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Gold edges higher but heads for weekly loss

 

·         Gold rose on Friday, but was headed for its worst week since March 2020 after the US Federal Reserve’s hawkish message on monetary policy lifted the dollar higher and dented the safe-haven metal’s appeal.

 

·         Spot gold was up 0.6% at $1,784.16/oz at 2.58am GMT. However, prices have fallen nearly 5% so far this week. US gold futures gained 0.5% to $1,783.20/oz.

 

·         It was the Fed meeting and reversal in their policy outlook that triggered the drop in gold prices, said ED&F Man Capital Markets analyst Edward Meir, adding “the reaction in gold has been somewhat overdone.”

 

·         “Despite the current high-growth, inflationary environment, the proposed Fed rate hikes are not expected to set in for at least another 18 months. So after a little bit more weakness here, gold prices will regroup and push higher.”

 

·         The Fed on Wednesday signalled it would be considering whether to taper its asset purchase programme meeting and brought forward projections for the first post-pandemic interest rate hikes into 2023.

 

·         After hawkish comments from Fed officials, the dollar jumped to a two-month high and was on track for its best week in nearly nine months, while US benchmark 10-year yield rose.

 

·         Though gold is considered as a hedge against inflation, higher interest rates will reduce its appeal as they translate into a higher opportunity cost of holding the asset.

 

·         Indicative of sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.4% to 1,041.99 tonnes on Thursday.

 

·         The Bank of Japan is expected to maintain its huge stimulus and may extend a deadline for its pandemic-relief programme at the end of its two-day policy meeting on Friday.

 

·         Spot gold may bounce to $1,797

 

Spot gold may bounce to $1,797 per ounce, as it has stabilized around a support at $1,769. Amid the widespread bearish sentiment, technical signals suggest an optimistic outlook that the drop from $1,916.40 could be over.

 

In the next few days, the metal is expected to keep recovering from the Thursday low of $1,766.29. A break above $1,797 could open the way towards $1,825.

 

 

·         LME copper eyes biggest weekly drop in 15 mths on China sale plan, dollar

London copper prices were set on Friday for their biggest weekly fall since March 2020 as the dollar firmed on the prospect of U.S. interest rate hikes and after China announced a plan to sell part of its reserves of the metal.

Three-month copper on the London Metal Exchange was down 0.8% at $9,242.50 a tonne by 0710 GMT, pushing its loss for the week to 7.6% and putting it on track for its steepest weekly fall since March last year, when the coronavirus hit demand. 

The most traded July copper contract on the Shanghai Futures Exchange dropped to 66,960 yuan ($10,394) a tonne, its lowest since April 15, before paring some losses to close at 67,260 yuan a tonne, still down 2.6%.

 

The dollar was headed for its biggest weekly gain in nearly nine months as investors scrambled to price in a sooner-than-expected ending to extraordinary U.S. monetary stimulus in the days after a surprise shift in tone from the Federal Reserve.

 

·         Elsewhere, palladium gained 1% to $2,521.38/oz, but was on track for its worst week since late March after a sharp drop on Thursday.

·         Silver rose 1.1% to $26.12/oz but was down 6% for the week. Platinum climbed 1% to $1,069.03/oz.

 

·         Yellen tells Mexican counterpart G20 countries should back global minimum tax

U.S. Treasury Secretary Janet Yellen met with Mexican finance minister Arturo Herrera on Thursday, stressing the importance of securing support from the Group of 20 major economies for a proposed global minimum tax, the Treasury said in a statement.

Yellen, whose proposal for a global minimum tax of at least 15% has won the backing of the Group of Seven advanced economies, is now urging G20 countries - including Mexico and China - to support the plan when they meet in Venice in July.

Yellen told U.S. lawmakers that Washington would not agree to any type of special treatment for China or other countries that would weaken a global minimum tax regime.

·         UK retail sales dip as consumers, freed from locked down, dine out

British retail sales fell unexpectedly last month as a lifting of lockdown restrictions encouraged spending in restaurants rather than shops, according to official data.

Retail sales fell 1.4% between April and May, the Office for National Statistics said.

A Reuters poll of economists had pointed to an 1.6% month-on-month increase in retail sales volumes for May.

·         Chinese scientists ensnared in U.S. visa fraud legal battle

For Chinese brain researcher Song Chen, a visiting scholar at Stanford University when she was arrested last July on a visa fraud charge, a court hearing last month in San Francisco brought some hope.

 

·         BOJ tankan to show manufacturers' Q2 mood improved

Business confidence among Japan's large manufacturers likely improved in the second quarter thanks to a boost to exports and corporate profits from a global demand recovery, a Reuters poll showed on Friday.

 

·         Health experts warn of Olympic COVID-19 threat, prefer no spectators

·         Japan minister says spectators 'will not exceed' 10,000

·         Singapore slows the pace of reopening as Covid cases haven’t declined significantly

 

·         RBA Will Begin Raising Interest Rates in Early 2023, Evans Says

The Reserve Bank of Australia will begin raising its key interest rate in early 2023 as the key metrics set by policy makers for the economy will be met by then, Westpac Banking Corp.’s chief economist said.

·         US embassy in Afghanistan on strict lockdown amid 'surging COVID cases

 

Reference: CNBC, Reuters