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Gold prices gained on Wednesday, as the dollar and U.S. Treasury yields eased after the U.S. Federal Reserve kept interest rates unchanged and re-affirmed its accommodative policy to support the economic recovery.

·         Spot gold rose 0.2% to $1,780.56 per ounce, having earlier dipped to its lowest since April 16 at $1,762.

 

·         U.S. gold futures settled down 0.3% at $1,773.9.

 

 

·         The Fed held interest rates and its bond-buying program steady after its two-day policy meet, nodding to the economy’s growing strength but gave no indication it was ready to reduce its support for the economic recovery.

 

·         “Bonds rallied, USD retreated sharply, and gold rallied to highs of the day after a test of the lows of the range earlier after Powell took great pains to emphasize there will be no tapering in Fed’s accommodative policy,” said Tai Wong, head of metals derivatives trading at BMO.

 

“The Fed has probably set gold up for a test of the top of the $1,800-$1,810 range, but it is unclear whether there is enough momentum to break above without a deeper drawdown in the dollar,” he added. Benchmark U.S. 10-year Treasury yields reversed course after rising to a two-week high earlier, raising bullion’s appeal.

 

·         The dollar also fell, making the bullion cheaper for holders in other currencies. While gold is considered a hedge against the inflation that could follow widespread stimulus, elevated Treasury yields have dulled non-yielding bullion’s appeal and has pushed gold down 6% so far this year.

 

·         Goldman Sachs, meanwhile, sees gold at $2,000 an ounce over the next six months and said it was too early for bitcoin to compete with gold for safe-haven demand.

 

·         Elsewhere, palladium inched 0.1% lower to $2,939.83 per ounce, having hit an all-time high of $2,962.50 on Tuesday.

 

·         Silver was flat at $26.23 per ounce, after reaching a low since April 21 at $25.80.

 

 

·         Platinum eased 0.4% to $1,223.38 per ounce.

 

·         The Federal Reserve on Wednesday kept its easy money policy in place despite an economy that it acknowledged is accelerating.

 As expected, the U.S. central bank decided to keep short-term interest rates anchored near zero as it buys at least $120 billion of bonds each month. The latter part of policy is a two-pronged effort to support an economy that grew strongly to start 2021 as well as to support market functioning at a time when 30-year mortgages still go for around 3%.

Fed Chairman Jerome Powell said the recovery is “uneven and far from complete.” While he noted that inflation pressures could rise in the coming months, these “one-time increases in prices are likely to only have transitory effects on inflation.”

Powell added that it’s still not time to talk about reducing policy accommodation, including the asset purchases.

 

·         In the statement, “the Fed offered no hints that it was considering slowing the pace of its asset purchases, let alone thinking about raising interest rates,” said Paul Ashworth, chief U.S. economist at Capital Economics.

 

·         Goldman Sachs chief economist Hatzius: We predict the Fed will not taper until early next year

Jan Hatzius, Goldman Sachs chief economist, joins ‘Closing Bell’ to discuss the Fed’s decision to keep rates near zero.

 

·         Fed's Powell: China's approach to digital currency would not work in U.S.

China’s rapid development of a digital version of the yuan will not push the Federal Reserve to rush its own digital currency project, Federal Reserve Chair Jerome Powell said on Wednesday, adding that China’s approach would not work in the United States.

Powell, in remarks following the Fed’s latest policy meeting, emphasized the Fed’s primary goal is not speed to market but rather avoiding any calamitous misstep in executing digitalization of the dollar, which remains the world’s dominant reserve currency.

 

·         Risk management breakdowns over Archegos in Fed focus - Powell

 

·         President Biden is about to make his first speech to Congress

- Biden will say 'America is on the move again' in speech to Congress

- Biden to push $4 trillion spending plans

He will argue that the new package, which together with an earlier infrastructure and jobs plan, totals around $4 trillion, rivaling the annual federal budget – is a once-in-a-generation investment vital to America’s future.

President Joe Biden plans to unveil a sweeping $1.8 trillion package for families and education in his first speech to Congress on Wednesday

Biden will highlight repeated police killings of African-American citizens and years of entrenched racism, while honoring the service of the vast majority of officers.

 

The plan includes $1 trillion in spending on education and childcare over 10 years and $800 billion in tax credits aimed at middle- and low-income families, according to a White House fact sheet.

 

There would be $200 billion for free, universal preschool for 3- and 4-year olds and $109 billion for free community college regardless of income for two years, the White House said.

 

The spending plans “reinvest in the future of the American economy and American workers, and will help us out-compete China and other countries around the world,” it said.

- Biden will argue that he has restored faith in democracy 100 days after he succeeded Donald Trump in office.

 

·         U.S. goods trade deficit vaults to record high in March

The U.S. trade deficit in goods jumped to a record high in March, suggesting trade was a drag on economic growth in the first quarter, but that was likely offset by robust domestic demand amid massive government aid.

The goods trade deficit surged 4.0% to $90.6 billion last month, the highest in the history of the series. Exports of goods accelerated 8.7% to $142.0 billion. They were boosted by shipments of motor vehicles, industrial supplies, consumer and capital goods, and food.

The jump in exports was offset by a 6.8% advance in imports to $232.6 billion. Imports rose broadly. There were large gains in imports of motor vehicles, industrial supplies, consumer goods and food. Capital goods imports also rose solidly.

 

·         Coronavirus Updates:

COVID-19 infections are still rising in 51 countries.

 

Global Cases: 150.20M (+879,230)

Global Deaths: 3.16M (+15,148)

 

No. 1 - 3

U.S. Cases: 32.98M (+56,572)

U.S. Deaths: 588,337 (+954)

 

India Cases: 18.36M (+379,459)

India Deaths: 204,812 (+3,647)

 

Brazil Cases: 14.52M (+77,266)

Brazil Deaths: 398,343 (+3,019)

 

No.38

Japan Cases: 575,563 (+4,523)

Japan Deaths: 10,055 (+51)

 

No.103

Thailand Cases: 61,699 (+2,012)

Thailand Deaths: 178 (+15)

 

 

·         India reports record new cases and fatalities, official Covid death toll surpasses 200,000

WHO classified the B1617 variant, with multiple sub-lineages that have slightly different characteristic mutations, as a variant of interest in its weekly epidemiological update on the pandemic. It was first detected in India last October but, as of Tuesday, was present in at least 17 countries including the United States, the U.K. and Singapore.

The international health body said in its report that the B1617 variant is circulating in India alongside other variants of concern as well as variant B1618, which was detected in some states. The WHO said these variants may be collectively playing a role in the current resurgence.

 

·         Brazil nears 400,000 COVID-19 deaths

 

·         Global Vaccination

So far, at least 178 countries have begun vaccinating people for the coronavirus and have administered at least 1,060,108,000 doses of the vaccine.

 

·         Blinken says Turkey, others, should refrain from new purchases of Russian weapons

U.S. Secretary of State Antony Blinken said Turkey and all U.S. allies on Wednesday should refrain from making further purchases of Russian weaponry, threatening the possibility of more sanctions.