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Gold drops to near 3-week low as yields firm on rate hike bets

 

Gold prices fell around 1% to a near three-week low on Tuesday as the renomination of U.S. Federal Reserve Chair Jerome Powell fuelled bets of faster interest rate hikes, bolstering the dollar and Treasury yields.

·         Spot gold fell 0.9% to $1,788.51 per ounce by 02:13 p.m. ET (1913 GMT).

·         U.S. gold futures settled down 1.3% at $1,783.8.

·         Caught in gold's slide, spot silver fell 2.8% to $23.49 per ounce, platinum tumbled 4.7% to $964.42 and palladium dropped 4.5% to $1,865.68.

·         Making gold expensive for holders of other currencies, the dollar index steadied, while U.S. Treasury yields firmed.

·         "Gold has been in a panic selloff over the last 48 hours and I would blame most of it on rising 10-year Treasury yields. As the yield curve gets steeper, gold futures do not respond kindly," said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

·         Investors are betting Powell will step up the pace at which the central bank is normalizing monetary policy to better grapple with surging consumer prices.

 

·         SPDR GOLD HOLDINGS:

Buy more 6.11 Tonnes at 991.11 Tonnes

 

Overall, the holdings of SPDR increased 8.97 tonnes in this month, but this year net sell 179.63 tonne

·             Powell and Treasury Secretary Janet Yellen are set to appear before the Senate Banking Committee next week.

·             Gold prices have fallen nearly $100 since scaling a five-month peak of $1,876.90 per ounce last week.

·             However, Ross Norman, an independent analyst, said it is "too early to write off gold".

"Inflation still has legs to run, and there are COVID-19 restrictions in Europe once again. But the onus is on the bulls to prove their case and garner support, failing which the metal could drift lower again," Norman added. read more

·        Gold is seen as a hedge against inflation, but rising Treasury yields have challenged that status as they translate into a higher opportunity cost of holding bullion.

 

·         Bond investors ramp up US inflation, rate-hike expectations - Russell Investments

 

·         Analysis: Investors bet Powell's Fed will get more aggressive on inflation

For months, Powell has insisted the current bout of inflation is likely to be transitory, and said the central bank will be "patient" in deciding when to begin raising its benchmark rate from near-zero. The Fed kicked off the taper of its $120 billion per month bond buying program in November, with a plan to end purchases altogether in mid-2022.

Some investors, however, believe the Fed will need to taper faster and raise rates sooner than expected to tame rising consumer prices, which grew at the quickest pace in more than three decades in October. Their view has been reinforced by recent public debate among some Fed officials on whether to withdraw support for the economy more quickly to help tame inflation.

One barometer of investors’ monetary policy expectations, futures on the federal funds rate, on Monday afternoon had priced in a 100% chance that the central bank will raise rates by July, from 92% last week.

 

·         Citizens Financial CEO says Fed’s Powell has been a ‘good consensus builder’

Bruce Van Saun, Citizens Financial Group chairman and CEO, joins ‘Closing Bell’ to discuss his reaction to Fed chairman Jerome Powell’s renomination. He also talks about the financial sector and banks on mergers and acquisitions.

  

·         Biden says U.S. gasoline prices will drop after release of strategic reserves

 

·         Euro zone November growth surprisingly strong but outlook darkens -PMI

IHS Markit's Flash Composite Purchasing Managers' Index, a good indicator of overall economic health, jumped to 55.8 in November from 54.2 in October.

That exceeded all forecasts in a Reuters poll which had predicted a drop to 53.2. Anything above 50 indicates growth.

 

·             Singapore’s economy grew 7.1% in the third quarter from a year ago — better than estimate

 

·             U.S. banking regulators to clarify banks' crypto role in 2022 - statement

U.S. banking regulators intend to clarify in 2022 what role traditional banks can legally play in the cryptocurrency market, they said on Tuesday.

In a statement, regulators said they plan to make clear what sort of activities banks can engage in involving cryptocurrency, including holding it on their balance sheets, issuing stablecoins and holding crypto assets and facilitating crypto trading on behalf of customers, among other currently murky areas.

 

·         BoE's Bailey sceptical that stablecoins can be made safe

 

·         COVID-19 UPDATES:

 

·         Europe and Central Asia could suffer another 700,000 Covid deaths by spring as infections soar, WHO says

 

·         Dutch Covid patients transferred to Germany as hospitals struggle

 

Reference: CNBC, Reuters, Worldometers