Gold prices fell on Tuesday as the U.S. dollar and equities gained ahead of a much-awaited U.S. Federal Reserve meeting that could provide a timeline on interest rate hikes amid rising inflationary pressures.
· Spot gold was down 0.3% at $1,787.04 per ounce by 01:35 p.m. EDT.
· U.S. gold futures settled down 0.4% to $1,789.40.
· Persistent strength in equities ahead of Fed’s statement on Wednesday continues to weigh on safe-haven metals, said Jim Wyckoff, senior analyst at Kitco Metals.
But recent concerns over inflation have limited the downside for gold and helped buying interest, Wyckoff said.
While gold is used as a hedge against inflation, reduced stimulus and interest rate hikes tend to push government bond yields up, raising the opportunity cost of holding non-yielding bullion.
· The Fed is expected to approve plans to scale back its bond-buying programme on Wednesday, when it concludes a two-day policy meeting.
· “I expect the Fed will announce the start of tapering but I do not see them giving a specific timing around a rate hike,” said Carsten Fritsch, a commodities analyst at Commerzbank.
“That may lead to some disappointment because market participants are expecting something more specific that could push gold towards $1,800 per ounce or even beyond that.”
· Markets will also be watching the Bank of England policy meeting on Thursday.
· “The week ahead could be volatile for gold prices ... the yellow metal is likely to be influenced by the dollar’s movements, Treasury yields, inflation expectations and global risk sentiment,” Lukman Otunuga, a senior research analyst at FXTM, said in a note.
· Silver fell 2.3% to a two-week low of $23.46 per ounce.
· Platinum slipped 2.4% to $1,038.82 per ounce, while palladium declined 1.8% to $2,011.69.
· Global equities rally to reach new record, dollar rises ahead of big Fed meeting
World shares reached new records on Tuesday, lifted by rising U.S. and European stocks, while the latest batch of earnings reports bolstered the dollar as investors await the Federal Reserve’s plans to taper its massive stimulus.
· Wall Street banks step up preparations for Fed tapering volatility
Wall Street banks are intensifying preparations for the Federal Reserve’s withdrawal of pandemic stimulus to ensure they are able to handle spikes in market volatility, help clients manage their risks -- and score a profit.
The expected increase in volatility presents an opportunity for trading desks to profit by helping clients buy and sell securities, provided the spread between bids and offers doesn’t become so stretched that it is impossible to make a market - a scenario bankers say is unlikely because the Fed has given plenty of warning of its intentions.
· Dollar firms as Fed policy meeting gets underway
The dollar firmed slightly on Tuesday as the U.S. Federal Reserve kicked off its two-day policy meeting where it was expected to announce it will begin tapering its massive asset purchases put in place at the start of the COVID-19 pandemic.
The dollar index, which measures the greenback against a basket of peer currencies, was up 0.19% at 94.106.
The euro edged 0.25% lower to $1.15775.
Sterling was on the back foot, slipping 0.32% to $1.36175, ahead of Thursday’s Bank of England meeting, where the market is pricing in an interest rate hike.
Investors in recent weeks have priced in a wave of tightening from central banks as they bet policymakers are sufficiently concerned about rising inflation to end pandemic-era levels of easing.
The Reserve Bank of Australia (RBA) on Tuesday sounded a more dovish tone than investors had anticipated, in the first of several central bank meetings this week, sending the Aussie to it’s biggest one-day loss since Sept. 29.
The Fed will announce its policy decision on Wednesday, and the Bank of England will do so on Thursday.
· TREASURIES-Yields tumble, curve steepens with focus on Fed
The benchmark 10-year yield was last down 2.6 basis points at 1.547%. The two-year yield, which hit a 19-month peak last week, had its biggest move downward since February, falling as low as 0.444%. It was last down 5.9 basis points at 0.4559%.
· Analysis: With Fed taper expected, investors brace for rate hikes on horizon
As the U.S. Federal Reserve gears up to taper its huge asset purchases, investors reeling from gyrations in the bond market are scanning the road ahead for signs of how effectively the central bank can tighten policy to deal with stubbornly high inflation.
· Biden says he will make Fed nomination announcements 'fairly quickly'
Biden told reporters that he has been thinking about personnel decisions, including whether to re-nominate Fed Chair Jerome Powell, and that he expected there would be “plenty of time” for his central bank nominees to be cleared by the Senate before current terms expire.
· Democrats reach a breakthrough deal on drug prices, as spending bill nears the finish line
· Build Back Better bill shows new progress in U.S. House; sticking points remain
One day after Senator Joe Manchin appeared to stymie efforts to advance a bill that is a centerpiece of President Joe Biden’s legislative agenda, the measure showed new promise for moving to the full House of Representatives for a vote on passage.
Democrats on Tuesday sought to conclude negotiations surrounding Biden’s Build Back Better plan, a $1.75 trillion framework on social spending and climate change that he unveiled last week. On Monday, influential Democrat Manchin refused to commit to support the legislation, rebuffing a previous demand by progressives.
Yet in the House, the bill showed signs of moving forward following a series of stops and starts in closed-door negotiations.
· India and China’s border dispute will not end anytime soon, former ambassador says
· China’s coal shortage eases after Beijing steps in, report says
· Oil mixed in choppy trade before U.S. inventories, OPEC+ meeting
Oil traded below $85 a barrel on Tuesday, but remained close to a three-year high in choppy trade ahead of weekly U.S. supply reports expected to show a rise in crude inventories as traders also looked toward Thursday’s OPEC+ meeting.
Analysts in a Reuters poll expected weekly U.S. crude inventory data to show a rise of 1.6 million barrels [EIA/S]. Industry group the American Petroleum Institute releases the first of this week’s two supply reports at 2030 GMT.
U.S. West Texas Intermediate (WTI) crude settled down 14 cents, or 0.2%, to $83.91. Earlier it had dropped more than $1 a barrel. Brent crude settled up 1 cent at $84.72 a barrel, having traded negative for much of the session.
· CDC gives final OK for immediate distribution of Pfizer Covid vaccine for kids ages 5 to 11
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