Gold hovers just off seven-week lows, capped by Fed policy tilt
· Gold prices slipped on Tuesday, ceding some of the previous session’s 1%-plus gains, as the dollar ticked higher and markets dug in to hear what Fed Chair Jerome Powell would say later in the day about the bank’s monetary policy stance.
· Spot gold traded at $1,779.10 per ounce by 0739 GMT, down 0.2% on the day, having earlier risen as much as $1,789.89. It stands well off the seven-week lows hit last week, when a hawkish tone from the U.S. Federal Reserve boosted the dollar and sent gold prices reeling.
· U.S. gold futures were down 0.1% at $1,780.5 per ounce.
· The dollar index inched up 0.1%, but stayed off its recent two-month highs.
· Powell, who will appear before Congress from 1800 GMT, in prepared remarks said inflation had “increased notably in recent months”.
· Last week, gold tumbled 6% after the Fed signalled on Wednesday that interest rates could rise in 2023. Higher interest rates translate into higher opportunity cost of holding gold.
· Avtar Sandu, a senior commodities manager at Phillip Futures, said in a note that despite Monday’s bounce, “gold prices were being traded mostly within last Friday’s chart pattern, a pattern that is more reflective of a pause and indecision.”
· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% on Monday.
· Gold Futures: Further upside looks limited
CME Group’s advanced figures for gold futures markets noted open interest extended the downtrend for yet another session on Monday, this time by around 6.1K contracts. In the same line, volume shrank for the second session in a row, now by around 71.8K contracts.
Gold faces the next hurdle at $1,800
Gold prices managed to rebound from the $1,760 region. The move, however, was on the back of shrinking open interest and volume, leaving the upside somewhat contained. That said, the yellow metal still faces a key resistance at the $1,800 mark per ounce troy for the time being.
· Gold Price Forecast: XAU/USD bulls to regain control on a daily closing above 100-DMA at $1794
Gold is consolidating its recovery below $1890, as higher US dollar and yields limit the upside. The focus now remains on Powell’s Q&A session during his testimony later on Tuesday, FXStreet’s Dhwani Mehta briefs.
“The renewed optimism over the US infrastructure stimulus deal favors gold bulls. Markets also reassess the Fed’s monetary policy goals, especially after the text of Fed Chair Jerome Powel’s testimony released early Tuesday. Powell said inflation had accelerated but should move back toward the central bank’s 2% target once supply imbalances resolve.”
“All eyes remain on the Fed Chair’s Q&A session during his testimony on the Fed’s emergency lending programs and current policies before the House Select Subcommittee on the Coronavirus Crisis.”
“Gold’s daily chart shows that the price is fast approaching the critical 100-Daily Moving Average (DMA) at $1794, the previous key support now resistance. Gold bulls need to find a foothold above the 100-DMA on a daily closing basis, in order to unleash recovery gains. The next significant resistance awaits at $1797, the June 18 high. Further up, the $1800 round number could come into play, opening doors towards the June 17 highs of $1825.”
“Should the 100-DMA continue to guard the upside, gold price could fall back towards the daily lows of $1782. The $1763-$1760 demand zone will emerge as strong support for the bullish traders.”
· Copper rises as dollar weakens ahead of Fed chief testimony
Copper prices rose on Tuesday, as the dollar paused for breath ahead of a highly-anticipated testimony from the U.S. Federal Reserve chair Jerome Powell due later in the day, making the greenback-priced metals cheaper to holders of other currencies.
Three-month copper on the London Metal Exchange was up 0.6% at $9,238 a tonne, as of 0336 GMT, while the most-traded July copper contract on the Shanghai Futures Exchange advanced 1.2% to 67,600 yuan ($10,461.00) a tonne.
· Elsewhere, silver fell 0.3% to $25.85 per ounce, palladium gained 0.7% at $2,602.68 and platinum rose 0.4% to $1,057.12.
· The Fed will continue to dominate the market in the week ahead after sell-off
The Federal Reserve’s signal that it is looking to step away from some of its easy policy is expected to be a dominant trading theme in the week ahead and likely for the rest of the summer.
· Fed officials open debate on bond taper
The debate over when and how the Federal Reserve could begin to reduce some of its massive stimulus for the economy was on full display on Monday, as two U.S. central bank officials explained their support for an earlier withdrawal and a third said any change was still quite a ways away.
The conversation over the future of the Fed’s $120 billion in monthly bond purchases is just beginning, and is expected to be a central topic when Fed Chair Jerome Powell appears on Tuesday before the U.S. House of Representatives Select Subcommittee on the Coronavirus Crisis.
In prepared testimony released late on Monday, Powell said the U.S. economy continues to show “sustained improvement” and forecast further job market gains and a decline in inflation from current elevated levels, but he did not say anything about the taper debate.
But earlier in the day, St. Louis Fed President James Bullard and Dallas Fed President Robert Kaplan laid out some of the major questions Fed officials will have to grapple with as they work through an early test of the central bank’s new strategic framework at a time when inflation is coming in strong and the labor market recovery is weaker than expected.
“Creating optionality for the committee will be really useful and that will be part of the taper debate as we think about how much signaling we are doing about future rate policy,” Bullard said during a virtual event organized by the Official Monetary and Financial Institutions Forum and the Philadelphia Fed.
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· China's regulators struggle to sway companies on currency risk
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· U.S. chip foundry announces new manufacturing plant in Singapore
· Myanmar troops kill four in gun battle with anti-junta militia
Myanmar soldiers battled an anti-junta civilian militia with small arms and grenades in the country’s second city on Tuesday, with four protesters killed and several members of the security forces injured, authorities said.
Reference: CNBC, FXStreet, Reuters
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