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· Gold prices dive amid vaccine hopes and rising Treasury yields

Gold prices tumbled further during Asia hours on Wednesday, a day after the precious metal plunged to a record one-day low overnight.

Prices declined more than 5% to $1,927.39 per ounce on Tuesday – the worst single-day rout in seven years and a far cry from Friday’s record intraday high of $2,089.20. Spot gold prices had shot above the $2,000 level for the first time last week.

By Wednesday morning, spot gold prices plunged further – to $1,862, before clawing back gains to trade at $1,920 in the afternoon.

Analysts pegged that tumble to rising U.S. real yields on optimism surrounding the virus, among other factors. The dollar has also been strengthening, which is bad news for gold as it means the precious metal will be more expensive for those holding other currencies.

Treasury yields jumped on Tuesday, continuing its climb since last week as optimism spiked on positive vaccine news.

Gold fights back after steep decline as slowdown fears persist

· Gold recovered on Wednesday after dipping below the key $1,900 level earlier and a day after registering its worst fall in seven years as bleak economic data underscored concerns over a pandemic-led slowdown.

· Spot gold climbed 1.4% to $1,937.42 per ounce, after declining as much as 2.5% earlier. U.S. gold futures settled up 0.1% at $1,949.

· On Tuesday, gold slumped as much as 6.2%, for its worst one-day fall since April 2013. Silver, which on Tuesday declined 15%, its biggest fall since October 2008, on Wednesday was 4.3% higher at $25.85.

· “That decline was a healthy correction, it allows more people to get in, so prices will rally again and by the end of the year we’ll see new all-time highs with gold at $2,500 per ounce and silver at $35,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

“We have all the same fundamental factors that supports gold... the U.S. Federal Reserve is going to remain dovish for an extended period of time, they have already said that they will allow inflation to rise above their targets.”

· Large stimulus measures tend to support gold, which is often considered a hedge against inflation.

· Concerns over the economic damage caused by the pandemic as Britain’s economy shrank by a record 20.4% in the second quarter buoyed gold’s appeal along with a weaker dollar, which slid 0.3%.

· “The global economy still faces a host of problems which have the capacity to support gold,” James Steel, chief precious metals analyst at HSBC said in a note.

“This includes geopolitical risks and ongoing monetary and fiscal stimulation. These factors will cushion further declines.”

· All eyes are on a U.S. coronavirus aid after talks between White House and top Democrats in Congress broke down last week.

· Elsewhere, platinum rose 0.5% to $934.56 per ounce, while palladium gained 1.1% to $2,113.50.

· Largest 10-year Treasury auction sold near historic low yields

The U.S. Treasury Department on Wednesday sold a record $38 billion in 10-year government notes to strong demand near historically low yields.

Investors easily absorbed the additional supply, up $6 billion from the last record-sized auction in May. The coronavirus pandemic has driven the benchmark 10-year yield US10YT=RR to all-time lows, as demand for high-quality, safe-haven assets has dramatically narrowed the premium offered to investors for holding the debt.

Following the auction, the 10-year yield dropped, and last was roughly flat on the day at 0.661%.

· Trump’s $300 unemployment boost could take a month to reach workers

A $300-a-week boost to unemployment benefits authorized by President Trump could take at least a month to reach workers.

In some states, the benefit may not be available at all.

An executive order, which Trump issued Saturday, would divert up to $44 billion in federal disaster-relief funding to jobless Americans in order to give them an extra $300 a week in benefits. (States were asked to put in another $100 a week, but current guidelines allow them to skirt that requirement.)

The White House believes aid will arrive in about two weeks. But administrative challenges could hold up that aid for much longer, labor experts said.

Governors in many states, like California, Delaware, Florida, Kentucky, Mississippi, New Jersey and New York, have already signaled apprehension toward offering the benefit. They may also shy away from the effort and cost of building out the program, experts said.

· No sign of a stimulus deal in sight as Mnuchin, Pelosi phone call yields no progress

The prospects of another round of coronavirus relief appeared even more grim Wednesday after a call between House Speaker Nancy Pelosi and Treasury Secretary Steven Mnuchin moved them no closer to cracking a stalemate.

Pelosi and Senate Minority Leader Chuck Schumer have not met with Mnuchin and White House chief of staff Mark Meadows to hash out a pandemic aid package since Friday. Talks fell apart even as the virus spreads around the country and Americans struggle to find work after two financial lifelines lapsed last month.

Mnuchin reached out to Pelosi by phone on Wednesday, a source familiar with the call said. In a joint statement, Pelosi and Schumer signaled they would not yet restart discussions after the Treasury secretary again rejected their offer to find a middle ground between the Democrats’ more than $3 trillion relief package and the GOP’s roughly $1 trillion proposal.

· U.S. Treasury chief says Democrats not interested in negotiating on coronavirus aid

U.S. Treasury Secretary Steven Mnuchin said House Speaker Nancy Pelosi made clear in a call with him on Wednesday that she was unwilling to resume talks over coronavirus aid unless the White House agreed to Democrats’ $2 trillion proposal.

He said in a statement that the Trump administration was willing to move forward on relief legislation but added, “Democrats have no interest in negotiating.”

· Fed policymakers say economic growth will be muted until virus contained

The U.S. economic recovery will be slow until the coronavirus is under control, and Americans will have to manage life with the virus for at least the next several months, three Federal Reserve policymakers said on Wednesday.

After rebounding strongly in May and June, economic activity began to trail off in July, when an increase in infections led to new restrictions in some states and contributed to a slowdown in spending. Employment growth also slowed considerably last month, and the expiration of enhanced unemployment benefits has raised concerns that jobless Americans could start to fall behind on rent and other expenses.

Consumer spending will probably remain weak as people avoid activities that require high levels of social interaction for health reasons, Boston Fed President Eric Rosengren said during an online event organized by the South Shore Chamber of Commerce in Massachusetts.

The San Francisco Fed president, Mary Daly, warned about the impact of the expiration of the supplemental $600 weekly jobless benefit.

“It creates the potential for a hole, a little bit of a hole, in consumer demand and consumer spending,” Daly said. “We have evidence that suggests they were spending those resources to pay rent or to buy food or to buy other consumer goods.”

Despite concerns from some employers that the benefits were discouraging people from returning to work, Daly, in a webcast discussion with the Economic Club of Las Vegas, said there was little evidence to support that claim.

Both Rosengren and Dallas Fed President Robert Kaplan warned that Americans will need to find ways to adapt to the risks of the virus, until a vaccine becomes available.

Daly said she expects the economic rebound will be slow and gradual, depending on the virus, and she does not expect a V-shaped recovery.

Rosengren said the United States had done a poor job of containing the virus when compared to parts of Europe, and that the blunders were affecting the recovery. He pointed to states that saw only a short-lived increase in economic activity after lifting restrictions too quickly while states that imposed longer shutdowns earlier are now benefiting from better health outcomes and more robust spending.

“Limited or inconsistent efforts by states to control the virus based on public health guidance are not only placing citizens at unnecessary risk of severe illness and possible death – but are also likely to prolong the economic downturn,” Rosengren said.

Kaplan said he expects the U.S. unemployment rate to remain elevated at 9% at the end of the year, but said it could be lower if businesses and consumers take steps to control the spread of the virus. The unemployment rate in July was 10.2%.

“If we don’t follow that, while people may feel freer, the economy will grow slower,” Kaplan said.

· Russia first to register coronavirus vaccine worldwide, Putin claims, saying his daughter has had it

Russian President Vladimir Putin claimed Tuesday that Russia has developed the first coronavirus vaccine and said his daughter has taken it, local news agencies reported.

Putin announced the registration of what Russia claims to be the first vaccine against Covid-19.

· Brazilian state agrees to produce Russian COVID-19 vaccine

A Brazilian technology institute said on Wednesday it expects to produce a controversial coronavirus Russian vaccine by the second half of 2021, shortly after the state of Parana signed a memorandum of understanding with Moscow.

Russia has touted it as the world’s first registered coronavirus vaccine, although experts have also raised safety concerns for going to market while other pharmaceutical companies are still carrying out mass testing.

· CORONAVIRUS UPDATES:

Global cases: More than 20.7 million

Global deaths: At least 751,560

U.S. cases: More than 5.3 million

U.S. deaths: At least 169,131

Testing crisis in key states skews drop in new cases