Gold prices pared gains on Tuesday, after rising more than 1% earlier, as their safe-haven appeal took a knock from rising U.S. Treasury yields and upbeat earnings from American companies.
· Spot gold was up 0.3% at $1,769.94 per ounce by 1:31 p.m. ET (1731 GMT).
It rose as much as 1.2% earlier in the session on a weaker dollar that makes precious metals cheaper for holders of other currencies.
· U.S. gold futures for December settled up 0.3% at $1,770.5.
· “There’s not much conviction on bullion right now,” said Edward Moya, a senior market analyst at brokerage OANDA.
“We don’t know exactly if we are going to see any major shifts from the Federal Reserve. You’re seeing earnings, for the most part, impress, and that’s been the primary driver to keep risk appetite strong.”
· Wall Street rose on Tuesday, aided by upbeat results from Johnson & Johnson and insurer Travelers.
· Diminishing the appeal of gold, which is non-yielding, U.S. benchmark 10-year Treasury yields hit their highest level since early June at 1.6302%.
· Market participants are increasingly expecting the Fed to start tapering its asset purchases soon, as the earnings season has been encouraging so far and recent data showed a solid increase in U.S. consumer prices.
· Reduced stimulus and interest rate hikes tend to drive up government bond yields, raising bullion’s opportunity cost.
· Among other precious metals, platinum rose 0.6% to $1,041.50 per ounce and palladium jumped 4.2% to $2,100.15 per ounce.
· Spot silver surged 2.7% to $23.80 per ounce and touched a more than one-month high.
· Along with platinum and palladium likely being helped by short-covering, “there is some expectation that the chip shortage has potentially peaked,” UBS analyst Giovanni Staunovo said. “If data shows that’s the case, we should get some improvement on the car production side.”
· Bitcoin rises back toward record as first related U.S. ETF begins trading
· U.S. homebuilding stumbles as supply constraints mount
U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.
Housing starts dropped 1.6% to a seasonally adjusted annual rate of 1.555 million units last month, the lowest level since April. Data for August was revised down to a rate of 1.580 million units from the previously reported 1.615 million units.
Permits for future homebuilding plunged 7.7% to a rate of 1.589 million units last month, the lowest level since September 2020. Single-family permits fell 0.9% to a rate of 1.041 million units.
· Dollar dips, while sterling, NZ dollar gain
The dollar pared losses on Tuesday as Treasury yields climbed but remained lower on the day as other currencies, including sterling, were boosted by expectations of sooner-than-previously expected interest rate hikes.
The dollar index against a basket of other currencies was last down 0.22% on the day at 93.73, after earlier dropping to 93.50, the lowest since Sept. 28.
The dollar also dipped after data showed that U.S. homebuilding unexpectedly fell in September and permits dropped to a one-year low amid acute shortages of raw materials and labor, supporting expectations that economic growth slowed sharply in the third quarter.
The euro gained 0.25% to $1.1640.
Currencies, including sterling and the New Zealand dollar, are benefiting from rising interest rate increase expectations.
The British pound rose 0.51% to $1.3798 as money markets priced in a cumulative 35 basis points in rate hikes by the end of the year.
· TREASURIES-U.S. yield curve steepens as investors pare aggressive rate hike bets
The U.S. Treasury yield curve widened on Tuesday, as investors unwound flattening moves of the last few sessions after global central banks dampened expectations of near-term tightening that spilled over to the world's largest bond market.
The steepening of the curve extended further after weaker than-expected U.S. housing data.
The benchmark 10-year U.S. Treasury yield, meanwhile, rose to its highest in more than four months.
U.S. fed fund futures, which track short-term Federal Reserve rate expectations, on Tuesday priced a 64% chance of a rate hike in July next year, down from 82% on Monday. Traders also priced a 46% chance of a U.S. rate rise by June next year, down from a more than 60% chance on Monday.
· Analysts said global central banks' dovish comments on Tuesday prompted some of the session's earlier steepening moves.
· Bank of France Governor Francois Villeroy de Galhau, a member of the European Central Bank's policy-setting Governing Council, said on Tuesday there is no reason for the ECB to raise rates between now and the end of 2022 as euro zone inflation is expected to fall back below the ECB's 2% target.
· Earlier, the Reserve Bank of Australia, in the minutes of its October policy meeting, said the outbreak of the Delta variant had interrupted the Australian economy's recovery. It reiterated its view of no hike in the 0.1% cash rate until 2024 given sluggish wages and inflation.
· The long end hit their peaks after Federal Reserve Governor Christopher Waller said the Fed may have to adopt "a more aggressive policy response" if high inflation continues through the end of the year.
· Fed's Bowman says we may see inflation lasting longer than expected
Supply chain disruptions are leading to higher prices and it will be important to watch how long that inflation lasts and how it affects long-term expectations, Federal Reserve Governor Michelle Bowman said on Tuesday.
· Richmond Fed President Thomas Barkin said on Tuesday that U.S. labor shortages may outlast the coronavirus pandemic and limit overall economic growth unless the country comes up with better education, health and childcare policies to boost the number of people willing and able to work.
· Biden, Democrats aim for deal on spending package in coming days
U.S. President Joe Biden and Democratic lawmakers are edging toward a deal on the scope of their cornerstone economic revival package and hope to reach a compromise as soon as this week, people briefed on the negotiations said on Tuesday.
· IMF downgrades its growth forecast for Asia, says Covid still ‘ravaging’ the region
· N.Korea confirms submarine launch of new ballistic missile
North Korea test-fired a new, smaller ballistic missile from a submarine, state media confirmed on Wednesday, a move that analysts said could be aimed at more quickly fielding an operational missile submarine.
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