Gold prices rose on Monday as the dollar eased and equities pared gains, with the focus now on the U.S. Federal Reserve timetable for a rollback in stimulus measures at a key meeting this week.
· Spot gold was up 0.6% at $1,793.48 per ounce at 01:42 p.m. EDT (1742 GMT).
· U.S. gold futures for December delivery settled up 0.7% to $1,795.80.
· “It is mostly a dollar move,” said Edward Moya, senior market analyst at brokerage OANDA.
“You’re going to see limited positioning leading up to the Fed, but right now some bullish signals will merge for gold and that’s ultimately going to help gold in the long term.”
· U.S. equities, whose strong performance Moya said has dampened demand for safe-haven gold, pared some gains on Monday.
· The dollar index dipped slightly against its rivals, making gold more appealing to holders of other currencies.
· The U.S. Federal Reserve, which concludes a two-day meeting on Wednesday, is expected to say it will start to roll back bond purchases, a sign that it sees the U.S. economy recovering, though the focus is on clues about rates lift-off.
· “We need some fresh air coming into markets and this week’s Fed meeting could be such an event... until then the market will be drifting,” said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
· Reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding non-interest bearing gold.
· The retail physical market is strengthening considerably in places like India and China, and although rare, that demand could be supporting gold prices as well, StoneX analyst Rhona O’Connell said.
· SPDR GOLD HOLDINGS:
Sell continue 2.62 Tonnes on the first date of November
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 2.62 Tonnes to 979.52 tons on Thursday.
Overall, this year net sell 191.22 tonnes.
· Elsewhere, silver rose 0.7% to $24.01 per ounce.
· Platinum jumped 4.4% to $1,062.56 per ounce and palladium also climbed 2.6% to $2,054.69, having risen over 3% earlier.
· Worsening shortages, high prices restrain U.S. manufacturing activity
U.S. manufacturing activity slowed in October, with all industries reporting record-long lead times for raw materials, indicating that stretched supply chains continued to constrain economic activity early in the fourth quarter.
The Institute for Supply Management (ISM) survey on Monday also hinted at some moderation in demand amid surging prices, with a measure of new orders dropping to a 16-month low. Still, demand remains strong as retail inventories continue to be depressed, which should keep manufacturing humming.
The ISM's index of national factory activity slipped to a reading of 60.8 last month from 61.1 in September. A reading above 50 indicates expansion in manufacturing, which accounts for 12% of the U.S. economy. Economists polled by Reuters had forecast the index would fall to 60.5.
The ISM reported 26 commodities were in short supply in October, some for as long as 13 straight months. That compared to 24 in September.
· Construction spending unexpectedly falls in September
U.S. construction spending unexpectedly fell in September amid declines in outlays on both private and public projects.
The Commerce Department said on Monday that construction spending dropped 0.5% after edging up 0.1% in August. Economists polled by Reuters had forecast construction spending gaining 0.4%.
Construction spending increased 7.8% on a year-on-year basis in September. The government reported last week that gross domestic product increased at a 2.0% annualized rate, stepping down from the April-June's robust 6.7% pace.
Spending on private construction projects decreased 0.5% in September after falling 0.3% in August. Outlays on residential construction dropped 0.4% after nudging up 0.1% in August. Single-family homebuilding spending declined 0.6% and outlays on multi-family housing projects slipped 0.3%.
· Dollar ticks lower with Fed policy decision in focus
Monetary policy in the United States, Australia and Britain is in focus, with the Fed widely expected to announce a tapering of stimulus, a factor that has fueled the greenback's rise in recent weeks.
The dollar index , which measures the U.S. currency against six rivals, was down 0.321% at 93.894.
Money markets assign a 50% probability of a 25 basis point rate hike by the Fed by next June, compared with 15% a month earlier, CME futures data shows.
The euro ticked 0.037% higher to $1.16045, after having given up most of its European Central Bank policy gains on Friday when it touched $1.1535, its weakest since Oct. 13.
Hedge fund manager Stephen Jen of Eurizon SLJ Capital in a note to clients said FX markets seem too hawkish on the ECB and too dovish on the Fed.
The British pound fell to its lowest in more than two weeks versus the dollar, pressured by uncertainty over the Bank of England's policy stance and an escalating post-Brexit spat with France over fishing rights.
Most expect the Bank of England will raise rates by 15 basis points to 0.25% on Thursday, although a split vote is likely and some think the bank may hold fire, contenting itself with a hawkish signal.
· Yellen says U.S economy is not overheating
U.S. Treasury Secretary Janet Yellen on Monday said she does not think the U.S. economy is overheating and that while inflation is higher than in recent years, it is related to disruption from the COVID-19 pandemic.
· Yellen says she has discussed Fed chair with Biden, praises Powell for doing a ‘good job’
· Schumer says talks on Biden agenda still making 'good progress'
U.S. Senate Majority Leader Chuck Schumer said on Monday that talks on President Joe Biden’s social policy and climate change legislation continue to make “good progress,” despite concerns aired earlier in the day by a key Democratic lawmaker.
· Biden tells leaders U.S. will meet climate goals, while his agenda falters at home
President Joe Biden on Monday sought to assure world leaders the United States would fulfill its promise to slash greenhouse gas emissions in half by the end of the decade, but a setback at home heightened uncertainty about his ability to follow through.
Biden joined leaders from over 100 countries in Glasgow for the start of the COP26 climate conference, which kicked off on the heels of the G20 summit in Rome that concluded with a statement that urged "meaningful and effective" action on climate change but left huge work for negotiators to ensure an ambitious outcome.
· U.S. Treasury increases Q4 borrowing estimate
The U.S. Treasury said on Monday it plans to borrow $1.015 trillion in the fourth quarter, more than the August estimate of $703 billion, due to having a lower balance at the beginning of the quarter.
This is somewhat offset by a lower end-of-quarter balance and higher receipts, the Treasury said in a statement. The fourth-quarter estimate assumes an end-Dec. cash balance of $650 billion.
· Novavax COVID-19 vaccine gets first authorization; expects more within weeks, CEO says
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