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PRECIOUS-Gold climbs on weaker dollar, lingering Evergrande risks

·         Spot gold was 0.4% higher at $1,750 per ounce by 1:50 pm EDT (1750 GMT) but still on course for a third consecutive week of falls.

·         U.S. gold futures settled up 0.1% to $1,751.7.

·         Gold prices rose on Friday due to a subdued dollar and as investors avoided riskier assets because of China’s Evergrande saga, but looming interest rate hikes slowed bullion’s advance.

·         SPDR GOLD HOLDINGS:

BUY 0.87 Tonnes on Friday!

·         Although gold recovered some ground after Thursday’s 1% fall, OANDA analyst Craig Erlam expected gold to weaken again.

 

“We’ll see a continuation of the downward trend driven by the Fed’s stance, especially as some of the fears surrounding Evergrande have subsided,” he said.

·         Gold slid to a one-month low on Thursday on expectations the U.S. Federal Reserve could hike rates. But a weakening dollar index on Friday offered support, making bullion cheaper for holders of other currencies.

·         “The Fed has announced that tapering is ahead, the next step is when it’s implemented, that will push real rates even further up, and that should be negative for the gold,” said UBS analyst Giovanni Staunovo, adding it would cause day-to-day volatility.

·         Cleveland Fed President Loretta Mester said on Friday the central bank should start reducing its support for the economy in November and could start raising interest rates by the end of next year should labour markets continue to improve.

·         A Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

·         Elsewhere, palladium fell 0.9% to $1,965.54 per ounce, and was on track for a third straight weekly decline.

·         Platinum slipped 1.2% to $976.85 per ounce, although the metal was set to rise on the week after two weekly falls.

·         Silver fell 0.6% to $22.35.

 

·         New Homes Sales Rise in August, Prices Continue to Climb

Sales of new homes last month rose 1.5%, the Commerce Department reported Friday, reaching a seasonally adjusted annual rate of 740,000.

·         FOMC Chairman Jerome Powell speaks at Fed Listens – live stream

 

·         Powell Says Fed Taper Could Start ‘Soon’ and End Around Mid-2022

Federal Reserve Chair Jerome Powell said the U.S. central bank could begin scaling back asset purchases in November and complete the process by mid-2022, after officials revealed a growing inclination to raise interest rates next year.

Powell, explaining the U.S. central bank’s first steps toward withdrawing emergency pandemic support for the economy, told reporters Wednesday that tapering “could come as soon as the next meeting.”

That refers to the policy gathering on Nov. 2-3, though he left the door open to waiting longer if needed and stressed that tapering was not meant to start a countdown to liftoff from zero interest rates.

Powell said he didn’t expect the Fed to begin rate increases until after completing the taper process, which would wrap up “sometime around the middle of next year.”

The Fed took 10 months to complete the exercise of scaling back bond buying back in 2014.

·         Fed's Powell opens door to tougher regulations as renomination decision looms

 

·         Fed officials, readying for taper, hear from small businesses and community groups

Days after reaching broad consensus that labor markets have healed enough for the Federal Reserve to soon begin withdrawing support, Fed Chair Jerome Powell on Friday heard from a broad range of economic players about the challenges holding them back during the recovery.

 

·         Two Fed policymakers say bar for taper met, nod to next debates

In separate appearances, Cleveland Federal Reserve Bank President Loretta Mester and Kansas City Fed President Esther George both said that the economy had made “substantial further progress” toward the Fed’s maximum employment and 2% inflation goal. That’s the bar the Fed has set for beginning to taper its current $120 billion in monthly asset purchases, aimed at pushing down longer-term interest rates.

The remarks came days after Fed Chair Powell said the economy is one “decent” monthly jobs report short of meeting that threshold, allowing the Fed to begin to reduce its monthly asset purchases by the Fed’s next meeting Nov. 2-3.

“I support starting to dial back our purchases in November and concluding them over the first half of next year,” Mester said during an event organized by the Ohio Bankers League.

“The rationale for continuing to add to our asset holdings each month has waned,” George told the American Enterprise Institute.

Both events were conducted online, underscoring the continued scourge of the coronavirus pandemic that plunged the economy into its sharpest and shortest recession last year and is still keeping labor and materials short of what’s needed to sate the rising demand for both as the economy recovers.

That’s led to inflation above the Fed’s 2% goal that policymakers like Mester and George worry could become persistent.

 

·         Pelosi says U.S. infrastructure bill will pass, eyes smaller social spending bill

U.S. House of Representatives Speaker Nancy Pelosi expressed confidence on Sunday that the $1 trillion infrastructure bill will pass this week but sounded more doubtful about bringing it to the House floor on Monday as she previously pledged to do.

 

·         Evergrande misses payment deadline, EV unit warns of cash crunch

China Evergrande's electric car unit warned on Friday it faced an uncertain future unless it got a swift injection of cash, the clearest sign yet that the property developer's liquidity crisis is worsening in other parts of its business.

Evergrande (3333.HK) owes $305 billion, has run short of cash and investors are worried a collapse could pose systemic risks to China's financial system and reverberate around the world.

The company missed a payment deadline on a dollar bond this week and its silence on the matter has left global investors wondering if they will have to swallow large losses when a 30-day grace period ends.

 

·         Elon Musk praises China, says Tesla will continue to expand investments there

 

·         China’s Xi warns of ‘grim’ Taiwan situation in letter to opposition

The situation in the Taiwan Strait is “complex and grim”, Chinese President Xi Jinping wrote in a congratulatory letter on Sunday to the newly elected leader of Taiwan’s main opposition party, who has pledged to renew talks with Beijing.

Taiwan’s Kuomintang (KMT) elected as their leader on Saturday former New Taipei City mayor Eric Chu, who said he would rekindle stalled high-level contacts with China’s ruling Communist Party.

 

·         Germany’s Social Democrats hold narrow lead in the race to succeed Angela Merkel

Germany looks set for a three-way coalition in Berlin after one of the country’s most significant federal elections in recent years.

 

·         Iran fails to fully honour agreement on monitoring equipment, IAEA says

The U.N. nuclear watchdog said on Sunday Iran had failed to fully honour the terms of a deal struck two weeks ago to allow the watchdog's inspectors to service monitoring equipment in the country.

 

  

·         COVID-19 UPDATES:

 

·         Pfizer CEO Albert Bourla predicts normal life will return within a year and adds we may need annual Covid shots

·         Thailand Lifts Debt-to-GDP Cap to 70% to Aid Economy Rebuild

·         Malaysia, India Top Asian Forecasts for Faster Growth in 2022