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Gold firms as Fed’s Powell calms rate-hike fears

· Gold gained on Wednesday, lifted by soothing words from Federal Reserve Chair Jerome Powell who said inflation would not be the only determinant of interest rate decisions and the central bank would not rush into hiking interest rates.

· Spot gold rose 0.3% to $1,782.96 per ounce by 1:42 p.m. EDT (1742 GMT). U.S. gold futures settled up 0.3% at $1,783.40.

· Powell’s words on Tuesday calmed investors who had worried about policy tightening following last week’s hawkish turn by the Fed.

· Still, the precious metal has failed to reverse last week’s 6% drop as expectations of Fed policy tightening have taken hold in markets. Higher interest rates translate into a reduced opportunity cost of holding bullion, which pays no interest.

· But David Meger, director of metals trading at High Ridge Futures, said it was not a foregone conclusion the Fed would move to raise interest rates or reduce asset purchases as quickly as last week’s meeting suggested.

“We’re clearly trading in a very accommodative environment that will underpin gold prices (and) overall it’s still too early to start making mention of reduction in asset purchases and increases in interest rates,” Meger said.

· Gold also benefited from a subdued dollar, which hit a near one-week trough earlier in the session, boosting gold’s appeal for holders of other currencies.

· Technicals were supportive too, Quantitative Commodity Research analyst Peter Fertig said, noting gold appeared to have bottomed out from last week’s selloff.

· While the gold market’s pricing for Fed hikes could prove too hawkish, the underlying inflation trends will likely remain distorted for months, inhibiting positive flows into gold for now, TD Securities analysts said in a note.

· Elsewhere, silver rose 1.1% to $26.02 per ounce and palladium climbed 2.5% to $2,620.12. Platinum was up 1.1% at $1,091.43.

· Dollar slips after Fed's Powell downplays inflation fears

The dollar index was last down 0.21% at 91.551. It fell to a session low after data showed that a measure of U.S. factory activity climbed to a record high in June.

The euro rose 0.18% to $1.962.

· TREASURIES-10-year yield stalls below 1.5%; reverse repo hits another record

Ten-year Treasury yields inched higher but remained below 1.5% in muted trading on Wednesday, one day after Federal Reserve Chairman Jerome Powell reaffirmed in congressional testimony the central bank's view that rising inflation will likely be temporary.

Fed Governor Michelle Bowman and Atlanta Federal Reserve Bank President Raphael Bostic echoed the central bank's sentiment that high inflation will be temporary as the economy settles back to normal after the coronavirus pandemic, though above-average inflation may last longer than originally thought.

The benchmark 10-year Treasury yield rose to 1.4869%, while shorter-term 2-year yields edged higher to 0.2621%. Long duration 30-year Treasury yields inched up to 2.1104%.

· Yellen says inflation should be lower than current levels by year end

U.S. Treasury Secretary Janet Yellen said on Wednesday that inflation should retreat by year end from its current elevated level as supply bottlenecks get worked out, adding she sees little evidence inflation expectations are becoming unanchored.

· Fed's Rosengren says central bank needs to keep eye on financial stability risks

Federal Reserve officials need to keep a close watch on financial stability risks, and rising home prices in particular should be monitored, Boston Fed President Eric Rosengren said on Wednesday.

“Long periods of very low interest rates do encourage people to take risk,” Rosengren said during a virtual conversation organized by the New England chapter of the National Association of Corporate Directors.

· Fed Governor Michelle Bowman and Atlanta Federal Reserve Bank President Raphael Bostic echoed the central bank's sentiment that high inflation will be temporary as the economy settles back to normal after the coronavirus pandemic, though above-average inflation may last longer than originally thought.

· U.S. senators, Biden to discuss framework for possible infrastructure deal Thursday

· U.S. new home sales tumble to one-year low as prices soar

Sales of new U.S. single-family homes fell to a one-year low in May as the median price of newly built houses soared amid expensive raw materials, including framing lumber.

New home sales dropped 5.9% to a seasonally adjusted annual rate of 769,000 units last month, the lowest level since May 2020. April's sales pace was revised down to 817,000 units from the previously reported 863,000 units. The median new house price jumped 18.1% from a year earlier to $374,400 in May.

· U.S. bans imports of solar panel material from Chinese company

· Rising inflation puts Bank of England on the spot

· Euro zone business activity surges by its fastest rate in 15 years

· S.Korea c.bank flags stronger inflationary pressure in H2

CORONA VIRUS UPDATES

· Covid cases will rise in the fall as delta variant spreads, epidemiologist warns

New Covid-19 infections in the U.S. will tick higher this fall as the highly contagious delta variant spreads, epidemiologist Dr. Anne Rimoin warned Wednesday.

“This variant, the delta variant, is 60% more infectious than the alpha variant, so that just shows you, that if you have the same contact with somebody that you had previously who has Covid, and you’re not vaccinated, you are at substantial risk of getting infected,” Rimoin, a professor of epidemiology at the UCLA School of Public Health, told CNBC’s “The News with Shepard Smith.”

· Asia may be first in, last out of the Covid pandemic, says travel services firm

Asia was the first epicenter of the Covid-19 outbreak and could be the last region to emerge from the pandemic — especially with regard to travel, according to the Asia Pacific president of a travel services firm.

“Unfortunately, Asia was first … in to the pandemic and we’re predicting that it’s probably going to be last out of the pandemic because of the vaccination rates,” said Todd Handcock of Collinson Group, which offers a slew of travel-related services such as insurance and operating airport lounges.

According to Our World in Data, only 22.26% of people in Asia have received at least one dose of Covid-19 vaccine. In comparison, that figure is 53.03% in the U.S. and 63.56% in the U.K.

· Fauci says delta accounts for 20% of new cases and will be dominant Covid variant in U.S. in weeks

Reference: CNBC, Reuters, Worldometers