Gold hits more than one-week high on virus surge jitters
· Gold prices hit a more than one-week high on Tuesday as surging coronavirus Delta variant cases raised concerns over its impact on the pace of economic recovery, driving investors towards safe-haven assets.
· Spot gold rose 0.2% to $1,791.55 per ounce by 0655 GMT, after hitting a peak since Aug. 6 at $1,795.15
· U.S. gold futures were up 0.2% at $1,793.00.
· Kunal Shah of commodities trader Nirmal Bang Commodities in Mumbai said that rising cases of the coronavirus in the United States and China, and prospects of a slowdown is global growth in the second half of the year, would support gold prices.
· “I am expecting gold to touch $1,850 this year,” Shah added.
· Recent data showing a sharp drop in U.S. consumer confidence and a bigger than expected drop in the New York Federal Reserve’s Empire State manufacturing business index have allayed some concerns of an early policy tightening by the central bank.
· Data on Monday showed China’s factory output and retail sales growth slowed sharply in July amid new COVID-19 outbreaks, adding to signs its economic recovery is losing momentum.
· Focus is now on U.S. retail sales data due later in the day as well as the minutes of Fed’s July meeting on Wednesday for cues on the central bank’s stimulus tapering.
· “If retail sales come out low, ultimately that means that the Fed will have to continue adding money to the system and this will keep rates low and this should be supportive for gold,” said Stephen Innes, managing partner at SPI Asset Management.
· Asian shares declined on growing anxiety over the spike in the Delta variant infections and concerns over China’s regulations for its internet sector.
· Markets were also tracking escalating tensions over Afghanistan.
· Spot gold may rise into $1,801-$1,811 range
Spot gold may rise into a range of $1,801-$1,811 per ounce, as the bounce from the Aug. 9 low of $1,684.37 has extended.
The bounce is driven by a wave c, which has just travelled above its 100% projection level of $1,785. This wave has a better chance of extending into a range of $1,811-$1,827, which is also pointed by a falling trendline.
Support is at $1,775, a break below which could signal the completion of the wave c. A bearish target zone of $1,743-$1,759 will be established then.
Spot gold may fall into $1,759-$1,769 range
On the daily chart, a projection analysis reveals a break above the 38.2% level of $1,765. The break opened the way towards $1,823.
A retracement analysis marks a target zone of $1,800-$1,828. All these calculation indicate a further gain from the current level.
· Gold price pauses near $1,800, analysts warn of another selloff
After seeing double-digit gains Monday, the gold's price action paused just below $1,800 an ounce. And some analysts are now warning of another selloff if the $1,800 level proves to be too strong of a resistance point.
What gold does next at the $1,800 level will not only be important from the technical perspective but will also determine its future price direction.
"Our model sees a fair value range for gold from $1,735 to $1,845, so at the current level, gold is somewhere near the middle of this range," said OCBC Bank's strategists. "The FOMC minutes are likely to determine gold's next near-term direction, where a hawkish report may send gold tumbling once more."
"The message must be: if you have a tactical position, get out; if you have a strategic position, hedge it," Dominic Schnider, head of commodities and Asia Pacific foreign exchange at UBS Global Wealth Management CIO Office, told Bloomberg. "In a world that looks better, why would you want to hold so much insurance asset, and that simply means the market needs to balance at the lower level."
UBS added that gold could drop towards $1,600 an ounce and silver towards $22 an ounce.
However, far from all analysts are these bearish on the yellow metal. For example, Goldman Sachs still expects to see gold reaching $2,000 an ounce by the end of the year as demand for the yellow metal recovers.
This week's focus is on macroeconomic data, especially the U.S retail sales, which will be released on Tuesday.
· Gold has a few supportive drivers out there at the moment, including the combination of a somewhat weaker U.S. dollar and lower yields, said Craig Erlam, senior market analyst at OANDA Europe.
"People had become overly bullish following a raft of good data and hawkish Fed commentary, so when the profit-taking came, it did so in an aggressive fashion. Naturally, the worst sentiment reading in almost a decade turbo-charged the move, which is why gold exploded back above the $1,740-$1,760 resistance zone and now finds itself flirting with $1,800 once more," Erlam said.
However, Erlam added that the current rally had not changed gold's fundamentals, and the yellow metal is unlikely to successfully breach the $1,800 an ounce level in the short term.
"Unless this is the first in a series of shocking economic numbers for the U.S., I don't think its fortunes have drastically improved. It will struggle to break $1,800, and the fact that it marks the 50% retracement of the early June highs to August lows won't help matters," he said on Monday.
Gold is also seeing additional price support come in from the growing central banks' gold demand, with Brazil and India the latest ones to step up their official gold purchases.
"Growing central bank purchases have provided an offsetting force against the speculative pressures that have been building in the yellow metal for some time. In turn, gold prices have recovered towards the $1,780/oz range that could catalyze additional short covering from trend followers," said commodity strategists at TD Securities.
· Elsewhere, silver rose 0.2% to $23.86 per ounce, having hit a high since Aug. 9 at $23.95.
· Platinum fell 0.6% to $1,016.13, while palladium was down 0.9% at $2,582.96.
· Higher inflation target could trigger jobs boom, former Fed staffers say
The Federal Reserve may be wrestling with an inflation problem, but two former senior staffers at the U.S. central bank argue that continued higher prices in the future may be what is needed to shift the whole economy to a higher plateau and deliver a jobs boom that helps the broadest set of people.
David Wilcox, a former Fed research director, and David Reifschneider, a special adviser to former Fed Chair Janet Yellen, argue in a new research paper that once the coronavirus pandemic passes and the Fed is able to raise interest rates to more normal levels, it should then increase the national inflation target from 2% to 3% and use a shock treatment of surprise rate cuts to hit it.
· FX Traders Vulnerable to Powell Surprise at Tuesday Town Hall
Investors vulnerable to surprises when Federal Reserve Chair Jerome Powell hosts a town hall meeting later Tuesday.
Traders betting Powell won’t say anything substantive till next week’s event. The Fed Chairman will respond to questions from educators in Tuesday’s virtual forum.
Investors are eagerly anticipating the annual central bank gathering, looking for updates on Fed policy and whether the impressive July employment report will bring forward the likelihood of bond tapering. The symposium -- which takes place Aug. 26-28 -- has been the setting for important announcements in the past.
There is no guarantee Powell will make any comments related to monetary policy at the town hall, but there may be room for him to claim further progress is needed in the labor market before a taper. Even after the unemployment rate fell to 5.4% in July, it remains well above the pre-virus level of 3.5% from February last year.
If he does surprise, the currency most likely to move is the yen -- the best Group-of-10 performer this quarter -- where traders have built up sizeable short positions. Momentum indicators for the dollar-yen remain bearish and any dovish comments from Powell would likely pressure U.S. yields, leaving the pair vulnerable to breach near-term technical support.
· U.S. declares first Western reservoir water shortage, triggering cuts
· Beijing owns stakes in ByteDance, Weibo domestic entities, records show
The Chinese government has taken stakes in Chinese entities owned by tech companies ByteDance and Sina Weibo (WB.O), corporate records showed, amid a widening regulatory crackdown on the industry.
· Sydney COVID-19 cases set to rise, hospitals under pressure
· U.S. plans to begin administering COVID-19 booster shots in September - source
· Japan to extend COVID-19 emergency lockdown as cases surge
Japan was set on Tuesday to extend its state of emergency in Tokyo and other regions to Sept. 12 and widen curbs to seven more prefectures, as COVID-19 cases spike in the capital and nationwide, burdening the medical system.
The current state of emergency is due to expire on Aug. 31, but a continuing surge in coronavirus cases has spurred calls to extend it. Tokyo announced 2,962 new daily cases on Monday, after a record 5,773 on Friday.
· New Zealand reports first coronavirus case in community since Feb
· U.S.'s Blinken speaks to European counterparts on Afghan situation
U.S. Secretary of State Antony Blinken held separate discussions on Monday with counterparts in Britain, the European Union, Turkey and NATO on the situation in Afghanistan and U.S. efforts to bring back their citizens, State Department spokesperson Ned Price said in a statement.
· Afghan central bank chief flees Kabul, blaming Ghani for chaos
The head of Afghanistan’s central bank has fled Kabul, questioned the loyalty of Afghan security forces and blamed President Ashraf Ghani and his inexperienced advisors for the country’s swift and chaotic fall to the Taliban.
· Australia's central bank ready to act if lockdowns threaten economy
Australia’s central bank would be prepared to take policy action should coronavirus lockdowns across the country threaten a deeper economic setback, minutes from its August meeting showed on Tuesday.
That outcome now looks ever more likely as the Delta variant spreads, piling pressure on the Reserve Bank of Australia (RBA) to delay a planned tapering of its bond buying programme, or even to ease.
The chance of fresh stimulus saw the local dollar slip a quarter of a cent to $0.7308 while 10-year bond yields dropped to near seven-month lows at 1.16%.
· Military evacuation flights taking off from Kabul - Western official
· Japan closes embassy in Afghanistan
Japan has closed its embassy in Kabul due to the worsening security situation in Afghanistan and the last remaining twelve embassy personnel had left the country, the Foreign Ministry said on Tuesday.
· China may align itself with Taliban and try to exploit Afghanistan’s rare earth metals, analyst warns
Reference: CNBC, Reuters, Brecorder, Kitco
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