PRECIOUS-Gold up after U.S. Fed minutes; dollar strength cuts gains
Gold turned positive after the release of the U.S. Federal Reserve’s July policy meeting minutes on Wednesday, although a firm dollar limited any safe haven inflows into bullion in response to the spread of the Delta coronavirus variant.
· Spot gold was up 0.1% at $1,786.76 per ounce by 2:43 pm EDT (1843 GMT).
· U.S. gold futures settled down 0.2% at $1,784.4 per ounce.
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· “Concerns about the Delta variants spreading across the globe is obviously a little bit of a driver for gold,” said Michael Matousek, head trader at U.S. Global Investors.
Although people are also expecting more from the Fed on policy tightening, “so that’s been the main driver since morning,” Matousek added.
· According to the Fed’s July meeting minutes, officials said they still had faith in the U.S. economic recovery despite a troubling rise in Delta variant cases and continued laying plans for the eventual end of the central bank’s monthly purchases of Treasury bonds and mortgage-backed securities (MBS).
· Minutes highlight a Fed split over labor market, bond-buying taper
Federal Reserve officials felt their employment benchmark for decreasing support for the economy “could be reached this year,” but appeared to disagree on other key aspects of where monetary policy should turn next in the transition from the pandemic crisis, according to minutes from last month’s policy meeting.
· “Ultimately the focus is on the Jackson Hole symposium and the next non-farm payroll numbers, which will be very crucial for the market,” said Jigar Trivedi, commodities analyst at Mumbai-based broker Anand Rathi Shares.
· The dollar index hit its highest since April, limiting the appetite for gold for those holding other currencies, while concerns over rising coronavirus cases dented risk appetite.
· “Gold prices have recovered sharply on increased haven flows of late and the drop in bond yields, but with the U.S. dollar rising, the upside for the precious metal has been capped,” Fawad Razaqzada, market analyst with ThinkMarkets said in a note.
· Elsewhere, silver fell 0.5% to $23.51 per ounce.
· Platinum rose 0.4% to $1,001.
· Palladium shed 2.7% to $2,422.85.
· The slide in “these two highly industrial precious” could be attributed to weakness in some base metals, Commerzbank said in a note.
· Copper hits lowest in almost two months as concerns linger
Copper prices slumped to their lowest in nearly two months on Wednesday after recent weak economic data reinforced demand fears while a looming central bankers conference focuses attention on interest rates.
· Federal Reserve preparing for taper this year, July minutes show
Federal Reserve officials at their July gathering made plans to pull back the pace of their monthly bond purchases likely before the end of the year, meeting minutes released Wednesday indicated.
However, the summary of the July 27-28 Federal Open Market Committee gathering indicated that the central bankers wanted to be clear that the reduction, or tapering, of assets was not a precursor to an imminent rate hike. The minutes noted that “some” members preferred to wait until early in 2022 to start tapering.
The Fed is worried the rise of stablecoins could impact financial stability
· U.S. homebuilding stumbles amid unrelenting supply constraints
U.S. homebuilding fell more than expected in July, the latest sign that surging construction costs and home prices continued to constrain the housing market early in the third quarter.
Housing starts dropped 7.0% to a seasonally adjusted annual rate of 1.534 million units last month. Data for June was revised up to a rate of 1.650 million units from the previously reported 1.643 million units. Economists polled by Reuters had forecast starts would fall to a rate of 1.600 million units.
Homebuilding fell in the Northeast, Midwest and West, but rose in the populous South. Starts increased 2.5% on a year-on-year basis in July. Single-family starts, which account for the largest share of the housing market, fell 4.5% to a rate of 1.111 million units. Starts for the multi-family segment tumbled 13.1% to a rate of 423,000 units.
· U.S. employment growth through March revised modestly lower
The U.S. economy likely created 166,000 fewer jobs in the 12 months through March than previously estimated, the Labor Department’s Bureau of Labor Statistics said on Wednesday.
The reading is a preliminary estimate of the BLS’ annual “benchmark” revision to the closely watched payrolls data. The leisure and hospitality sector, which was hardest hit by the COVID-19 pandemic, accounted for the bulk of the revision, with employment growth revised down by 597,000 or 4.6%.
Once a year, the BLS compares its non-farm payrolls data, based on monthly surveys of a sample of employers, with a much more complete database of unemployment insurance tax records.
A final benchmark revision will be released in February along with the BLS’ report on employment for January. Government statisticians will use the final benchmark count to revise payroll data for months both prior to and after March.
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