Gold prices rose on Tuesday, as rising inflation fears dulled risk appetite and boosted demand for the safe-haven metal, although an advancing U.S. dollar limited bullion’s gains.
· Spot gold rose 0.3% to $1,759.31 per ounce by 13:44 p.m. EDT, while U.S. gold futures settled 0.2% higher at $1,759.3.
· A global energy crunch has threatened economic outlook and fanned inflation fears, driving some investors toward safer assets.
· “We see undertones of support coming from the general idea that inflationary pressures are going to be enough to hold gold up in the midst of an environment where we see the Federal Reserve slowly moving towards reducing asset purchases,” said David Meger, director of metals trading at High Ridge Futures.
But overall, the dollar is pulling at the heels of the gold market and limiting its upside, Meger said.
· If stagflation talks come to the fore increasingly, gold could clock $1,900 by year-end as interest rates should remain relatively low even if the Fed starts tapering, Briesemann said.
· Focus is on minutes from the Fed’s Sept. 21-22 policy meeting and the consumer price index, both due on Wednesday.
· Spot silver fell 0.2% to $22.52 per ounce.
· Platinum was 0.1% higher at $1,009.37.
· Palladium slid 2.5% to $2,058.71.
· Dollar hits one-year high as U.S. yields rise, inflation data on tap
The dollar hit a one-year high on Tuesday on expectations the U.S. Federal Reserve will announce a tapering of its massive bond-buying program next month, and as concerns over soaring energy prices also sent investors to the safe-haven greenback.
Yields on the U.S. two-year Treasury note jumped to their highest in more than 18 months, as investors sold U.S. debt, reckoning that surging energy prices would fuel inflation and add to pressure on the Fed to take action sooner than anticipated.
The dollar index, which measures the greenback against a basket of major currencies, touched 94.563, its highest since late September 2020.
A Deutsche Bank monthly market sentiment survey this month noted that an overwhelming majority of respondents expect U.S. Treasury yields to rise from current levels.
· Yields on the U.S. two-yearTreasury note jumped to their highest level in more than 18 months on Tuesday, on concerns rising inflation may force the U.S. Federal Reserve to take action earlier than currently anticipated with a key report on consumer prices on Wednesday in focus.
The yield on the 2-year was up 3.2 basis points to 0.350% after reaching as high as 0.36%, its highest level since March 25, 2020.
The dollar also strengthened against the euro, with the common currency down 0.23% at $1.1525, its lowest since July 2020 as rising energy prices fed worries inflation may dent economic growth.
· U.S. Treasury yields fall Tuesday ahead of inflation reading
The yield on the benchmark 10-year Treasury note dipped 3.5 basis points to 1.57% at 4:10 p.m. ET. The yield on the 30-year Treasury bond gave up 7.5 basis points at 2.085%. Yields move inversely to prices and 1 basis point is equal to 0.01%.
· House approves debt limit increase that will last through part of December, sends bill to Biden
· House Speaker Nancy Pelosi suggests Democrats could cut major pieces of Biden’s economic plan
· Markets were “mostly in wait-and-see mode” ahead of report releases this week, Bank of America said.
September is slated to be announced Wednesday morning. Economists expect prices for an array of consumer goods to jump 0.3% in September from the month prior and 5.3% year over year, according to Dow Jones.
The Federal Open Market Committee on Wednesday is also set to release its minutes from the September meeting. Investors will be digesting the minutes for any potential clues regarding the central bank’s plans to pull back easy monetary policy.
· Fed policymakers hone in on November taper timeline
Three U.S. Federal Reserve policymakers on Tuesday said the economy has healed enough for the central bank to begin to withdraw its crisis-era support, cementing expectations the Fed will start to taper its monthly bond purchases as soon as next month.
“I myself believe that the ‘substantial further progress’ standard has more than been met with regard to our price-stability mandate and has all but been met with regard to our employment mandate,” Fed Vice Chair Richard Clarida told the Institute of International Finance virtual annual meeting.
He was referring to the Fed’s promise to keep buying $120 billion of Treasuries and mortgage-backed securities each month until the economy had met that standard on both its mandates.
Fed policymakers at their last meeting agreed that tapering “may soon be warranted” and would likely conclude in the middle of next year, he said.
Speaking in separate appearances on Tuesday, both Atlanta Fed President Raphael Bostic and St. Louis Fed President James Bullard said they also endorsed a November start.
“I think that the progress has been made, and the sooner we get moving on that the better,” Bostic said in an interview with the Financial Times.
· Fed’s Bullard says bond purchases should be tapered quickly in case rate hikes are needed
St. Louis Federal Reserve President James Bullard advocated Tuesday for the central bank to be aggressive as it starts winding down its monthly bond-buying program in case inflation becomes a larger problem.
In a CNBC interview, the Fed official said he thinks it’s a 50-50 chance that the current inflation pressures are transitory, so policymakers have to be ready.
· Fed announces Quarles to step away from internal regulatory lead role as vice-chair term expires
The Federal Reserve said on Tuesday that Vice Chair for Supervision Randal Quarles would no longer lead the internal committee overseeing bank rules and supervision, as his term as the central bank’s top regulatory official expires on Wednesday.
· A record 4.3 million workers quit their jobs in August, led by food and retail industries
The number of Americans voluntarily quitting their jobs surged to a record high in August and there were more than 10 million vacancies, pointing to a tightening labor market that could help to keep inflation high as companies raise wages to lure workers.
Job openings, a measure of labor demand, dropped 659,000 to a still-high 10.4 million on the last day of August. Data for July was revised to show 11.1 million unfilled jobs instead of the previously reported 10.9 million.
· UK's Sunak calls on G7 to work together on supply-chain difficulties
Reference: CNBC, Reuters, Worldometers
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