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Gold slides over 2% as dollar firms after Powell’s renomination

Gold prices fell more than 2% on Monday as the dollar jumped after Federal Reserve Chair Jerome Powell was nominated for a second term, driving expectations that the central bank may stay the course on tapering economic support.

·         Spot gold slipped 2.1% to $1,805.30 per ounce, its lowest since Nov. 5.

·         U.S. gold futures settled 2.4% lower at $1,806.30.

·         “Gold sold off on notions that maybe the Fed would keep on its present monetary policy path as opposed to a Lael Brainard nomination,” which would have been perceived as paving the way for more dovish policy, said Jim Wyckoff, senior analyst at Kitco Metals.

“But it’s just a knee-jerk reaction by the gold market,” Wyckoff said, with the dollar rallying to its highest since July last year. The news also led to a jump in U.S. Treasury yields.

·         A stronger dollar makes bullion expensive for overseas buyers, while higher interest rates translate into increased opportunity cost of holding non-yielding gold. Money markets now expect the Fed to raise interest rates by 25 basis points by next June versus July previously.

·         “The move higher with real yields has accelerated some of gold’s weakness, but it is way too early for investors thinking this is the beginning of a sustained trend,” said Edward Moya, senior market analyst at brokerage OANDA.

Gold has support around the $1,800 level and with a shortened trading week, it could consolidate between $1,800-$1,850 leading up to the Dec. 15 FOMC policy meeting, Moya said.

·         Fed policymakers are debating whether to withdraw support more quickly to deal with inflation, after one of its most influential officials signalled that the idea will be on the table at the December meeting.

·         Silver eased 1.3% to $24.26 per ounce, platinum fell 1.7% to $1,013.45, while palladium dipped 5.4% to $1,950.31.

·        U.S. home sales climb to nine-month high; housing shortage persists

Existing home sales rose 0.8% to a seasonally adjusted annual rate of 6.34 million units last month. The second straight monthly increase lifted sales to their highest level since January. Economists polled by Reuters had forecast sales falling to a rate of 6.20 million units.

 

·         Biden picks Jerome Powell to lead the Fed for a second term as the U.S. battles Covid and inflation

 

·         Treasury yields rise after Biden picks Powell over Brainard for top Fed post

 

·         White House says Biden intends to run again in 2024

 

·         Xi says China will not seek dominance over Southeast Asia

 

·         U.S. House Democrats urge Biden to release oil reserves, reinstate export ban

Democrats in the U.S. House of Representatives are urging President Joe Biden to release crude oil from the U.S. Strategic Petroleum Reserve (SPR) and reinstate a ban on oil exports to help drive down surging energy prices.

 

·         COVID-19 UPDATES:

 

·         Pfizer's COVID-19 vaccine trial data shows long-term efficacy in adolescents

·         Germany’s Merkel urges tougher measures to battle 4th wave of Covid

Reference: CNBC, Reuters, Worldometers