PRECIOUS-Gold hovers below $1,800 as markets await fresh cenbank cues
· Gold prices held below the key psychological level of $1,800 on Wednesday, as a buoyant dollar made bullion more expensive for holders of other currency, while investors await clues from major central banks on their stimulus tapering measures.
· Spot gold was flat at $1,795.22 per ounce by 0703 GMT, hovering close to an over one-week low of $1,791.90 touched on Tuesday. U.S. gold futures fell 0.1% to $1,796.90.
· The dollar index rose to a one-week peak against major peers, buoyed by higher Treasury yields and a weaker euro ahead of a European Central Bank policy decision.
· “In the shorter term, gold remains data-dependent and what that U.S. data says about the tapering timeline,” IG Market analyst Kyle Rodda said.
· “So if the can keeps getting kicked down the road that gives gold an opportunity to rise again and retest that $1,830 level ... But there doesn’t seem to be high level of conviction to push the prices higher from here.”
· Rising COVID-19 cases weighed on U.S. job growth recovery last month, triggering speculations that the Federal Reserve could delay tapering.
· The Federal Open Market Committee is due to meet later this month.
· Investors were also cautious ahead of the ECB meeting on Thursday, anticipating a potential trim to the central bank’s stimulus.
· “There may be some influence from the ECB meeting if the meeting is more dovish than expected,” Nicholas Frappell, global general manager at ABC Bullion said.
· “In the very short term, I expect gold to recover to $1,807, possibly $1,815.”
· Gold is often considered a hedge against inflation and currency debasement, caused by massive stimulus measures while low interest rates also reduce the opportunity cost of holding non-yielding bullion.
· Gold Price Forecast: XAU/USD rebound stalls near $1,800 amid US dollar pick-up
Gold (XAU/USD) struggles to consolidate the heaviest daily losses in a month below $1,800, up 0.15% intraday near $1,797 ahead of Tuesday’s European session. That said, the precious metal snaps two-day fall despite recently easing from the day’s high.
Multiple failures to cross the key hurdle around $1,830-35 join the broad US dollar strength to keep gold sellers hopeful. The bearish impulse also takes clues from the commodity’s recent downside break of important technical levels.
The US Dollar Index (DXY) refrains from tracking the bond coupon to the south and refreshes the intraday high to 92.57 by the press time. Behind the DXY moves could be the ongoing grim concerns over the coronavirus and its economic impacts. The covid infections from Australia snapped a three-day downtrend while those from Germany rose 13,565 versus 6,726 the previous day.
The worsening of the COVID-19 conditions in the US pushes President Joe Biden towards a six-pronged strategy, the details of which will be out on Thursday and Friday. The same propelled the US 10-year Treasury yields to a two-month top on Tuesday, recently up a bit around 1.37%.
On a different page, US policymakers jostle over the much-awaited stimulus package as the bill inches closer to the passage, with the key hurdle ahead. Furthermore, the pre-ECB caution and mixed statements over the future performance of the Fed weigh on the market’s mood and favors the US dollar’s safe-haven demand.
It should be noted that the comments from the New York Fed President John C. Williams will be important to watch for intraday moves while Thursday’s monetary policy decision by the European Central bank (ECB), where the tapering is teased, becomes the crucial event of the week.
Technical analysis
While extending the pullback from the triple tops formed since mid-July, gold prices dropped below the monthly support line, now resistance, while also breaking the convergence of 100-day and 200-day EMA.
Having breached crucial EMAs and trend lines, XAU/USD remains directed towards an ascending support line from August 16, near $1,790.
However, any further weakness won’t hesitate to challenge June’s low around $1,750 whereas an extended fall past $1,750 could make the commodity vulnerable to aim for the yearly low surrounding $1,676.
On the contrary, the stated EMA confluence near $1,805 guards immediate upside of the metal ahead of the support-turned-resistance line close to $1,825.
It should be noted that the gold buyers remain skeptical unless witnessing sustained trading beyond the $1,832-34 horizontal resistance area.
· Silver fell 0.1% to $24.27 per ounce, platinum rose 0.2% to $1,000.56 and palladium eased 0.3% to $2,366.52.
· UPDATE 1-Fed's Bullard says stimulus tapering should begin this year - FT
The U.S. Federal Reserve should move forward with a plan to trim its massive pandemic stimulus programme despite a slowdown in job growth last month, St. Louis Federal Reserve Bank President James Bullard said in an interview with the Financial Times.
Bullard dismissed concerns that the labour market recovery was faltering even as the U.S. economy created the fewest jobs in seven months in August after hiring in the leisure and hospitality sector stalled amid a resurgence in COVID-19 infections.
· China’s central bank keeps the brakes on economic stimulus
China’s central bank policymakers pushed back Tuesday on expectations they would take aggressive measures to boost economic growth.
“China’s monetary policy remains within a normal range,” said Pan Gongsheng, a vice governor at the People’s Bank of China and head of the State Administration of Foreign Exchange.
He added that China would not embark on large-scale, flood-like stimulus. That’s according to a CNBC translation of his Chinese remarks released on the central bank’s website.
· Expectations for near-term easing cool after China central bank comments
Expectations for near-term easing cooled and the yuan strengthened Wednesday after comments by central bank officials the day before that China will maintain prudent monetary policy and that there is no shortfall in base money.
China will not resort to flood-like stimulus, Pan Gongsheng, vice governor at the People’s Bank of China (PBOC) told a news conference on Tuesday.
· China’s Xi Jinping to attend virtual BRICS summit chaired by India
Chinese President Xi Jinping will virtually meet his counterparts from Brazil, Russia, India and South Africa during the 13th BRICS Summit on Sept. 9, the country’s foreign ministry said Wednesday.
· Australia will not see a V-shaped economic recovery after current lockdown: HSBC
Paul Bloxham from HSBC explains why he is more ‘downbeat’ about Australia’s economic recovery than the RBA is forecasting.
· WHO says Covid will mutate like the flu and is likely here to stay
Covid-19 is likely “here to stay with us” as the virus continues to mutate in unvaccinated countries across the world and previous hopes of eradicating it diminish, global health officials said Tuesday.
· Fighting continues in Afghanistan’s Panjshir Valley as anti-Taliban resistance vows to hold out
Reference: CNBC, Reuters, Financial Times, FXStreet
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