Archives: Reuters Articles

Aug 21 – Gold prices hovered around a five-month low on Monday, as elevated bond yields pressured bullion, while investors looked ahead to the US Federal Reserve’s Jackson Hole symposium later this week for more clarity on the interest rate path.

Spot gold edged up 0.3% to USD 1,893.82 per ounce by 02:13 p.m. ET (1813 GMT), but still held near a five-month low of USD 1,883.70 it touched on Friday.

US gold futures settled 0.3% higher at USD 1,923.00.

“We are seeing some buying interest at these levels, but the buying interest is being limited because the charts remain bearish,” said Jim Wyckoff, senior market analyst at Kitco.

“The recent rhetoric coming from Fed officials has kind of leaned hawkish. Treasury yields have been rising. That’s bearish for the metals … path of least resistance for prices is sideways to lower.”

Helping gold, the dollar index slipped 0.1%. However, benchmark US 10-year Treasury yields extended a rise to 4.3439%, the highest level since October and lessening the appeal of non-yielding bullion.

Gold prices dropped to their lowest since mid-March at USD 1,883.70 last week, as buoyant economic data raised bets for higher-for-longer US interest rates.

Investors’ focus this week will be on Fed Chair Jerome Powell’s speech on Friday, as central bankers from around the world assemble in Jackson Hole for their annual conference.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding it.

Meanwhile, receding fears of a US slowdown, surging bond yields, and the robust performance of equities have gradually eroded the appeal of exchange-traded funds (ETF) backed by traditional safe-haven gold.

“With bond yields, which are typically negatively correlated to the gold prices, expected to be pressured higher, and the World Gold Council calling for weaker than normal seasonal demand from India and China, we think ETF selling and lower gold prices may continue near-term,” analysts at Bank of America said in a note.

Spot silver rose 2.5% to USD 23.27 per ounce and platinum was up 0.1% to USD 910.65. Palladium dropped 1.4% to USD 1,238.32.

(Reporting by Harshit Verma and Brijesh Patel in Bengaluru; Editing by Kirsten Donovan, Sandra Maler, and Krishna Chandra Eluri)

 

HOUSTON, Aug 21 – Brent and US crude oil finished on Monday at a loss, as hopes for Chinese demand faded

“It seems that (China’s recovery) is not going to happen,” said John Kilduff, partner at Again Capital. “It’s doubtful they’re going to be buying. They bought a lot of crude for storage earlier in the year. They’re sitting on a lot of crude.”

Brent crude settled down 34 cents at USD 84.46, a loss of 0.4%. US West Texas Intermediate crude finished at USD 80.72 a barrel for a loss of 53 cents or 0.65%. Earlier in the session, both benchmarks had been up by as much as USD 1.

“Right now, it’s a battle between Saudi production cuts versus demand destruction,” said Robert Yawger, director of energy futures, Mizuho Securities USA.

Gains in crude prices through the summer were driven by the tight balance between crude oil supply and high demand, especially in the US summer driving season, which ends the first of September, and from Latin America.

At the same time, OPEC led by Saudi Arabia, plus Russia have cut production to better match demand, especially from China, which has yet to meet expectations for post-pandemic recovery.

Saudi Arabia said this month its production would remain at around 9 million barrels per day, a cut of about 1 million barrels, through the month of September.

Last week, both front-month benchmark fell 2%, snapping a seven-week winning streak on concerns China’s sluggish economic growth will curb oil demand, while the possibility of further increases to US interest rates also overshadows the demand outlook.

China’s central bank trimmed its one-year lending rate by 10 basis points and left its five-year rate unmoved. That was a surprise to analysts who had expected cuts of 15 bps to both as recovery in the world’s second-largest economy has been slowed by a worsening property slump, weak spending, and tumbling credit growth.

Top exporter Saudi Arabia’s July shipments to China fell 31% from June while Russia, with its discounted crude, remained the Asian giant’s largest supplier, Chinese customs data showed.

China’s crude oil imports from Saudi Arabia are expected to remain depressed through the third quarter, analysts said.

China is drawing on record inventories amassed earlier this year as refiners scale back purchases after prices were driven above USD 80 a barrel by supply cuts implemented by the OPEC+ group comprising the Organization of the Petroleum Exporting Countries (OPEC) and allies including Russia.

“We still see a tight oil balance for the remainder of the year, which suggests that prices still have some room to run higher,” said Warren Patterson, ING’s head of commodities research, adding that the dollar was also providing support.

A weaker dollar makes oil purchases less expensive for holders of other currencies, potentially boosting demand.

(Reporting by Erwin Seba in Houston, Natalie Grover and Paul Carsten in London, Florence Tan in Singapore, and Mohi Narayan in New Delhi; Editing by David Goodman, Mark Potter, Barbara Lewis, Nick Macfie, and David Gregorio)

 

Aug 18 – Japanese inflation grabs the Asian economic data spotlight on Friday as investors close out a bruising week marked by a soaring US dollar, rising global bond yields, and crumbling equity markets.

The gloom enveloping markets will not have been lifted by the news late on Thursday that Chinese property developer Evergrande, the most indebted developer in the world, filed for bankruptcy protection in the US.

With the nominal 10-year US Treasury yield a whisker from printing its highest level since 2007 and the inflation-adjusted ‘real’ yield already the highest since 2009, there is a growing sense that the post-2008 world of ultra-low interest rates and borrowing costs might be gone for good.

At the very least, investors are nervous and scrambling to adjust to the higher yield environment. A poor auction of 20-year Japanese Government Bonds on Thursday – one of the worst in decades, according to some analysts – only deepened the sense of anxiety.

Figures on Friday are expected to show that core consumer price inflation in Japan eased to a 3.1% annual rate in July from 3.3% in June.

The Bank of Japan is in a tight spot. It is reluctant to take another step back from ultra-loose monetary policy until it is sure the economy is out of deflation for good, but the yen’s weakness is raising expectations the BOJ will have to spend billions from its FX reserves to support the currency.

The dollar rose to 146.50 yen on Thursday, and the euro this week rose above 159.00 yen for the first time since 2008.

Japan’s second-quarter growth smashed expectations thanks to booming exports, but July trade figures suggest that engine is already sputtering. Exports fell last month, and perhaps more importantly, shipments to China tumbled 13.4%.

The People’s Bank of China insists it will keep liquidity reasonably ample and retain “precise and forceful” policy to support the economy. But given the tightening of financial conditions around the world, investors remain wary.

The 10-year US Treasury yield is above 4.30%, a whisker from highs not recorded since 2007 and the 10-year real yield at almost 2.0% is already at levels last seen in 2009. The dollar index is at a two-month high and has risen 4% in a month.

This is taking its toll – financial conditions across emerging markets are the tightest since early December, according to Goldman Sachs’s EM financial conditions index, and risk assets are getting pounded.

The MSCI World, Asia ex-Japan, and Emerging Market indexes are all down 11 of the last 13 sessions, and all three are having their worst months since September last year.

The weekend can’t come quickly enough.

Here are key developments that could provide more direction to markets on Friday:

– Japan inflation (July)

– Malaysia GDP (Q2)

– Malaysia trade, retail sales (July)

(By Jamie McGeever; Editing by Josie Kao)