Gold falls as stronger U.S. bond yields, dollar weigh
· Gold dipped on Monday, extending its steep sell-off from the previous session, as U.S. bond yields and the dollar strengthened.
· Spot gold fell 0.2% to $1,764.22 per ounce by 0701 GMT, after Friday’s 1.6% slide. U.S. gold futures declined 0.2% to $1,764.70.
· Denting gold’s appeal by raising the non-yielding asset’s opportunity cost, benchmark U.S. 10-year Treasury yields moved up and were close to last week’s multi-month highs.
· Treasury yields rose sharply on Friday after an unexpected rise in September’s U.S. retail sales brought forward expectations for an interest rate hike by the Federal Reserve.
· “Price pressures around the world only heighten the conditions for central banks to tighten their monetary policies – that’s not good for gold and it should trend lower over time,” said Kyle Rodda, an analyst at IG markets.
· The dollar also strengthened, making gold more expensive for buyers in other currencies.
· Investors also took stock of data showing China’s economy grew slower than expected in the third quarter with power outages and supply bottlenecks hurting factories.
· “The concern is that these supply bottlenecks are bad for growth and also put upward pressure on inflation, but markets are signaling that central banks will prioritize inflation risks and tighten policy even if that leads to slightly weaker growth,” Rodda said.
· Gold is often considered an inflation hedge, though reduced stimulus and interest rate hikes push government bond yields up, raising the opportunity cost of holding non-yielding bullion.
· “The lack of staying power from gold longs suggests that it will struggle to maintain any upward momentum, even if gold reaches $1,800,” said Jeffrey Halley, senior market analyst for Asia-Pacific at OANDA.
· Halley also noted that it could take economic growth falling into negative territory to spark renewed safe-haven interest in gold.
· Gold Price Forecast: XAU/USD eases below $1,770 amid higher US T-bond yields
After testing the $1,800 mark in a month on Thursday, the gold prices turned lower. Gold is posting a fall for the second straight day as a fresh trading week begins. The US benchmark 10-year Treasury yields rise above 1.60%, reducing non-yielding bullion’s opportunity cost.
The US Dollar Index, which tracks the performance of the greenback against the basket of six major currencies trades higher above 94.10 with 0.19% gains, making gold expansive for other currencies holders.
The US Retail Sales, which jumped 0.7% in September, beating the market estimates of a 0.2% decline, bolstered expectations for sooner-than-expected interest rate hikes from the US Federal Reserve.
In addition to that, the Bank of England (BOE) Governor Andrew Bailey also hinted that the British central bank is gearing up to raise interest rates in December or early 2022 as inflation risk mounts.
The Asian stock market and US futures dropped amid surging energy prices boosting worries about inflation and also as the Chinese growth faltered.
China’s economy stumbled in the third quarter, hurt by power shortages, supply chain bottlenecks, and major disruptions in the property market. The Gross Domestic Product (GDP) expanded 4.9% in July-September, much below the market forecast.
Technical Outlook: XAG/USD daily chart
The Moving Average Convergence Divergence (MACD) holds below the midline with a bearish crossover. Any downtick in the MACD indicator would amplify the selling pressure and the prices would approach Tuesday’s low of $1,750.81. A daily close below the mentioned level would entice bears to retest the $1,740 horizontal support level. XAU/USD bears could meet the September, 29 low at $1,721.
Alternatively, if the prices sustain above the intraday high, it could retrace to the $1,780 horizontal resistance level, above the 50-day SMA at $1,777.66. Next, the XAU/USD bulls would again test the 100-day SMA at $1,782.21. A daily close above the mentioned level would see the $1,820 horizontal resistance level for the bulls.
· Gold Price Forecast: XAU/USD clings to gains near $1,770 area, upside seems limited
Gold price is looking to extend Friday’s decline towards the horizontal 21-DMA support at $1761. A sustained break below the latter could bring the last week’s demand area at $1750-$1745 back into play. Further south, the multi-week lows of $1722 could be on the sellers’ radars.
The 14-day Relative Strength Index (RSI) is trading flat just beneath the midline, suggesting that more downside could open up going forward. Adding credence to a potential move lower, the 100-DMA is on the verge of cutting the 200-DMA from above to confirm a bear cross.
On the flip side, gold bulls will need to recapture the 50-DMA at $1778 to revive the bullish interests. The next relevant target awaits at $1795, the confluence of the 100 and 200-DMAs. Buyers will then aim for the $1800 round number.
· Spot silver fell 0.1% to $23.26 per ounce, while platinum eased 0.7% to $1,047.58 and palladium dropped 0.2% to $2,068.36.
· Progressives in U.S. Congress open to cutting cost, not scope, of Biden bill
U.S. Congress progressives on Tuesday signaled a new willingness to shrink the cost, but not the scope, of President Joe Biden's multi-trillion-dollar plan to broaden social programs and tackle climate change, as they struggle to reach a deal with party moderates.
Centrist Democrats have balked at the plan's initial $3.5 trillion price tag. As a result, Biden faces a difficult balancing act in trying to bring down the cost but not alienate progressives who also are essential to passage.
Following a meeting earlier this month on Capitol Hill with his fellow Democrats, Biden suggested the bill could cost around $2 trillion over 10 years.
· China GDP disappoints, third-quarter growth slows to 4.9%
China’s third-quarter GDP grew a disappointing 4.9% as industrial activity rose less than expected in September.
The National Bureau of Statistics said Monday that gross domestic product grew 4.9% in the third quarter from a year ago. That missed expectations for a 5.2% expansion, according to analysts polled by Reuters.
Industrial production rose by 3.1% in September, below the 4.5% expected by Reuters.
However, retail sales beat expectations, rising 4.4% in September from a year ago. The Reuters poll predicted 3.3% growth.
Fixed asset investment for the first three quarters of the year came in weaker than expected, up 7.3% from a year ago versus the expected 7.9% figure.
· China Q3 GDP growth hits 1-year low, raising heat on policymakers
· China's GDP growth hits 1-year low as power crunch, bottlenecks choke output
· China's new construction starts plunge as chill spreads across sector
China's September new construction starts slumped for a sixth straight month, the longest spate of monthly declines since 2015, as cash-strapped developers reined in investment and put a pause on projects following tighter regulations on borrowing.
New construction starts in September fell 13.54% from a year earlier, according to Reuters calculations based on January-September data released by the National Bureau of Statistics on Monday.
· China Sept daily steel output lowest since Dec 2018 on power curbs*
The world’s top steel producer churned out 73.75 million tonnes of the metal last month, compared with August output of 83.24 million tonnes data from the National Bureau of Statistics showed on Monday. That is down 21.2% from same month a year earlier.
· China's Sept coal output dips on tighter safety inspections
China’s September coal output fell from a month ago, as tightened safety inspections curbed production at some major mining regions.
China, the world’s biggest coal producer and consumer, produced 334.1 million tonnes of the dirty fuel last month, down from 335.24 million tonnes in August, the National Bureau of Statistics data showed on Monday
September coal output was also 0.9% lower than the same period last year.
· U.S. Secretary of State Blinken discusses Afghanistan with Qatar
· Myanmar opposition welcomes ASEAN's junta snub, wants summit invite
· New Zealand PM Ardern extends COVID-19 lockdown in Auckland
Reference: Reuters, CNBC, FXStreet
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