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Gold stalls as investors look for direction from Fed, inflation data

Gold prices were little changed on Wednesday, with a subdued dollar offsetting firmer U.S. Treasury yields, as investors squared positions in the run-up to U.S. consumer prices data this week.

·         Spot gold was nearly flat at $1,784.01 per ounce, retreating from the session’s peak of$1,792.90.

 

·         U.S. gold futures settled mostly unchanged at $1,785.50.

 

·         “The only pressure that gold is getting is rising Treasury yields, but the upside on yields is fairly limited,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

 

·         Benchmark U.S. Treasury yields climbed, dimming gold’s appeal. On the other hand, the dollar index fell, making bullion cheaper for holders of other currencies.

 

·         Trading standard seeks to cut risk of gold benchmark volatility

A group of banks, financial firms and blue-chip companies has drawn up trading guidelines designed to boost activity in the auctions that set gold and silver benchmark prices used around the world and make them more reliable.

The benchmarks are intended to be a fair and accurate snapshot of the fast-moving spot market. But they sometimes diverge from the spot price, leaving buyers and sellers with unexpected gains or losses.

 

·         Gold was anchored at $1,780-$1,800 an ounce, awaiting cues from the U.S. Federal Reserve and U.S. Consumer Price Index (CPI) data, Streible added.

 

·         The CPI report due on Friday could influence the timeline of the Fed tapering its economic support before its next policy meeting on Dec. 14-15.

 

·         With the narrative shifting back to central banks’ tightening policy, which was likely to boost the U.S. dollar, any upside in gold is likely to be limited, Ricardo Evangelista, senior analyst at ActivTrades, said.

 

·         Reduced stimulus and interest rate hikes tend to push government bond yields higher, raising the opportunity cost of holding gold, which bears no interest.

 

·         “Gold at the moment is not an arrow, it is a feather, and the feather is literally book squaring; it’s people selling a bit here and buying a bit there and in thin markets you can get big moves,” independent analyst Ross Norman said.

 

·         Spot silver shed 0.2% to $22.43 per ounce, platinum gained 0.8% to $958.83 per ounce and palladium dipped 0.1% to $1,855.31.

 

·         Dollar slips, stocks edge up as Omicron fears ease

The dollar index, which tracks the greenback versus a basket of six currencies, fell 0.404% to 95.879. The euro rose 0.75% to $1.1347 and the yen added 0.10% to $113.68.

 

·         U.S. yields climb as vaccine update weighed against Omicron spread

The benchmark U.S. 10-year Treasury yield rose modestly on Wednesday, as investors weighed encouraging vaccine news on the new Omicron variant against the rapid spread of cases.

Drugmakers Pfizer (PFE.N) and BioNtech (22UAy.DE) said a three-shot course of their COVID-19 vaccine was shown to generate a neutralizing effect against the variant in a laboratory test.

The yield on 10-year Treasury notes was up 2.8 basis points to 1.508%. The three-day climb in yields marks the longest streak of gains since mid-October.

 

·         Pfizer CEO says fourth Covid vaccine doses may be needed sooner than expected due to omicron

 

·         WHO says omicron variant could change the course of the Covid pandemic

 

·         Covid cases more than doubled in South Africa last week as omicron variant spreads, WHO says

 

·         Work from home again: UK tightens rules amid omicron spread

 

·         JPMorgan says 2022 to see full global recovery

U.S. investment bank JP Morgan predicted on Wednesday that 2022 will mark the end of the coronavirus pandemic and see a full global economic recovery.

 

·         U.S. job openings jump to 11 million; fewer workers voluntarily quitting

U.S. job openings surged in October while hiring decreased, suggesting a worsening worker shortage, which could hamper employment growth and the overall economy.

The Labor Department's monthly Job Openings and Labor Turnover Survey, or JOLTS report, on Wednesday also showed a steady decline in layoffs, another sign that the jobs market was tightening. While the number of people voluntarily quitting their jobs fell, it remained quite high.

Job openings, a measure of labor demand, increased by 431,000 to 11.0 million on the last day of October. This was the second-highest on record. Economists polled by Reuters had forecast 10.4 million vacancies.

·         Senate panel likely to hold hearings for Fed's Powell, Brainard next month

U.S. Senate Banking Committee Chair Sherrod Brown expects to wait until January to hold hearings on President Joe Biden's nominees to the top two Federal Reserve positions, according to the Ohio senator's office.

 

·             Biden didn’t accept Putin’s ‘red lines’ on Ukraine

President Joe Biden didn’t accept Russian leader Vladimir Putin’s “red lines” on Ukraine during their high-stakes video call Tuesday that came as Russia’s military builds its presence on the Ukrainian border.

 

·         Euro zone inflation will take longer to fall back to 2%, says ECB

Euro zone inflation will take longer to fall back to target than earlier thought but so far there is no evidence that high prices are becoming embedded in wages, ECB Vice President Luis de Guindos said on Wednesday.

High inflation is challenging the ECB, which has little experience dealing with rapid price growth and complicates a crucial policy decision due on Dec. 16.

Inflation hit 4.9% last month, a record high, and most private forecasters do not see it back under the ECB's 2% target until very late 2022.

 

·         Bank of Canada keeps interest rates unchanged, warns of Omicron uncertainty

The Bank of Canada on Wednesday held its key overnight interest rate unchanged, as expected, and said inflation was broadening even as it warned that the Omicron coronavirus variant has created "renewed uncertainty."

The central bank, in a regular rate decision, left its key overnight interest rate at 0.25% and maintained guidance that economic slack would be absorbed in the "middle quarters" of 2022, setting the stage for a first rate hike as soon as April.

The Bank of Canada reiterated that it expects inflation to remain elevated in the first half of 2022, returning to its 2% target in the second half of the year.

 

·         India c.bank holds rates, sees growth as 'overarching priority'

 

·         Digital euro, Swiss franc trials were successful, c.banks say

Europe's first cross-border trial of central bank digital currency payments has been described as a success by the central banks of Switzerland and France, though they said it would not immediately lead to issuance of CBDCs.

Project Jura, named after the mountains between the two countries, is the latest in a series of CBDC trials conducted by central banks keen to rebut the threat from crypto assets.

 

·         China Evergrande shares hit new low amid debt crisis; Kaisa misses pay date

China Evergrande Group's shares hit a record low on Wednesday after a missed debt payment deadline put the developer at risk of becoming the country's biggest defaulter, even as hopes of a managed debt restructuring calmed fears of a messy collapse.

 

Reference: CNBC, Reuters