Gold near 3-month lows as Powell sticks to rate-hike script

Reuters – Gold prices on Thursday hovered close to a three-month low hit in the previous session on renewed talks of interest rate hikes by the US Federal Reserve, but a softer dollar limited losses in bullion.

Spot gold ticked down 0.1% to USD 1,930.74 per ounce by 0446 GMT. US gold futures fell 0.2% to USD 1,941.30.

Fed Chair Jerome Powell in his remarks to lawmakers on Wednesday said further rate increases are “a pretty good guess” of where the US central bank is heading if the economy continues in its current direction.

While higher interest rates dull the appeal for zero-yield bullion, Edward Meir, a metals analyst at Marex said that “the market still believes the central bank is very close to finishing their rate hikes, and that’s why gold hasn’t really done all that much.”

“It’s (gold) a little bit on the defensive, but hasn’t collapsed” and could trade between USD 1,900 to USD 1,980 until the next Fed decision, Meir added.

Markets are pricing in a 72% chance of a 25 basis points (bps) hike next month, according to the CME FedWatch tool.

Atlanta Fed President Raphael Bostic, meanwhile, became the first policymaker to suggest the Fed would need to wait at least past its July meeting to decide on further rate increases.

The dollar index held close to Wednesday’s lows. A weaker dollar usually makes bullion more appealing for overseas investors.

Traders now await weekly US initial jobless claims data at 1230 GMT, an important indicator of the US economy, and the Bank of England‘s rate decision after inflation data came in higher than expected again, with investors split on just how big the new hike will be.

Spot silver was down 0.2% to USD 22.59 per ounce, after hitting its lowest since March 22 in the previous session.

Platinum fell 0.2% to USD 939.45, and palladium shed 0.8% to USD 1,336.81.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Sherry Jacob-Phillips, Nivedita Bhattacharjee and Varun H K)

Hawkish Powell keeps markets on defense

June 22 (Reuters) – The week’s main attraction, Fed Chair Jerome Powell’s testimony before the US House Financial Services Committee, came and went without rearranging the pieces on the table much.

The Japanese yen looked a bit steadier by late morning on Wednesday but that was after the dollar advanced to a seven-month high following publication of Powell’s embargoed remarks that the central bank’s effort to bring inflation back down to 2% was “far from over.”

During the grilling by committee members, Powell pushed back on the description of last week’s decision to hold its benchmark rate at 5-5.25% as a “pause” from the aggressive 500 basis-point tightening since last March, saying two more 25 bp rate hikes by year-end was “a pretty good guess.”

Clouding the picture though, Atlanta Federal Reserve President Raphael Bostic said in written remarks and an interview on Yahoo Finance that the Fed should not raise rates further or it would risk “needlessly” sapping the strength of the US economy.

So, that left traders expecting rate hikes to resume at the Fed’s July meeting, even as the futures market reflects doubts that the Fed will deliver more increases beyond that.

The Japanese currency remained under pressure in US dealings after Bank of Japan Governor Kazuo Ueda on Wednesday reiterated the central bank’s dovish stance to maintain its ultra-loose monetary policy.

The dollar firmed 0.3% on the day, wrapping up around 141.805 yen, though it pulled back from its highest print since Nov. 11 at 142.39, hit before Powell’s live testimony began.

Meanwhile, the offshore yuan having weakened above 7.20 per dollar for the first time since late November overnight, departed Wednesday’s US FX session at 7.1779.

The Australian dollar was up 0.15% at USD 0.67975, set to snap a three-day losing streak following Tuesday’s release of the minutes of the Reserve Bank of Australia’s June policy meeting, which lacked guidance on further rate hikes. Markets took this as a dovish sign.

US Treasury yields held to pretty narrow ranges and, with Powell leaning hawkish but not deviating much from last week’s FOMC message, the three major US stock indexes fell, for the third straight session.

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

– Japan core CPI for May

– Indonesia’s state budget balance as of May

– Fed Chair Jerome Powell testifies before Senate Banking Committee

(Reporting by Alden Bentley, editing by Deepa Babington)

Gold steadies after hitting 3-month low on Powell’s remarks

June 21 (Reuters) – Gold prices pared losses on Wednesday, helped by a retreat in the dollar, although an uptick in bond yields after US Federal Reserve Chair Jerome Powell’s congressional testimony kept bullion near a three-month low.

Spot gold was steady at USD 1,936.96 per ounce by 2:32 p.m. ET (1832 GMT) after dropping as much as 0.9% earlier. US gold futures settled 0.1% lower at USD 1,944.9.

Further rate increases are “a pretty good guess” of where the central bank is heading if the economy continues in its current direction, Powell said in remarks on Capitol Hill, as the fight against inflation still “has a long way to go.”

There’s not one major element putting pressure on the gold market, but rather a combination of rising yields and technical selling pressure, said Jim Wyckoff, senior analyst at Kitco.

Benchmark 10-year Treasury yields rose after Powell’s testimony started, raising the opportunity cost of holding non-yielding bullion.

If Powell is even a bit more downbeat on future US economic growth prospects or is ambivalent on future rate hikes, that may weaken the dollar index, in turn helping gold, Wyckoff added.

The dollar index eased 0.5% after Powell’s testimony began, making gold less expensive for holders of foreign currencies.

Traders are now pricing in a 79% chance of a 25-basis point Fed rate hike in July, according to the CME’s Fedwatch tool, with no rate cuts seen this year.

Gold prices have been getting dragged lower by large-scale selling activity observed across silver, platinum, and palladium, despite the dollar’s weakness, said Daniel Ghali, commodity strategist at TD Securities.

Spot silver fell 1.6% to USD 22.81 per ounce, while platinum was down 1.5% at USD 947.83, with both having hit their three-month lows.

Palladium was down 2.3% at USD 1,347.89.

(Reporting by Deep Vakil in Bengaluru; Editing by Anil D’Silva, Shounak Dasgupta and Maju Samuel)

Stock sale frenzy foretells US IPO market comeback

NEW YORK, June 21 (Reuters) – A flurry of stock sales by companies points to a likely wave of initial public offerings launching come September, potentially marking the end of a weak market for debuts that has persisted for a year and a half.

Publicly listed companies and their backers, such as private equity firms, have sold stock worth more than USD 28 billion in the United States since the end of April through follow-on and secondary sales, according to data provider LSEG Deals Intelligence. That compares with USD 7.3 billion over the corresponding period a year ago.

This spike bodes well for the IPO market, bankers say, because both new listings and secondary stock sales rely on strong demand from equity investors.

“Historically, follow-on activity of this magnitude should lead to animal spirits in the IPO market,” said Daniel Burton-Morgan, head of Americas syndicate for equity capital markets at Bank of America Corp (BAC).

The IPO market has been in the doldrums since the start of 2022, when Russia’s invasion of Ukraine and a spike in inflation fueled a bout of market volatility as investors fretted over US interest rate hikes. IPOs excluding special purpose acquisition vehicles raised USD 154 billion globally in 2022, a 65% decrease from a record-breaking 2021, according to data provider Dealogic.

With investors now predicting the end of Federal Reserve rate hikes later this year, volatility has subsided. The VIX, an index that measures volatility and is known as Wall Street’s “fear gauge”, has consistently been below 20 — the threshold above which market jitters are seen as too hostile for IPOs — for much of the second quarter. It is now at one of its lowest levels since February 2020.

Goldman Sachs Group Inc’s (GS) IPO Issuance Barometer, which measures how conducive the macroeconomic environment is for IPOs, is now at its highest level since March 2022.

“The stabilization in equity prices has been the primary driver of the rebound in the IPO Issuance Barometer,” Goldman Sachs analysts wrote in a note to clients earlier this month.

The week of June 5 saw 19 follow-on and secondary stock sales in the United States, totaling proceeds of USD 6.6 billion, one of the highest weekly tallies since the end of 2021.

The tally included Intel Corp (INTC) selling USD 1.6 billion worth of stock in former self-driving technology unit Mobileye Global (MBLY), and General Electric’s (GE) USD 2 billion sell-down of its stake in GE Healthcare Technologies (GEHC).

IPO HOPEFULS

Major companies are waiting in the wings to launch their market debut come September, when the IPO window traditionally opens after a summer lull.

These include SoftBank Group Corp-owned chipmaker Arm Holdings and data and marketing automation firm Klaviyo. The exact timing will be determined by market conditions and is subject to change.

One company that took the IPO plunge last week reaped the benefits. Shares of Mediterranean restaurant chain Cava Group (CAVA) have at one point doubled in value since it went public on Thursday at a USD 2.45 billion valuation. It priced its IPO above its expected range, which it had previously revised upwards.

“(The Cava IPO) is potentially a significant signal for other companies considering testing the market in both consumer and other sectors,” said Alex Wellins, co-founder and managing partner of capital markets advisory firm Blueshirt Group.

“By all accounts for me that was a blockbuster success, and I think that’s going to give others some confidence,” said Keith Townsend, a capital markets attorney at law firm King & Spalding.

(Reporting by Echo Wang and Lance Tupper in New York; Editing by Greg Roumeliotis and Sam Holmes)

Oil rallies as grain markets tighten, dollar falls on Fed Chair comments

BENGALURU, June 21 (Reuters) – Oil prices gained a dollar a barrel on Wednesday as US corn and soybean prices raced to multi-month highs, raising expectations that crop shortfalls around the globe could lower biofuels blending and increase oil demand.

Brent futures rose USD 1.22, or 1.6%, to settle at USD 77.12 a barrel, while the US West Texas Intermediate (WTI) crude futures rose USD 1.34, or 1.9%, to settle at USD 72.53 a barrel. Both contracts hit two-week highs earlier in the session.

Chicago Board of Trade corn futures rose 5.2% on Wednesday after a government report showed much of the US crop being stressed by dry conditions as it neared key development phases, traders said. CBOT November soybeans SX3 hit their highest since March 9.

“The grain markets are starting to wake up to the fact that inventories are low and it’ll only be a matter of time before the oil market wakes up to that fact,” Flynn said.

Also supporting oil prices, the US dollar fell against a basket of global currencies on Wednesday after Federal Reserve Chair Jerome Powell suggested that the central bank is nearing its policy destination.

A cheaper greenback makes dollar-denominated oil more attractive for investors holding other currencies, raising demand.

US crude oil inventories fell last week, while gasoline inventories rose, according to market sources citing American Petroleum Institute figures on Wednesday. Crude stocks fell by about 1.2 million barrels in the week ended June 16, according to the sources.

Official US oil inventory data from the Energy Information Administration will be released on Thursday, after being delayed a day by the Juneteenth public holiday on Monday.

Oil price gains were capped after data showed on Wednesday that British inflation defied expectations of a slowdown. The rate held at 8.7% in May, boosting expectations the Bank of England will raise interest rates by a hefty half a percentage point on Thursday.

“Countries are struggling to rein in inflation … and that’s going to dampen growth and threaten recessions across the globe,” said Craig Erlam, senior markets analyst at OANDA.

(Reporting by Shariq Khan; Additional reporting by Rowena Edwards, Katya Golubkova, and Trixie Yap; Editing by Emelia Sithole-Matarise, David Goodman, Chris Reese, Cynthia Osterman, and David Gregorio)

Gold flat as markets await Powell’s testimony for rate cues

Reuters – Gold prices moved in a tight range on Wednesday after two-straight sessions of declines, as investors refrained from making large bets ahead of US Federal Reserve Chairman Jerome Powell’s congressional testimony.

Spot gold held its ground at USD 1,936.03 per ounce by 0504 GMT. US gold futures were little changed at USD 1,947.10.

“The expected sustained (Fed) tightening bias is weighing on gold. In this light, Chairman Powell’s testimony could have a major short-term impact on the market,” said Clifford Bennett, chief economist at ACY Securities.

Powell delivers a semi-annual monetary policy testimony to the US House Financial Affairs Committee at 1400 GMT and market participants will be looking out for the central bank’s thinking on need for further interest rate increases amid hawkish remarks from policymakers.

Two Federal Reserve policymakers and an economist nominated to join them on the Fed’s Washington-based board on Tuesday said their focus is on bringing down too-high inflation so that the US economy can get back to sustainable growth.

Traders are now pricing in an about 77% chance of a 25 basis point Fed rate hike in July, according to the CME Fedwatch tool. Interest-rate hikes raise the opportunity cost of holding non-yielding bullion.

“For the moment gold is under the great interest rate threat hammer, but the very real on-going strong jewellery and manufacturing demand should eventually win the day,” Bennett added.

The US dollar, meanwhile, was firm in Asia trade following surprisingly strong US housing data, keeping bullion under pressure.

“Gold is breaking below the 100-day moving average, which adds further pressure to prices as technical traders exit or short gold and look at USD 1,842 as the potential downside to current prices,” Michael Langford, chief investment officer at Scorpion Minerals said.

Among other precious metals, spot silver fell 0.4% to USD 23.0973 per ounce, platinum shed 0.6% to $957.16, and palladium lost 0.3% to USD 1,375.37.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu and Nivedita Bhattacharjee)

Gold range-bound as markets position for Powell’s testimony

June 21 (Reuters) – Gold traded in a narrow range on Wednesday as traders refrained from making big bets ahead of Federal Reserve Chairman Jerome Powell’s congressional testimony, which could offer further insight into the central bank’s interest-rate hike plan.

FUNDAMENTALS

* Spot gold was almost unchanged at USD 1,936.99 per ounce by 0028 GMT. US gold futures too were little changed at USD 1,948.20.

* Powell’s congressional testimonies due on Wednesday and Thursday will be scanned for US interest rate outlook.

* Two Federal Reserve policymakers and an economist nominated to join them on the Fed’s Washington-based board on Tuesday said their focus is on bringing down too-high inflation so that the US economy can get back to sustainable growth.

* The Senate Banking committee also released prepared remarks from Fed Board nominee Adriana Kugler, who said returning inflation to the central bank’s 2% target is key to setting a strong foundation for the US economy.

* Gold is considered a hedge against inflation, but interest-rate hikes raise the opportunity cost of holding non-yielding bullion.

* Traders are now pricing in an about 78% chance of a Fed rate hike in July, according to the CME Fedwatch tool.

* US Treasury yields fell on Tuesday, in line with declines in Europe and the UK, as investors priced in market expectations that the Fed is near the end of its rate-hiking cycle, with some sectors of the economy having shown signs of moderation.

* Meanwhile, pressure is mounting on China’s cash-strapped local governments as authorities move to shut a private funding route for their financing arms, according to planned new rules and people familiar with their aims, raising credit risks and default worries.

* Spot silver ticked down 0.1% to USD 23.1517 per ounce, platinum fell 0.3% to USD 959.76, while palladium rose 0.4% to USD 1,385.18.

DATA/EVENTS (GMT)

0100 Australia Composite Leading Index May

0600 UK Core CPI, CPI Y/Y May

1400 US Federal Reserve Chair Jerome Powell delivers semiannual monetary policy testimony to the US House Financial Affairs Committee

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Subhranshu Sahu)

Oil extends declines on China growth woes, firmer dollar

TOKYO, June 21 (Reuters) – Oil prices weakened on Wednesday, extending falls to a third straight day, as the dollar strengthened on a US housing market recovery while fears persisted that monetary stimulus may not be enough to revive growth in China.

Brent futures fell 21 cents, or 0.3%, to USD 75.69 a barrel and US West Texas Intermediate (WTI) crude futures were down 14 cents, or 0.2%, at USD 71.06 at 0043 GMT.

The dollar rose after data showed US homebuilding surged in May to the highest in more than a year and permits for future construction climbed, suggesting the housing market may be recovering after being hammered by Federal Reserve rate hikes.

A firmer dollar weighs on oil demand as it makes the commodity more expensive for buyers holding other currencies.

The market remains concerned about a faltering recovery in China, the world’s top oil importer. Looking to boost growth, China on Tuesday cut its benchmark loan prime rates (LPR) for the first time in 10 months, with a smaller-than-expected 10-basis-point reduction in the five-year LPR.

The rate reduction followed recent economic data showing that China’s retail and factory sectors were struggling to sustain momentum from earlier this year.

“Investors remained impatient with China’s efforts to boost economic growth,” ANZ Research said in a client note on Wednesday. “Beijing’s slow stimulus rollout is adding concerns about the weakening economy.”

Oil trade was also cautious ahead of congressional testimony by US Federal Reserve Chair Jerome Powell later on Wednesday which is expected to provide clues on future rate moves in the world’s biggest economy.

“We expect Fed Chair Powell to deliver a hawkish semi-annual testimony to Congress reflecting the FOMC’s median projection for higher interest rates in coming months and more resilient inflation in the near term,” ANZ Research said in the note, referring to the central bank’s Federal Open Market Committee.

Traders will also be looking out for US oil inventory data from the American Petroleum Institute industry group later on Wednesday and the Energy Information Administration on Thursday, both reports delayed by a day following the Juneteenth public holiday on Monday.

Five analysts polled by Reuters estimated on average that crude stockpiles fell by about 400,000 barrels in the week to June 16.

(Reporting by Katya Golubkova in Tokyo; Editing by Sonali Paul)

Dollar finds footing on housing data as yuan falters

SINGAPORE, June 21 (Reuters) – The US dollar was firm in Asia trade on Wednesday following surprisingly strong US housing data, while the yuan and Aussie dollar nursed losses and focus turned to Federal Reserve Chair Jerome Powell’s appearance before Congress later in the day.

Single-family housing starts surged 21.7% in May against expectations they’d be more or less flat. Traders discounted it somewhat since the jump wasn’t led by a leap in permits, but it still gave the dollar a boost ahead of Powell’s testimony.

The greenback was marginally stronger at USD 1.0916 per euro overnight and steady early in the Asia session. The yen was also firm at 140.50 per dollar ahead of an appearance by Bank of Japan Governor Kazuo Ueda on Wednesday.

The Aussie and yuan were Tuesday’s largest losers and were in no mood for a bounce early on Wednesday. China had cut rates by less than expected and while its post-COVID recovery stalls, the hoped-for major stimulus is yet to arrive.

The yuan fell about 0.3% overnight and in offshore trade early on Wednesday the currency was pinned at 7.1826 per dollar, near a seven-month low.

With China’s Premier Li Qiang abroad in Europe, traders see an imminent announcement of further stimulus as unlikely.

The Aussie had taken a further beating thanks to Tuesday’s less-hawkish-than-expected central bank minutes following this month’s rate hike. It fell 0.9% overnight and last bought USD 0.6790.

“The path of least resistance is further declines,” said Commonwealth Bank of Australia strategist Joe Capurso.

“The Aussie could dip below 0.6700 this week, particularly if Powell is hawkish,” he said. Powell is due to begin his testimony at 1400 GMT.

The New Zealand dollar was dragged lower in sympathy, breaking below its 50-day moving average before steadying just above its 200-day moving average at USD 0.6168.

It is under pressure after the central bank flagged it was finished with hikes, while data showed the economy in recession.

“From here we see further stagnation in growth,” said Mieneke Perniskie, a currency trader at Kiwibank in Wellington.

“Our pick is that the kiwi will head towards the USD 0.57 level before the year is out, but it won’t be in a straight line,” she said. “First off the bat we will need to crack the USD 0.59 level. That may only be a matter of weeks away.”

Elsewhere sterling recovered some of its overnight drop to sit at USD 1.2760. British inflation data is due later in the day with economists hoping for signs its easing.

The data is likely to be decisive for the Bank of England, which meets on Thursday with markets currently pricing about a 3/4 chance of a 25 bp hike and a 1/4 chance of a 50 bp hike.

“Sterling may halt the current reversal (if) expectations are reshaped, with the pair potentially jumping back above 1.28 and re-testing last week’s resistance at 1.2847,” said Daniela Hathorn, analyst at Capital.com.

The US dollar index was steady at 102.55. Bitcoin jumped 5% overnight to break over USD 28,000 for the first time since late May, helped by the launch of a new crypto exchange backed by Fidelity, Citadel Securites and Charles Schwab.

(Reporting by Tom Westbrook)

Markets lose steam, central banks not helping

June 21 (Reuters) – A deepening sense of caution descends over Asian markets as the trading week reaches its mid-point, as investors give a lukewarm reaction to China’s interest rate cut and await key remarks from Federal Reserve Chair Jerome Powell later on Wednesday.

Adding to the lackluster market tone and feeling among investors that the global policy tightening cycle is not yet over, UK inflation data on Wednesday will be closely watched ahead of the Bank of England’s expected rate hike on Thursday.

The Asian economic data calendar on Wednesday is light, with Japan’s tankan manufacturing index for June one of the few releases on tap and the one most likely to stir markets.

The Bank of Japan is one of two outliers among leading monetary authorities, and remarks from governor Kazuo Ueda on Wednesday could determine whether the yen pulls back from a seven-month low against the dollar, or extends its decline.

The other is the People’s Bank of China, which is now actually cutting rates for the first time in almost a year. On Tuesday it lowered key lending benchmarks by 10 basis points as officials seek to shore up a slowing economic recovery, but investors weren’t impressed.

The one-year loan prime rate (LPR) was cut to 3.55% and the five-year LPR was cut to 4.20%. Investors had hoped the five-year LPR would be reduced by more.

For the yuan, the PBOC was stuck between a rock and a hard place – more aggressive easing would further reduce the attractiveness of Chinese bonds, which is bad news for the yuan; a more cautious easing probably won’t give the economy much support, which is also bad news for the yuan.

The yuan has been trading through 7.00 per dollar every day since May 18 and is now approaching 7.20/dollar. Last October’s weak point around 7.30/dollar, a low not seen since late 2007, may soon come onto traders’ horizon.

On the Chinese corporate front, investors are digesting the news of changes at the top of e-commerce giant Alibaba Group. The company said on Tuesday its CEO and chairman Daniel Zhang will step down from the roles, which will be filled by Eddie Yongming Wu and Joseph Tsai, respectively.

China’s stocks are on the defensive, but they are not alone. The MSCI Asia-ex Japan index on Tuesday had its worst day this month; world stocks fell for a third day, their longest losing streak since early May; and Wall Street ended in the red.

The main global event for markets on Wednesday is likely to be Fed Chair Powell’s semi-annual testimony to the House Financial Affairs Committee. Investors will be parsing his words for any extra steer on the policy outlook, no matter how slight.

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

– Japan tankan survey (June)

– BOJ Governor Kazuo Ueda speaks

– Fed Chair Jerome Powell speaks

(By Jamie McGeever; Editing by Deepa Babington)

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