· Gold and silver move marginally higher heading into the EU open
Gold has moved 0.20% higher again leading into the EU session and trades at $1734.65/oz. Silver is also up but only marginally as it flirts with the $26/oz figure.
Looking at the news, the US have identified 24 China & HK officials who have reduced Hong Kong's autonomy and warn of sanctions. There are high-level talks taking place between US and Chinese officials in Alaska this week. A US official has said (on talks with China due this week) talks will be robust, frank. lastly, US Sec State Blinken says China acting more aggressively, repressively.
US House passed a two-month PPP extension in a 415-3 vote, The PP serves to support smaller business (mainly). There is still around USD93bn left in the kitty to disburse.
In company news, Honda is suspending some production at all US and Canadian plants due to supply issues. There have been some serious semi conductor shortages at the moment but it is unclear if this is the problem.
From central banks, RBA's Kent doesn't think monetary policy should or can control asset prices. He added he expects a rise in business failures as fiscal support is phased out.
ECB's Schnabel has said the EU's EUR 750bln recovery fund may not be large enough. He added what matters now is spending money as quickly as possible.
ECB's Kazimir believes the EU's fiscal response is lagging behind America's. He also said bond yields must reflect the fundamentals and the Euro-Area's yield moves are not dramatic.
The latest International Atomic Energy Agency report shows Iran edging closer to developing a nuclear weapon. This will not please the international community who may respond with sanctions.
France's PM says its time to think about a lockdown for the Paris area. Italy and France are now considering ending the suspension of the Oxford/AstraZeneca vaccine.
Looking ahead to the rest of the session highlights include the FOMC rate decision (statement), IEA reports, EZ CPI, Canadian CPI, DoE's, NZ GDP, Dutch general election and comments from ECB's Elderson and Fed's Powell.
· 2% bond yield would force the Fed to act, and that is good for gold price - Chantelle Schieven
The gold market continues to struggle as bond yields hold near a one-year high above 1.6%; however, one market analyst said there is a strong floor as the bond market selloff cannot last much longer.
While the gold market might not see record highs again in 2021, Chantelle Schieven, head of research at Murrenbeeld & Co, said in a telephone interview with Kitco News that gold is still on track to end the year higher from where it started, despite the recent lackluster price performance.
"I think we have seen the lows in the gold price," Schieven said. "Whether the is $50 lower or a $100 lower, there is this floor in the market because we know that there's going to be a limit for how high yields can go."
As to how high yields can go in the near term, Schieven said she thinks the market's pain threshold is around 2%.
"If yields go up any further than that, consumers are going to be in trouble," she said. "I think if we see a further move to 2%, then central banks will start trying to jawbone the markets."
· VanEck sees gold price falling to $1,600 before it rallies to $3,000
Gold prices have pushed solidly above last week's 10-month low; however, according to one portfolio manager, the precious metal still faces challenging headwinds as the outlook for the U.S. economy continues to improve.
'We have downgraded our near-term outlook from a consolidation to a correction in which we expect gold to trade above $1,600," he said.
Although gold could continue to struggle in the next few months, Foster said that they expect to see a catalyst emerge in the second half of the year to drive gold prices higher. He added that he remains a long-term gold bull.
'The most likely catalyst would be excessive inflationary expectations. Inflation expectations have returned to pre-pandemic norms, although a number of developments suggest it could spiral out of control," he said.
· Inflation bets nudge gold higher ahead of Fed outcome
Gold prices edged up on Wednesday to hover near their highest in more than two weeks on prospects of higher inflation, although trade was range-bound as investors exercised caution ahead of the U.S. Federal Reserve’s two-day policy meeting outcome.
Spot gold was up 0.3% at $1,736.42 per ounce by 0455 GMT, having earlier touched a level unseen since March 1 at $1,740.90. U.S. gold futures were up 0.3% at $1,735.40.
“Gold appears to be finding few friends finally even as U.S. yields and the dollar continue to grind higher … perhaps gold’s inflation hedging role is quietly returning to prominence and that is supporting prices,” said OANDA senior market analyst Jeffrey Halley.
Some investors view gold as a hedge against higher inflation that could follow stimulus measures, but a resultant rise in Treasury yields tends to dull the appeal of the non-yielding commodity.
“Gold’s true test though will come once the FOMC meeting concludes and if it can remain steady in the face of another spike in U.S. yields, should that occur,” Halley said.
While the market awaits the Fed statement, the technical picture remains bearish, Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note.
“The main trend will change upwards when buyers take up positions above $1,760 an ounce,” Sandu said.
In other metals, silver fell 0.2% to $25.90 an ounce. Palladium shed 0.3% to $2,490.16, having hit a one-year high of $2,520.31 on Tuesday, and platinum was down 0.4% to $1,207.56.
Reference: CNBC, Kitco
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