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Gold races past $1,800/oz as bond yields, dollar slide

·         Gold jumped over 1% on Thursday with a weaker dollar and easing Treasury yields propelling it over the key $1,800 psychological level.

·         Spot gold rose 1.6% to $1,814.50 per ounce. During the session it hit $1,817.90, its highest since Feb. 16.

·         U.S. gold futures settled 1.8% higher at $1,815.7.

·         “We really have yet to see a strong rebound in Treasury yields,” said Edward Moya, senior market analyst at OANDA.

 

Despite the economic optimism, Federal Reserve policymakers seem unlikely to budge on their accommodative stance yet and investor inflation fears should boost gold, Moya added.

·         The Fed plans to keep borrowing costs near 0% and maintain monthly asset purchases worth $120 billion until it sees “substantial further progress” towards full employment and its 2% flexible inflation target.

·         U.S. 10-year Treasury yields slipped.

·         The dollar index fell 0.4%, making gold more attractive for those holding other currencies.

·         At a time of heavy government stimulus, gold is considered a hedge against potential inflation, but elevated Treasury yields have dulled the non-yielding bullion’s appeal this year.

·         “Gold is starting to move on rising inflationary pressures... Gold could get to over $1,850 within the next month,” said ED&F Man Capital Markets analyst Edward Meir.

·         Gold’s uptick also came despite data showing weekly jobless claims dropped to a 13-month low.

·         Focus now shifts to Friday’s U.S. monthly jobs report, which is expected to show non-farm payrolls increased by 978,000 last month.

·         Gold powers to 10-week high on bullish technicals, weaker greenback

The gold market pushed above what was key technical resistance at the $1,800.00 level Thursday morning and hit a 10-week high. Silver prices notched a nine-week high. The move above $1,800.00 in gold set off pre-placed buy stop orders in the futures market to propel prices even higher.

The metals are boosted by more bullish charts this week, a drop in the U.S. dollar index on this day and bond yields that have pulled back from this week’s highs.

It could also be that increasing worries about global inflation becoming problematic in the coming months are prompting the buying of gold and silver as a hedge against serious inflationary pressures that could occur down the road. There are certainly several clues recently that do suggest such being the case.

·         Meanwhile, palladium fell 1% to $2,943.37 per ounce, having scaled an all-time high of $3,017.18 on Tuesday on strained supplies for the autocatalyst metal.

·         Silver climbed 3.2% to $27.34 per ounce, having earlier hit its highest level in over two months at $27.45.

·         Platinum gained 2.1% to $1,250.74.

·         Copper is ‘the new oil’ and low inventories could push it to $20,000 per ton, analysts say

In a note Tuesday, Bank of America commodity strategist Michael Widmer highlighted inventories measured in tons are now at levels seen 15 years ago.

 

·         U.S. weekly jobless claims drop to fresh 13-month low

Fewer Americans filed new claims for unemployment benefits last week as the labor market recovery gains steam amid an economic boom, which is being fueled by a rapidly improving public health situation and massive government financial assistance.

Labor market strength was reinforced by other data on Thursday showing U.S.-based employers in April announced the fewest job cuts in nearly 21 years. The reports added to other upbeat employment data in suggesting that the economy enjoyed another blockbuster month of job growth in April.

But the labor market is not out of the woods yet, with about 16.2 million people still on unemployment benefits.

Initial claims for state unemployment benefits tumbled 92,000 to a seasonally adjusted 498,000 for the week ended May 1, the Labor Department said. That was the lowest since mid-March 2020, when mandatory shutdowns of nonessential businesses were enforced to slow the first wave of COVID-19 infections.

 

·         Biden willing to accept 25% corporate tax rate to fund spending programs

U.S. President Joe Biden said a corporate tax rate between 25% and 28% could help pay for badly needed infrastructure, suggesting he could accept a lower rate than what he has proposed in his search for Republican support for the funding.

"The way I can pay for this, is making sure that the largest companies don't pay zero, and reducing the (2017 corporate) tax cut to between 25 and 28" percent, Biden said during a visit to Lake Charles, Louisiana.

In his $2.3 trillion infrastructure plan, the Democratic president initially proposed raising the corporate tax rate from 21% to 28%. Tax experts and congressional aides told Reuters in April that a 25% rate would be a likely compromise.

 

·         Fed warns about potential for ‘significant declines’ in asset prices as valuations climb

Rising asset prices in the stock market and elsewhere are posing increasing threats to the financial system, the Federal Reserve warned in a report Thursday.

 

·         Investors were also paying attention to elections in Scotland that could herald a political showdown over a new independence referendum.

 

·         Bank of England slows pace of bond-buying on growing hopes for recovery

The Bank of England kept the scale of its stimulus programme unchanged on Thursday as Britain's economy shows signs of recovery from its coronavirus slump, helped by the country's fast rollout of its COVID-19 vaccination programme.

The BoE kept its benchmark interest rate at an all-time low of 0.1% and the size of its bond-buying programme unchanged at 895 billion pounds ($1.24 trillion), as expected by economists polled by Reuters.

·         CORONAVIRUS UPDATES:

COVID-19 infections are still rising in 42 countries.

Global Cases: 156.67M (+843,468)
Global Deaths: 3.26M (+13,734)

No.1-3
U.S. Cases: 33.36M (+46,315)
U.S. Deaths: 593,995 (+849)

India Cases: 21.48M (+414,433)
India Deaths: 234,071 (+3,920)

Brazil Cases: 15.00M (+72,559)
Brazil Deaths: 417,176 (+2,531)

No.98
Thailand Cases: 76,811 (+1,911)

Thailand Deaths: 336 (+18)

·         Drugmakers say Biden misguided over vaccine patent waiver

Drugmakers on Thursday said U.S. President Joe Biden’s support for waiving patents of COVID-19 vaccines could disrupt a fragile supply chain and that rich countries should instead share more generously with the developing world.

Biden on Wednesday threw his support behind waiving intellectual property rights for COVID-19 vaccines, angering research-based pharmaceutical companies.

 

·         Global pharma shares sink as Biden backs COVID-19 vaccine IP waiver

 

·         Covid vaccine makers’ shares seesaw after Biden administration says it will back patent waivers

 

·         EU 'ready to discuss' COVID vaccine patent waiver, says von der Leyen

The European Union is willing to discuss a proposal, now backed by the United States, to waive intellectual property rights for COVID-19 vaccines, European Commission president Ursula von der Leyen said on Thursday.

The head of the EU executive said the bloc's vaccination effort was accelerating, with 30 Europeans being inoculated per second, while exporting more than 200 million vaccine doses to the rest of the world - contrasting with limited sharing of vaccines by the United States and Britain.

 

·         Russia authorizes use of ‘Sputnik Light,’ a one-shot Covid vaccine it says is 79% effective

 

·         U.S. supports Ukraine against 'reckless' Russian moves - Blinken