Gold hits 2-week low as firm dollar, Fed taper timeline loom
Gold prices were near their lowest level in two weeks on Monday, constrained by a stronger dollar and expectations the U.S. Federal Reserve would accelerate the pace of stimulus tapering to curb broadening inflationary risks.
Spot gold was down 0.2% at $1,841.36 per ounce, as of 0650 GMT. U.S. gold futures eased 0.3% to $1,845.20.
The metal hit its lowest level since Nov. 10 earlier in the session, after comments from Fed Vice-Chair Richard Clarida suggested the central bank would table the idea of tapering its asset purchases in its upcoming December meeting.
"In the short- to medium-term, gold's fundamentals look good because real (inflation-adjusted) yields are so negative, but eventually we'll get tighter monetary policy and gold will trend lower in the bigger picture," IG Markets analyst Kyle Rodda said.
"There's also a growing sense that the United States and China are going to intervene to bring oil prices lower, one of the biggest drivers of inflation expectations, and this has weighed on gold's momentum around its role as an inflation hedge."
Further pressuring bullion was a stronger dollar index , which made bullion more expensive for holders of other currencies.
But "with inflationary pressures reflecting only in short-dated (U.S. bond) rates, only more officials jumping on to a faster-taper narrative, or a sudden move higher in longer-term U.S. yields is likely to derail gold's rally," Jeffrey Halley, senior market analyst at OANDA, said in a note.
Halley said a move towards $2,000 in gold before the December Fed meeting can't be ruled out.
Also on investors' radar was U.S. President Joe Biden's appointment of a new Fed Chair and the return of COVID-19 restrictions in parts of Europe.
Spot silver rose 0.5% to $24.70 per ounce. Platinum was flat at $1,030.98 7 and palladium fell 0.9% to $2,042.95.
· Gold Price Forecast: XAU/USD off weekly lows, recaptures $1,840 amid risk-aversion
Gold is trading above $1,840, attempting a recovery from an eight-day low of $1,839 amid the covid resurgence-led risk-off mood. Concerns over the renewed lockdown in Europe due to another wave of coronavirus rearing its ugly head, as the winter sets in, dents the investors’ sentiment. However, the further upside appears limited due to a broadly stronger US dollar alongside the Treasury yields. Despite the rebound, gold price remains on in the red zone for the third straight session, having faced rejection at the critical $1,870 level in the previous week. The focus this week remains on the Fed minutes to gauge the timing of a potential rate hike, which could likely have a significant impact on the non-interest-bearing gold.
The price of gold is lower despite the risk-off mood. XAU/USD ended on Friday down some 0.70% falling from a high of $1,865.83 to a low of $1,843.09. The greenback was favoured instead after Austria said it would be the first country in Western Europe to reimpose a full lockdown while Germany said it could follow suit, sending the euro lower and lifting the US dollar.
Meanwhile, the CTA buying program in gold has run out of steam, leaving the yellow metal vulnerable to a deeper consolidation if prices fail to hold above the $1,840/oz region, analysts at TD Securities argued.
''After all, while the yellow metal remains an ideal hedge against rising stagflationary winds, the tug-of-war between high inflation prints and market pricing for central bank hikes hasn't definitively concluded.' TD Securities forecast slowing growth and inflation next year, noting that the market's pricing for Fed hikes remains far too hawkish.
· Gold Heads For A Test Of $1900
For the first time in a while, a threat of COVID restrictions becomes an overriding market theme again. Austria announced a new lockdown, Germany could follow suit. The Swiss franc, dollar, yen led the growth in FX on Friday. At the same time, the yen, traditional safe-haven asset, rallied against USD which added to the case that risk-off was becoming the key driver of market moves again.
Given that European countries have not been able to dodge the new wave of COVID despite the high rates of vaccination, the main risk for this situation is an increase in COVID hospitalization rates in the United States. If the country is swept by a new coronavirus wave, a full-fledged risk-off will most likely begin in the markets and it will be possible to forget about policy tightening from major central banks next year.
· Xi tells Southeast Asian leaders China does not seek 'hegemony'
Chinese President Xi Jinping told leaders of the 10-country Association of Southeast Asian Nations (ASEAN) at a summit on Monday that Beijing would not "bully" its smaller regional neighbours, amid rising tension over the South China Sea.
· China's land sales slump for 4th month as property woes worsen
· Australia to reopen to foreign visa holders in bid to revive economy
Australia will allow foreign visa holders to enter the country from the start of December, Prime Minister Scott Morrison said on Monday, the latest step to restart international travel and support its economy.
· New Zealand to end tough COVID curbs, adopt new virus-fighting system next week
New Zealand will adopt a new system of living with the virus from Dec. 3, which will end tough coronavirus measures and allow businesses to operate in its biggest city, Prime Minister Jacinda Ardern said in a statement on Monday.
· Steel prices could trend ‘much higher’ compared to the last 10 years, major Indian steelmaker says
· Singapore health minister says return to strict COVID-19 curbs a last resort
A return to stricter COVID-19 curbs in Singapore will be a "last resort", Health Minister Ong Ye Kung said on Monday, as the city-state partially eased limits on social gatherings and dining out under its calibrated reopening approach.
· Japan working on release of oil reserves after U.S. request - sources
Japanese officials are working on ways to get around restrictions on releasing national reserves of crude oil in tandem with other major economies to dampen prices, four government sources with knowledge of the plans told Reuters.
· Russian gas flows to Germany via Yamal pipeline are steady
· Thai Q3 unemployment at 16-yr high as virus curbs squeeze economy
Thailand's unemployment rate hit a more than 16-year high in the third quarter, as tougher coronavirus restrictions hit economic activity and jobs, the state planning agency said on Monday.
The curbs were eased from September, however, and the Southeast Asian country earlier this month reopened to vaccinated foreign visitors without quarantine requirements, in a bid to restart its important tourism sector.
The unemployment rate jumped to 2.25% in the September quarter, representing 870,000 workers without jobs, from 1.89% in the previous three months, the agency said in a statement.
The jobless rate was 2.52% in the first quarter of 2005.
Reference: Investing, Reuters, CNBC, FXStreet
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