Gold fell on Tuesday as the dollar firmed and as markets weighed the chances that the U.S. Federal Reserve this week may signal an eventual easing of stimulus.
Spot gold fell 0.5% to $1,855.99 per ounce by 1:55 p.m. EDT (1755 GMT).
U.S. gold futures settled down 0.5% at $1,856.40.
“There’s growing nervousness about rising inflation and the feeling in precious metal markets is that central banks have to start to respond a bit more aggressively to these inflationary pressures,” ED&F Man Capital Markets analyst Edward Meir said.
Meir said while gold could face a “short-lived” setback if the Fed begins tapering by end-2021 or even hints at it on Wednesday, bullion will likely be bought “on the dips” on concerns over rising inflation.
The Fed has repeatedly said that current price spikes are transitory, but its two-day meeting ending on Wednesday could feature initial discussions among policymakers about when and how fast to pare back its massive bond-buying program to address inflation.
Further reducing gold’s appeal, the dollar index firmed after hitting a one-month peak and benchmark yields rose, increasing non-yielding gold’s opportunity cost.
On the physical front, consultants Metals Focus said decreased buying of bullion by exchange traded funds could limit gold demand this year.
Meanwhile, data showed U.S. retail sales fell more than expected in May, while producer prices rose more than expected.
The data also showed a drop in receipts at auto dealerships.
While lower automobile output due to the global semi-conductor shortage should weigh on platinum and palladium’s auto-catalyst demand, concerns over inflation should support the metals, said Bob Haberkorn, senior market strategist at RJO Futures.
Elsewhere, silver shed 0.8% to $27.62 per ounce.
Platinum fell 1.4%, to $1,148.37.
Palladium rose 0.2% to $2,757.65.
The Fed is heavily favored to stay the course with easy policies through 2021, CNBC survey shows
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* U.S. retail sales take step back as spending pivots to services, trend remains strong
U.S. retail sales dropped more than expected in May, with spending rotating back to services from goods as vaccinations allow Americans to travel and engage in other activities that had been restricted by the COVID-19 pandemic.
Retail sales fell 1.3% last month. Data for April was revised higher to show sales increasing 0.9% instead of being unchanged as previously reported. Economists polled by Reuters had forecast retail sales declining 0.8%.
Retail sales surged 28.1% on a year-on-year basis. The retail sales report mostly capture spending on goods, with restaurants and bars the only services category included.
Excluding automobiles, gasoline, building materials and food services, retail sales dropped 0.7% after a revised 0.4% fall in April. These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.
* Producer prices climb 6.6% in May on annual basis, largest 12-month increase on record
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Producer prices rose at their fastest annual clip in nearly 11 years in May as inflation continued to build in the U.S. economy, the Labor Department reported Tuesday.
The 6.6% surge was the biggest 12-month rise in the final demand index since the Bureau of Labor Statistics began tracking the data in November 2010.
On a monthly basis, the producer price index for final demand rose 0.8%, ahead of the Dow Jones estimate of 0.5%.
Excluding food and energy, the 12-month final demand PPI rose 5.3%, which also was the biggest increase since that the BLS started tracking that number in August 2014.
* Federal Reserve officials believe the current increase will prove to be transitory as supply and demand issues balance out and low readings during the pandemic lockdown wash out of the system.
With the PPI and CPI data in hand, economists are forecasting that the Federal Reserve’s preferred inflation measure, the core personal consumption expenditures price index, rose at least 0.4% in May. That would push the year-on-year rate to about 3.4% from 3.1% in April. The U.S. central bank has a flexible 2% target.
However, several notable Wall Street names, including Bank of America CEO Brian Moynihan and hedge fund billionaire Paul Tudor Jones, told CNBC on Monday that it’s time for the Fed to pull back on the easy-money policy it instituted during the pandemic.
* White House says child tax credit should boost economy, offset unemployment phaseout
The Biden administration expects the start of child tax credit payments in July to provide a solid boost to the U.S. economy that should more than offset a halt in extra unemployment benefits by 25 states, a White House official said on Tuesday.
* Foreign holdings of U.S. Treasuries rise in April as rates stabilize -data
Foreign holdings of Treasuries rose in April, data from the Treasury Department showed on Tuesday, as investors bought back U.S. government debt after yields started to decline from their highs.
Major foreign holders of Treasuries held $7.070 trillion in Treasuries in April, up from $7.028 trillion in March.
* China is kicking out more than half the world’s bitcoin miners – and a whole lot of them could be headed to Texas
* China’s electric car leaders predict new energy vehicles will dominate the local market by 2030
* U.S. and EU resolve 17-year Boeing-Airbus trade dispute
The United States and European Union said Tuesday they have resolved a 17-year-long fight over aircraft subsidies, agreeing to suspend tariffs for five years stemming from the Boeing-Airbus dispute.
“This meeting has started with a breakthrough on aircraft,” said European Commission President Ursula von der Leyen, who met with President Joe Biden at a U.S.-EU summit in Brussels. “This really opens a new chapter in our relationship because we move from litigation to cooperation on aircraft — after 17 years of dispute.”
* Wide disagreements, low expectations as Biden, Putin meet
U.S. President Joe Biden and Russian President Vladimir Putin face off on Wednesday in their first meeting since Biden took office with wide disagreements likely and expectations low for any breakthroughs.
* Russia improves Q1 GDP assessment to contraction of 0.7% y/y
Russia on Tuesday revised up its first-quarter gross domestic product (GDP) assessment to a contraction of 0.7% year-on-year from a 1% decline, adding weight to assertions that the economy is close to returning to pre-crisis levels.
* Japan exports jump, machine orders up in sign of recovery
Japan’s exports rose at the fastest pace in 41 years in May and a key gauge of capital spending grew, helping the world’s third largest economy offset sluggish domestic demand as COVID-19 vaccinations boost business activity in key markets.
The solid data will likely bolster the view that the central bank will keep its ultra-easy policy unchanged at its June 17-18 policy meeting, although it may extend its pandemic-relief programmes to back a fragile economic recovery.
Ministry of Finance data on Wednesday showed exports grew 49.6% year-on-year in May, versus a 51.3% increase expected by economists in a Reuters poll, led by U.S.-bound car shipments.
The jump followed a 38% rise in April and marked the sharpest monthly increase since April 1980, when shipments surged 51.4%.
* Taiwan reports largest incursion yet by Chinese air force
Twenty-eight Chinese air force aircraft, including fighters and nuclear-capable bombers, entered Taiwan’s air defence identification zone (ADIZ) on Tuesday, the island’s government said, the largest reported incursion to date.
* Israel-Gaza violence erupts for first time since end of last month’s fighting
Israel mounted air strikes in the Gaza Strip on Wednesday, the first since the end of 11 days of cross-border fighting last month, in response to incendiary balloons launched from the Palestinian territory.
* CORONAVIRUS UPDATES:
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* COVID debt restructuring push not advanced enough, IMF chief cautions
Refrence: CNBC, Reuters, Worldometers
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