its Pandemic Emergency Purchase Programme (PEPP) earlier this year in a bid to shore up the bloc’s economy in the wake of the pandemic. Following Thursday’s expansion, the total asset purchase value is now 1.85 trillion euros, and the ECB extended the horizon for purchases under the PEPP to March 2022. Reinvestments of assets maturing from the PEPP have also been extended until the end of 2023.

In a statement following the decision, the ECB said it would conduct net purchases until its Governing Council judges that the “coronavirus crisis phase is over,” and restated that interest rates would remain at their current low levels until the central bank sees the inflation outlook “robustly converge” to its target of “close to, but below” 2%.

Euro rises - The ECB said it would “continue to monitor developments in the exchange rate with regard to their possible implications for the medium-term inflation outlook.”

Uncertainty remains high - The Governing Council also opted to “recalibrate” the third edition of its targeted longer-term refinancing operations (TLTRO III), which are ultra cheap loans for banks, by extending the current favorable terms to lenders by 12 months until June 2022.

 

·         EU leaders finally approve coronavirus stimulus package after Hungary and Poland lift their veto

The latest European impasse over a much-needed stimulus package has finally been overcome, meaning cash-strapped countries will soon get access to a historic level of funding.

In the wake of the coronavirus pandemic, European nations agreed in July to raise 750 billion euros ($908 billion) from public markets and use that money to support the economic recovery across the 27-member region. This was a significant move and came on top of 1.074 trillion euros ($1.3 trillion) to be spent between 2021 and 2027.

However, the implementation of this agreement had been at risk after Hungary and Poland vetoed linking the disbursements of the funds with compliance of European values — also known as the rule of law mechanism. Both nations have been under investigation for years for allegedly influencing the appointment of top judges and discouraging press freedom — actions that go against European law.

 

·         Brexit ‘mood music’ is getting worse and chances of a trade deal are narrowing, analysts warn

With new a deadline of Sunday to decide on the future of Brexit trade talks, analysts closely following the negotiations say the chances of an agreement are quickly diminishing.

Mujtaba Rahman, managing director of Europe at Eurasia Group, said his team had reduced the probability of a deal from 60% to 55%.

“If there is progress, talks could continue after Sunday. But the prospects of a no deal neither side wants are rising. One U.K. source said there had been “zero progress” tonight. Behind the bravado and spin, we agree with the directionality of this sentiment and are therefore reducing our probability of a deal from 60% to 55%,” Rahman said in a note overnight.

 

·         UK's Johnson says 'strong possibility' of no-deal split in EU trading ties

British Prime Minister Boris Johnson said on Thursday there was “a strong possibility” Britain and the EU would fail to strike a new trade deal, but vowed to do whatever he could to avoid a tumultuous split in three weeks.

 

·         Jobless claims rise more than expected after break from holiday

 

The pace of weekly jobless claims jumped last week after filings caught up with a decline due in part to the Thanksgiving holiday.

First-time claims for unemployment insurance totaled 853,000, an increase from the upwardly revised 716,000 total a week before, the Labor Department reported Thursday. Economists surveyed by Dow Jones had been expecting 730,000.

 This was the highest weekly total since Sept. 19 and reflects the job market’s struggles lately as coronavirus cases have spiked and local and state governments have imposed restrictions on some activities.

Continuing claims increased by 230,000 to 5.76 million, the first time that number has gone up since late August.

Markets reacted little to the news, with Wall Street indicating a slightly lower open for stocks.

 

·         Consumers are spending more in 2020 than they did in 2019, says Bank of America CEO

“When you look at what they’re spending year-to-date, they’ve spent more in 2020 than they did in 2019, and that is now across $2.7 trillion in money moved by our consumers,” Moynihan told CNBC’s Wilfred Frost in a Wednesday interview.

Despite the positive signs, Moynihan said that another round of stimulus is needed to support the unemployed and small businesses. Lawmakers are locked in negotiations over a last ditch attempt to approve a relief package before year-end.

 

·         Biden picks longtime China critic Katherine Tai as top U.S. trade official

President-elect Joe Biden on Thursday named Katherine Tai, a trade lawyer with a history of taking on China, as his incoming administration’s pick for the United States’ top trade representative.

If confirmed by the Senate, Tai would inherit a critical, Cabinet-level position tasked with enforcing America’s import rules and brokering trading terms with China and other nations.

Tai, who is Asian-American, would also be the first woman of color to serve as the USTR. She is fluent in Mandarin.

 

·         Trump officials hit out at China as presidential transition looms in the U.S.

Officials from President Donald Trump’s outgoing administration have again sought to portray China as a threat that needs to be dealt with — just weeks before President-elect Joe Biden takes over the White House.

Speaking at the Milken Institute Asia Summit on Thursday, U.S. Trade Representative Robert Lighthizer said one of Trump’s achievements over the last four years was that he showed there’s “a major issue” with China.

“This president realized that we had a trade system that has gone off the rails, that needed to be reset both in terms of what our objectives are, but also in terms of realizing that we have to deal with China as the biggest growing economy in the world and a very different system,” he said during a dialogue held virtually.

His comments followed that of Commerce Secretary Wilbur Ross, who said Tuesday at the same summit, that China remains the “principal military and economic threat” in Asia.

Lighthizer, known to be a China skeptic, said Chinese industrial policies have hurt the U.S. and other economies. He reiterated common complaints about China’s practices, such as subsidizing state-owned companies and forced transfer of technology from foreign firms to their Chinese partners

 

·         Fitch upgrades its China growth forecast for 2021

Fitch Ratings raised its forecast this week for China’s economic growth next year, based on increased domestic demand and expectations for coronavirus vaccine deployment.

Fitch now expects China’s gross domestic product to expand 8% in 2021, up from the 7.7% rate forecast in September.

“This would be well above our estimate of China’s long-term growth potential of around 5.5%, but is quite achievable from such a low base in 2020,” Fitch analysts Brian Coulton and Pawel Borowski wrote in the report released Thursday.

The analysts pointed out that in the last few months, data indicate a significant recovery in Chinese consumption, particularly in the catering industry and other activities that involve social gatherings. The global economic environment will likely also improve in the second half of next year as more people are vaccinated, the report said.

 

·         Fitch predicts global growth to contract 3.7% this year, slightly better than the 4.4% decline forecast in September. Global GDP is set to expand 5.3% next year, according to Fitch.

The world’s second-largest economy is set to expand 2.3% this year, Fitch said, after a contraction of 6.8% in the first quarter in the wake of the coronavirus pandemic.

The Fitch analysts do not expect China to reduce stimulus by raising the benchmark interest rate, given a decline in inflation and the strengthening of the yuan.

The upgrade to 8% GDP growth next year falls within a range of other analysts’ expectations.

Nomura predicts an expansion of 9% next year, up from 2.1% growth in 2020. Natixis forecasts growth of 7.8% next year.

 

·         NZ central bank says monetary policy not best way to cool housing market

 

·         Exclusive-U.S. set to sanction Turkey over Russian defense system -sources

The United States is poised to impose sanctions on Turkey over its acquisition last year of Russian S-400 air defense systems, five sources including two U.S. officials told Reuters on Thursday, a move likely to worsen already problematic ties between the two NATO allies.

The Turkish lira weakened as much as 1.4 percent following the news. U.S. sanctions could harm a Turkish economy struggling with a coronavirus-induced slowdown, double-digit inflation and badly depleted foreign reserves.

“Turkey is in favor of solving these problems with diplomacy and negotiations. We won’t accept one-sided impositions,” he said.

 

Reference: CNBC, Reuters, Wordometers