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old subdued as U.S. Treasury yields stay elevated

Gold pared some losses after dipping more than 1% earlier on Wednesday, helped by dovish comments from Federal Reserve Chair Jerome Powell, but bullion struggled for traction as elevated U.S. Treasury yields dampened its allure as an inflation hedge.

·         Spot gold was down 0.4% at $1,798.10 per ounce by 02:30 p.m. EST (1930 GMT), after dropping as much as 1.2% earlier in the session.

·         U.S. gold futures settled down 0.4% at $1,797.90.

·         "Rising bond yields continue to weigh on the gold market. Gold has not found any path to a sustainable recovery even with talks about additional stimulus measures," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

·         U.S. benchmark 10-year Treasury yields touched 1.4% for first time since February 2020. Rising yields tend to hurt bullion's appeal as an inflation hedge since they increase the opportunity cost of holding the metal.

·         Powell on Wednesday reiterated that U.S. interest rates will remain low and the Fed will keep buying bonds to support the U.S. economy.            

·         In his testimony before the U.S. Senate on Tuesday, Powell said monetary policy still needed to be accommodative, with economic recovery "uneven and far from complete."            

·         "Over the last two days a very dovish and hence risk-friendly Powell has cheered the stock market which is bearish for USD and as such has given gold a little breathing space," said Tai Wong, a trader at investment bank BMO in New York.           

·         The dollar index was hovering near a more than one-month low against its rivals.      

·         Investors kept a close watch on developments over a $1.9 trillion U.S. coronavirus relief package, which could contribute to a speedy economic recovery but at the cost of rising inflation.

·         Silver rose 0.7% to $27.82 an ounce.

·         Platinum climbed 1.7% to $1,258.50.

·         Palladium jumped 3.5% to $2,431.60 an ounce, its highest level since Jan. 15.

 

·         Bond markets react to Powell comments on Capitol Hill

The reversal in futures came as the 10-year Treasury yield hit a high of 1.42%, its highest level since February 2020.

Higher interest rates higher rates could prompt investors to rotate out of high-flying stocks and into bonds, while they could hamstring growth companies like tech, which benefited from the low-rate environment.

·         Dollar struggles as Powell stays dovish course; pound, loonie soar

The dollar struggled on Wednesday morning as dovish testimony from Fed Chair Jerome Powell bolstered concerns about rising inflation, hitting multi-year lows against the pound and commodity-linked currencies including the Canadian, Australian and New Zealand dollars.

The Australian dollar rose to a three-year high of $0.794 before paring some gains to trade 0.08% stronger at $0.792. The Kiwi rose to its highest since 2018, last up 0.69% on the day to 0.739.

The British pound climbed past $1.42 overnight for the first time since April 2018.

The dollar index against a basket of six major currencies was at 90.378, up 0.29% on the day, but still trading within a narrow range.

 

·         Bitcoin bounces back, surging above $50,000 after more buying from Square

Bitcoin’s price roared back Wednesday after a sharp sell-off, climbing above $50,000 again as Square announced it had purchased $170 million worth of the cryptocurrency.

At 11:00 a.m. ET, the world’s most valuable digital coin rose over 6% to a price of $50,061, according to data from Coin Metrics. The cryptocurrency had earlier climbed as high as $51,369 but later pared gains.

 

·         Fed to keep policy easy, stay patient as U.S. economy revives

Testifying on Wednesday before the House of Representatives Financial Services Committee, Fed Chair Jerome Powell emphasized the U.S. central bank’s promise to get the economy back to full employment, with little worry about inflation unless prices begin rising in a persistent and troubling way.

“We are just being honest about the challenge,” Powell told lawmakers when asked about Fed projections that inflation will remain at or below the central bank’s 2% target through 2023.

- Money printing doesn’t lead to inflation

- There is a lot of slack in the labor market

-  Digital dollar is ‘high-priority project for us’

 

·         Powell confirmed growing optimism for economic recovery: Expert

CNBC’s Melissa Lee discusses markets and the economic outlook with Angela Mwanza of UBS Global Wealth Management.

 

·         Fed's Clarida is 'bullish' on U.S. outlook, policy setting appropriate

Federal Reserve Vice Chair Richard Clarida said on Wednesday that he’s “bullish” on the outlook for the U.S. economy and sees inflation at the Fed’s 2% goal by year’s end, after what he expects to be a temporary rise above that level before then due to “base effects.”

 

·         U.S. House plans vote on COVID-19 aid bill on Friday

 

·         U.S. senators weigh paring back Biden's $1.9 trillion COVID-19 aid plan

U.S. senators on Wednesday were eyeing potentially significant cuts to President Joe Biden’s $1.9 trillion COVID-19 relief bill as they awaited a ruling on whether the measure can include raising the federal minimum wage to $15 an hour.

 

·         Biden signs executive order to address chip shortage through a review to strengthen supply chains

 

 

·         U.S. new home sales blow past expectations in January

Sales of new U.S. single-family homes increased more than expected in January, boosted by historically low mortgage rates and an acute shortage of previously owned houses on the market.

New home sales rose 4.3% to a seasonally adjusted annual rate of 923,000 units last month. December’s sales pace was revised higher to 885,000 units from the previously reported 842,000 units. Economists polled by Reuters had forecast new home sales, which account for 12.1% of U.S. home sales, climbing 2.1% to a rate of 855,000 units in January.

 

·         U.S. retail sales in 2021 expected to jump on vaccine, stimulus in positive sign for economy – NRF

U.S. retail sales could rise as much as 8.2% to more than $4.33 trillion this year as more people get the COVID-19 vaccine and the economy reopens, the National Retail Federation (NRF) said on Wednesday.

 

·         CORONAVIRUS UPDATES:

Global Cases: 113.07 (+425,673)

Global Deaths: 2.50M (+10,392)

 

No. 1

U.S. Cases: 28.96M (+68,656)

U.S. Deaths: 517,289 (+2,256)

 

No.4

Russia Cases: 4.20M (+11,749)
Russia Deaths: 84,430 (+383)

 

No. 37

Japan Cases: 427,467 (+1,011)

Japan Deaths: 7,584 (+55)

 

No.114

Thailand Cases: 25,692 (+93)

Thailand Deaths: 83

 

 

·         Czech Republic faces 'hellish days', needs tighter COVID measures, PM says

The country reported over 15,000 new COVID-19 cases on Tuesday, the highest daily tally since Jan. 6, and has the fastest spread rate in Europe, with per capita infections more than six times higher than in neighbouring Germany in the last two weeks.

The number of hospital patients with COVD-19 who are in serious condition has risen to a record 1,389, leaving few spare beds in the country of 10.7 million.

 

·         Covid variants could ‘undermine all of our efforts’ if virus spreads globally, CDC director says

 

·         Moderna developing booster shot for new coronavirus variants, increases vaccine production target

Moderna Inc said on Wednesday it is working with U.S. government scientists to study an experimental booster shot that targets a concerning new variant of the coronavirus, and has raised its global COVID-19 vaccine production goal for this year by 100 million doses.

 

·         In boost for COVID-19 battle, Pfizer vaccine found 94% effective in real world

The first big real-world study of the Pfizer/BioNTech vaccine to be independently reviewed shows the shot is highly effective at preventing COVID-19, in a potentially landmark moment for countries desperate to end lockdowns and reopen economies.

·         Johnson & Johnson's one-shot COVID-19 vaccine effective and safe: FDA staff

Johnson & Johnson’s one-shot COVID-19 vaccine appeared safe and effective in trials, U.S. Food and Drug Administration (FDA) staff said in documents published on Wednesday, paving the way for its approval for emergency use.

The FDA’s panel of independent experts meets on Friday to decide whether to approve the shot. While it is not bound to follow the advice of its experts, the FDA usually does and has authorized vaccines from Pfizer and Moderna.

J&J said in documents submitted to the FDA that its data suggested its vaccine was effective at preventing asymptomatic infections. It said that in a preliminary analysis of its trial, it found 16 cases of asymptomatic cases in the placebo group versus two in the vaccine group, or an 88% efficacy rate.

 

·         White House to roll out Johnson & Johnson vaccine doses next week, pending authorization

The United States expects to roll out three to four million doses of Johnson & Johnson’s COVID-19 vaccine next week, pending authorization from the Food and Drug Administration, White House COVID-19 response coordinator Jeff Zients said on Wednesday.

A Johnson & Johnson executive on Tuesday said the company expected to ship nearly 4 million doses of the vaccine once it gained authorization.

 

The additional vaccine will help President Joe Biden’s administration in its goal of ramping up vaccination across the country as it seeks to control the pandemic that has cost more than 500,000 lives in the United States and pummeled the economy.

 

·         COVID-19 cases slow in Americas, but vaccine impact on virus to take months: PAHO

COVID-19 cases and deaths in the United States fell by 30% in the last week and were declining in most South American nations, but vaccines will take months to have an impact on the virus, the Pan American Health Organization (PAHO) said on Wednesday.

PAHO Director Carissa Etienne urged governments and manufacturers to speed up delivery of vaccines to the region where one million people became sick and 34,000 died in the past seven days.

 

·         COVAX delivers its first vaccine shots with shipment to Ghana

 

·         Germany confirms it will receive 16 million AstraZeneca doses in second quarter

 

·         Germany approves COVID home tests to ease way out of lockdown

Germany approved three COVID-19 tests for home use as part Health Minister Jens Spahn’s strategy to help Europe’s biggest economy emerge from a lockdown that has been in place since mid-December.

The infection rate in Germany fell steadily in the first weeks of the year but has stagnated in recent days, making it more difficult for leaders to ease restrictions when they meet next week to consider lockdown rules that run to March 7.

 

·         German economy to shrink some 1.5% in early 2021: DIW

Germany’s economy could shrink by around 1.5% in the beginning of the year, the DIW research institute said on Wednesday, as lockdown measures to restrict coronavirus infections take a toll on Europe’s biggest economy.

DIW said a surge in coronavirus cases was constraining economic growth but that the pandemic’s impact was less severe than in last spring when production facilities came to a standstill.

 

·         India warns of worsening COVID-19 situation, vaccinations to expand

India announced an expansion of its vaccination programme on Wednesday but warned that breaches of coronavirus protocols could worsen an infection surge in many states.

Nearly a month after the health minister declared that COVID-19 had been contained, states such as Maharashtra in the west and Kerala in the south have reported a surge in cases, as reluctance grows over mask-wearing and social distancing.

India’s infections are the second highest in the world at 11.03 million, swelled in the past 24 hours by 13,742, health ministry data shows. Deaths rose by a two-week high of 104 to 156,567.

 

·         More than 200 groups urge G20 to back IMF issuance to help poor countries in pandemic

 

·         South Africa boosts vaccine spending in 'balancing act' amid debt worries

South Africa could spend up to 19.3 billion rand ($1.33 billion) over the next three years to vaccinate most of its population, the Treasury said on Wednesday, in a “difficult balancing act” meant to contain COVID-19 while avoiding a debt spiral.

 

·         India's economy likely returned to growth last quarter: Reuters poll

India’s economy is likely to have returned to growth in the December quarter due to the easing of restrictions on movement after the first wave of the coronavirus epidemic peaked, a Reuters poll predicted.

 

·         Iran says up to U.S. to move first on saving nuclear deal

Reference: CNBC, Reuters, Worldometers