· Gold eased on Tuesday as the dollar ticked higher, while investors focused on this week’s U.S. Federal Reserve meeting for clues about when the central bank might rein in its easy monetary policies.
· Spot gold fell 0.1% to $1,794.68 per ounce by 0656 GMT. U.S. gold futures eased 0.3% to $1,793.60.
· The Fed’s two-day meeting will start on Tuesday and a policy statement will be issued at 1800 GMT on Wednesday, followed by a news conference by Fed Chairman Jerome Powell.
· Investors will be looking at how the Fed responds to fast-rising prices while facing increasing threat posed by the more contagious Delta variant of the coronavirus.
· “The market has perhaps underestimated the adverse impact that the Delta variant could bring to economic rebound and give central banks reason to delay tapering,” said Margaret Yang, a strategist at DailyFX.
· In the medium term, gold prices will have more room to go up if central banks continue to implement their accommodative monetary policies, she added.
· Stimulus measures tend to support gold, which is often considered a hedge against inflation and currency debasement.
· Meanwhile, the dollar index was up 0.1%, making gold more expensive for holders of other currencies.
· Gold was likely to remain range-bound until the Fed meeting outcome, analysts said.
· “A daily close below $1,790.00 an ounce would suggest a deeper correction to the critical support at $1,750.00 an ounce,” Jeffrey Halley, a senior market analyst, Asia Pacific at OANDA said.
· “However, the charts indicate that gold is, in fact, quietly consolidating at these levels in preparation for a resumption of the longer-term uptrend.”
· Holdings of the SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% to 1,025.64 tonnes on Monday, the lowest since May 13.
· Gold is stuck at $1,800 as hedge funds reduce their exposure to the precious metal
Hedge funds covering some short positions in the gold market are helping the precious metal maintain its upward bias as prices hold around $1,800 an ounce, but analysts continue to see waning bullish momentum.
The CFTC disaggregated Commitments of Traders report for the week ending July 13 showed money managers decreased their speculative gross long positions in Comex gold futures by 775 contracts to 135,163. At the same time, short positions fell by 4,912 contracts to 44,735.
The gold market's net length now stands at 90,401 contracts, up 4.7% from the previous week. Although gold saw its net length increase for the third consecutive week, analysts have noted that it has not helped the precious metals price. During the survey period, gold price was not able to push significantly above $1,800 an ounce.
Many analysts have said that gold's lackluster price action as bond yields dropped to multi-month lows is an indication that prices could turn lower in the near term.
· Elsewhere, silver was flat at $25.16 per ounce, palladium dropped 0.5% to $2,644.19, and platinum fell 0.6% to $1,057.50.
· Copper touches multi-week highs as dollar softens
Shanghai and London copper hit multi-week highs on Tuesday, as a softer dollar made greenback-priced metals cheaper to holders of other currencies.
The dollar eased early on Tuesday just below recent peaks, but the safe-haven currency rebounded later in the session as investors turned their focus to this week’s Federal Reserve meeting for clues on the policy outlook.
The most-traded September copper contract on the Shanghai Futures Exchange climbed as much as 3.1% to 72,740 yuan a tonne, its highest since June 3, before easing to close at 71,770 yuan a tonne, still up 1.7%.
Three-month copper on the London Metal Exchange fell 1.1% to $9,706 a tonne at 0743 GMT, retreating from a high level unseen since June 15 of $9,924 a tonne hit earlier in the session.
· Dollar's ascent pauses before Fed outcome; Aussie struggles
The U.S. dollar’s march towards a 3-1/2 month high paused on Tuesday as a Fed policy meeting got underway with risk appetite broadly subdued, leaving the Australian dollar struggling due to a widening regulatory crackdown in China.
Against a basket of its rivals, the greenback was trading at 92.73, not far from an early April high of 93.19 hit on July 21. The dollar has rallied more than 4% from 2021 lows of below 90 hit in late May as a decline in U.S. Treasury yields forced investors to cut their short dollar bets.
Net long dollar positions flipped to their highest levels in more than 14 months last week, according to latest CFTC data. This marks a significant turnaround from the first quarter of 2021 when hedge funds had ramped up their bearish bets on expectations that record low U.S. interest rates would hobble the greenback.
In early London trading on Tuesday, the euro was changing hands at $1.1780, not far from an early April low of $1.1752 hit last week.
More gains for the dollar are in store if the Fed strikes a hawkish note at the outcome of a two-day policy meeting on Wednesday although market consensus believes unlikely.
The Fed’s meeting comes after a study released last week by the National Bureau of Economic Research showed the coronavirus-induced U.S. recession lasted only two months.
MUFG strategists said the shortness of the recession could lead the Fed to reverse its policy stance more quickly but that this seems unlikely as the new monetary policy strategy framework allows for a less aggressive response.
· China's yuan weakens to over 3-month lows, hurt by stock selloffs
China’s onshore and offshore yuan gave up intraday gains on Tuesday afternoon and eased to their lowest levels in more than three months, as sentiment soured after a sharp selloff in the country’s equity markets.
The onshore spot yuan weakened to a low of 6.5133 per dollar in afternoon trade, the weakest level since April 19, and was down 0.46% on the day. Its offshore counterpart hit a low of 6.5225, the softest since April 19.
· U.S. Federal Reserve now facing twin inflation, growth risks as COVID-19 cases rise and supply chains falter
· Fed MBS buying high on agenda as officials begin taper talk
Policy hawks at the Federal Reserve are setting their sights on scaling back the US central bank’s massive intervention in the mortgage market as home prices soar. But the Fed leadership doesn’t sound convinced by arguments in favour of a hasty exit strategy.
The debate – over whether to taper the Fed’s purchases of mortgage-backed securities faster than its buying of Treasury debt – will probably be near the top of the agenda when officials gather on July 27-28 to discuss next steps for policy.
Economists surveyed by Bloomberg expect them to leave their support in place and be silent on taper timing in their statement, released at 2pm Washington time on Wednesday. Pressure on Chair Jerome Powell to begin scaling back bond buying sooner rather than later has probably eased amid concern that spread of the coronavirus delta variant could sap the economic recovery.
· U.S. will not lift travel restrictions, citing Delta variant, White House says
The United States will not lift any existing travel restrictions "at this point" due to concerns over the highly transmissible COVID-19 Delta variant and the rising number of U.S. coronavirus cases, the White House confirmed on Monday.
· China's industrial profit growth slows in June on high raw material prices
Profit growth at China’s industrial firms slowed for the fourth straight month in June, as high raw material prices weighed on factories’ margins, pointing to some weakness in the recovery of the world’s second-biggest economy.
Industrial firms’ profits rose 20% year-on-year in June to 791.8 billion yuan ($122.27 billion), data from the National Bureau of Statistics showed on Tuesday, after a 36.4% increase in May.
The Chinese economy has largely recovered from disruptions caused by the coronavirus pandemic, but it has faced new challenges in recent months such as higher raw material costs and global supply chain crunches.
· South Korea's second-quarter GDP growth hits decade high but risks loom
South Korea’s economy expanded at the fastest annual pace in a decade in the second quarter, thanks to a pick up in private consumption, though a resurgence of COVID-19 casts doubt over the outlook for growth for the rest of the year.
Data from the Bank of Korea on Tuesday showed gross domestic product (GDP) grew 0.7% in the second quarter, after rising 1.7% three months earlier and matching 0.7% growth tipped in a Reuters survey.
The economy surged 5.9% year-on-year, the fastest growth in a decade and up sharply from 1.9% in the first quarter, in part because of the low base effect of last year but also driven by strong exports and imports as major trading partners continued to reopen.
· Singapore aims to start quarantine-free travel by September
Singapore is looking to allow quarantine-free travel for those who are fully vaccinated against COVID-19 from September, when 80% of the city-state's population should be inoculated, the government said on Monday.
Singapore will establish travel corridors with countries or regions where COVID-19 is under control, and those who are vaccinated may not have to quarantine or may be allowed to isolate at home, Finance Minister Lawrence Wong said.
· Indonesia's COVID-19 crisis to test fiscal discipline commitment
Indonesia's worsening COVID-19 crisis is raising pressure on the government to lift spending and widen the budget deficit, even as rating agencies warn any loosening of the country's hard-won fiscal discipline could bode ill for its credit ratings.
· South Africa's unrest likely shaved 0.7% off 2021 GDP growth, says S&P
· Koreas restore communication channels, agree to improve ties
North and South Korea have restored suspended communication channels between them and their leaders agreed to improve ties, both governments said Tuesday, despite a 2 ½ year-stalemate in US-led diplomacy aimed at stripping North Korea of its nuclear weapons.
· Kuroda says BOJ ready to modify climate change steps as needed
Bank of Japan Governor Haruhiko Kuroda said on Tuesday the central bank will roll out steps deemed important in dealing with climate change, and stand ready to modify them as needed.
“The key is to take the approach of ‘learning by doing’,” Kuroda told a speech focusing on the BOJ’s approach on climate change
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