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Gold gave up early gains on Wednesday as comments from a top U.S. Federal Reserve official and record U.S. services industry activity data shifted concerns back to the Federal Reserve potentially easing asset purchases later in the year.

 

·         Spot gold was up 0.1% at $1,811.38 per ounce by 2:11 p.m. EDT, while U.S. gold futures settled little changed at $1,814.50.

·         Prices jumped 1% earlier in the session on the back of weaker than expected ADP jobs data.

 

·         Offsetting the jobs data, was the Institute for Supply Management’s non-manufacturing PMI activity index, which raced to its highest reading in the series’ history last month.

 

·         “Given that the Fed said they’re going to look at economic data and maybe cut back on asset purchases come September or November, strong data like the PMI helps their cause to start cutting back,” said Bob Haberkorn, senior market strategist at RJO Futures.

 

·         The tapering view was cemented by comments from U.S. Federal Reserve Vice Chair Richard Clarida suggesting the central bank could start cutting back on bond purchases later in the year.

 

·         Benchmark U.S. 10-year yields rose off their low following Clarida’s comments, reducing the appeal of non-yielding bullion. The U.S. dollar too recovered, further reducing gold’s allure.

 

·         “While negative real yields remain a relevant driver of gold prices, in the near term, safe-haven demand and dollar strength are setting the tone for trading,” said Suki Cooper, analyst at Standard Chartered.

 

But, the emergence of physical demand has helped to cushion downside risk to gold prices, though demand hasn’t recovered to pre-COVID levels.

 

·         Market focus now shifts to Friday’s U.S. non-farm payroll report with economists in a Reuters poll forecasting a 926,000 increase in jobs.

 

·         Elsewhere, silver fell 0.5% to $25.42 per ounce, having earlier hit a near three-week peak.

 

·         Platinum eased 2.2% to $1,026.23 per ounce.

 

·         Palladium gained 0.2% to $2,653.65.

 

·         The big miss with the ADP raised concerns that the delta variant is having a bigger impact on the economy. 

Private companies only added 330,000 jobs in July, a huge miss of the 683,000 estimate, and downwardly revised prior reading of 680,000.  It is peak summer vacation time and leisure and hospitality only saw 139,000 jobs gained.  The labor market recovery is extremely uneven and suggests the economy continues to struggle in matching individuals up with the current job vacancies.

A favorable seasonal factor could be in play for Friday’s report, so investors should not be stunned if the private payrolls portion of the NFP report does come near the 718,000 estimate.

  

·         26 states ended federal unemployment benefits early. Data suggests it’s not getting people back to work

·         U.S. services sector growth accelerates despite supply constraints

U.S. services sector index races to record high in July -ISM survey

The Institute for Supply Management said on Wednesday its non-manufacturing activity index raced to 64.1 last month, the highest reading in the series' history, from 60.1 in June.

 

·         Fed's Clarida supports interest rates liftoff in 2023

The U.S. economy is on track by the end of next year to meet the employment and inflation hurdles the Federal Reserve has set for raising interest rates, consistent with a liftoff in borrowing costs in 2023, Fed Vice Chair Richard Clarida said on Wednesday.

Clarida said he expects some “pretty healthy” U.S. job gains this fall as factors holding back labor supply dissipate.

 

·         Fed's Daly sees bond program taper later this year or early 2022

San Francisco Federal Reserve President Mary Daly on Wednesday said that mostly likely the U.S. central bank will be in position to begin to reduce its massive asset-buying program later this year or early next year.

 

·         Fed's Kaplan wants bond-buying taper to start soon and be gradual

The U.S. central bank should start reducing its bond-buying program “soon” and gradually, Dallas Federal Reserve President Robert Kaplan said on Wednesday, adding that doing so would give it more flexibility to be “patient” on raising interest rates.

 

·         Yellen says monthly U.S. inflation rates should subside by end-2021

U.S. Treasury Secretary Janet Yellen said on Wednesday she anticipates that monthly inflation rates will subside by the end of 2021, even as year-over-year inflation readings stay elevated due to lingering comparison effects from the coronavirus pandemic.

Yellen, speaking to reporters after a tour of a social services agency in Atlanta, repeated her view that currently high inflation is a transitory effect from supply bottlenecks and shifts in spending demand caused by the pandemic and recovery.

 

 

Yellen says enacting Biden’s agenda is key to keeping U.S. the ‘world’s pre-eminent economic power’

Yellen is trying to rally the public behind the bipartisan infrastructure bill and Democrats’ even bigger $3.5 trillion spending plan.

 

Yellen says new U.S. eviction moratorium buys time to speed rental aid funds

U.S. Treasury Secretary Janet Yellen said on Wednesday her department will use a 60-day extension of a moratorium on residential evictions to try to accelerate the distribution of aid to struggling renters and landlords.

 

·         Euro zone business surged in July but price pressures and Covid weigh

IHS Markit’s final composite Purchasing Managers’ Index (PMI), seen as a good gauge of economic health, climbed to 60.2 last month from June’s 59.5, its highest level since June 2006, well above the 50 mark separating growth from contraction, though slightly below a 60.6 “flash” estimate.

 

·         Euro zone growth momentum will continue into the third quarter, economist says

Andrew Kenningham, chief European economist at Capital Economics, expects euro zone GDP to reach 2% or more in the third quarter as the services sector continues to rebound.

 

·         China outlook positive despite recent regulatory changes - AIA

 

 

·         COVID-19 UPDATES:

 

·         WHO asks wealthy nations to hold off on Covid vaccine boosters at least through September

The World Health Organization on Wednesday called on wealthy nations to stop the distribution of Covid-19 booster shots, citing vaccine inequity around the world.

The agency said the halt should last at least two months, to give the world a chance to meet the director-general’s goal of vaccinating 10% of the population of every country by the end of September.

 

·         New York auto show canceled due to the spreading Covid delta variant

 

·         From Beijing to Wuhan, China orders mass testing and restrictions as Covid cases rise

China’s National Health Commission said it confirmed 96 Covid cases on Wednesday — the third straight day it reported 90 cases and above. Of the newly confirmed cases, 71 were locally transmitted, said the health commission.

Economists are concerned that a strict government clampdown on movements could hurt the economy — the only major economy to grow last year.