Gold fell on Monday in step with a stronger dollar as investors cautiously looked forward to U.S. inflation data that could influence the Federal Reserve’s timeline for easing its bond purchases.
· Spot gold was down 0.2% to $1,804.80 per ounce by 1:50 p.m. ET. U.S. gold futures settled 0.3% lower at $1,805.90.
· The closely watched U.S. consumer price index (CPI) report is due to be released on Tuesday. Fed Chair Jerome Powell is scheduled to testify before Congress on Wednesday and Thursday.
· “We’re almost in this environment where good news is bad news and bad news is good news,” said David Meger, director of metals trading at High Ridge Futures, referring to the CPI data and its impact on Fed policy.
If inflation data becomes more benign, the Fed would feel slightly less inclined to ease its asset purchases, which should benefit gold, but if it is concerned about inflation, it is more likely “to tap the brakes,” pressuring gold, Meger added.
Economists polled by Reuters expect core U.S. consumer prices to have risen 0.4% in June.
· Analysts at JP Morgan suggested in a weekly note that gold investors’ cautious stance was warranted given their view of steadily rising yields and the dollar being supported around current levels until the end of this year.
The bank forecasts gold to average $1,686 per troy ounce this year.
· Market participants also seemed to look past a spike in cases of the Delta variant of the coronavirus in some countries.
It seems very unlikely that the Delta variant will have a broad-based economic impact, so safe-haven demand for gold and silver is unlikely to pick up in the short term, said Carsten Menke, analyst at Julius Baer.
· Elsewhere, silver rose 0.3% to $26.15 per ounce, palladium gained 1.6% to $2,852.81 and platinum was 1.2% higher at $1,116.91.
· Dollar edges higher amid pandemic concerns, U.S. inflation in focus
The dollar edged higher across the board on Monday as concerns about the pandemic encouraged investors to seek a safe haven, and as they awaited more clues about the global economic recovery.
Reports from around the globe of surging infections of the Delta coronavirus variant also hurt investors’ appetite for riskier assets.
Investors will look to U.S. inflation data on Tuesday and Federal Reserve Chair Jerome Powell’s economic testimony on Wednesday and Thursday as they gauge expectations for the Fed to dial back on stimulus as soon as this year, Manimbo said.
Any signs that inflation could be more persistent than previously thought could fan expectations that the Fed may exit from current pandemic-era stimulus earlier, supporting the dollar against other major currencies.
Conversely, more benign data could lead investors to think the U.S. central bank can afford to maintain an easy policy framework for longer, encouraging more bets on risk assets, including risk-sensitive currencies.
The dollar index, which measures the greenback against a basket of six currencies, was 0.1% higher at 92.267. The index remains close to a 3-month high of 92.844 touched last week.
· Sterling slips on COVID-19 worries as England set to lift restrictions
Sterling fell 0.1% to $1.3892 against the dollar by 1450 GMT, after jumping overnight to its highest in two weeks.
· Yields hold above five-month lows after solid auctions, before CPI
The Treasury sold $38 billion in 10-year notes at a high yield of 1.371%, slightly below where the debt had traded before the auction. Yields had backed up ahead of the sale, which likely helped demand.
· NY Fed's Williams says both Treasury and mortgage purchases are supporting housing market
The Federal Reserve’s purchases of Treasury securities and mortgage-backed securities are both affecting interest rates and financial conditions overall and one group does not have a significantly larger impact on the housing market, New York Fed Bank President John Williams said on Monday.
· Inflation expectations surge, hitting new high for New York Fed survey
Despite the Federal Reserve’s assurance that current inflation pressures won’t last, consumers see things differently, according to a survey Monday from the central bank’s New York district.
The June Survey of Consumer Expectations showed that median inflation expectations over the next 12 months jumped to 4.8%, a 0.8 percentage point rise from May and the highest reading in history for a series that goes back to 2013.
While the outlook for the next three years remained unchanged at 3.6%, that is still well above the 2% level that the Fed considers healthy for a growing economy.
· ECB to chart new policy path next week
The European Central Bank will chart a new policy path at its next meeting to reflect its change of strategy and show it is serious about reviving inflation, ECB policymakers said on Monday.
Announced last week, the ECB's new strategy allows it to tolerate inflation higher than its 2% goal when rates are near rock bottom, such as now.
This is meant to reassure investors that policy will not be tightened prematurely and cement their expectations about price growth, which has lagged below the ECB's target for most of the past decade.
· China is injecting $150 billion into the economy — that may fuel a short-term rally, UBS says
China’s move to cut the amount of funds banks need to hold in reserve could boost market sentiment — and that could be good news for stocks in certain sectors, according to investment bank UBS.
· Russian central bank says inflationary pressure remains high, but is easing
· Cryptocurrency trading volume plunges as interest wanes following bitcoin price drop
· Crypto assets post outflows after two-week run of inflows - CoinShares data
· Oil prices slip as economic worries offset tightening supplies
Crude futures slipped on Monday as concerns over slowing global growth outweighed the prospect of tightening supply after talks among key producers to raise output in coming months stalled.
Brent crude for September fell 0.52% to settle at $75.16 per barrel while U.S. West Texas Intermediate crude for August settled at $74.10 a barrel, for a loss of 0.62%.
Both benchmarks fell around 1% last week but still hover near highs last reached in October 2018.
· CORONAVIRUS UPDATES:
· Most fully vaccinated people who get Covid delta infections are asymptomatic, WHO says
· UK government confirms plan to lift lockdown measures in England despite fears over delta surge
· Johnson & Johnson in discussion with FDA regarding COVID-19 vaccine side effects
Reference: CNBC, Reuters, Worldometers
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