Gold slips 1% as US yields tick higher, focus still on Fed

June 7 (Reuters) – Gold prices fell 1% on Wednesday, weighed by an uptick in US bond yields, while investors looked forward to inflation data and the Federal Reserve policy meeting next week for more clarity on the US interest rate path.

Spot gold was down 1.1% at USD 1,942.32 per ounce by 2:42 p.m. EDT (1842 GMT).

US gold futures settled down 1.2% to USD 1,958.40.

Benchmark US 10-year Treasury yields rose to a more than one-week high after the Bank of Canada raised interest rates in a move that could help the Fed retain a hawkish stance when policymakers meet next week.

“Yields have remained relatively elevated keeping some light pressure on the gold market,” said David Meger, director of metals trading, High Ridge Futures.

“Clearly inflation is still the main focal point of this market. At this point the expectation is that the Fed is going to pause. However, if those inflationary numbers remain extremely elevated, you could see a shift in outlook.”

The US consumer inflation report for May, due on June 13, ahead of the Fed meeting, will provide investors with more clarity about the health of the world’s largest economy.

The US economy is strong amid robust consumer spending, but some areas are slowing down, US Treasury Secretary Janet Yellen said, adding that she expects continued progress in bringing inflation down over the next two years.

The Fed will not raise interest rates for the first time in well over a year at its June 13-14 meeting, according to economists polled by Reuters.

Gold prices are highly sensitive to rising US interest rates, as these increase the opportunity cost of holding non-yielding bullion.

Data from China showed exports shrank much faster than expected in May, hinting of a slowing global economy that could crimp demand for the precious metal, Jim Wyckoff, senior analyst at Kitco, wrote in a note.

Silver dipped 0.5% to USD 23.47 per ounce, platinum fell 1.2% to USD 1,019.11, while palladium slipped 1.6% to USD 1,391.16.

(Reporting by Brijesh Patel in Bengaluru; Editing by Emelia Sithole-Matarise, Shilpi Majumdar and Chizu Nomiyama)

Oil prices rise as Saudi output cuts outweigh weak demand signals

HOUSTON, June 7 (Reuters) – Oil prices climbed about 1% on Wednesday as Saudi Arabia’s plans for deep output cuts more than offset demand woes stemming from rising US fuel stocks and weak Chinese export data.

Brent crude futures settled 66 cents, or 0.9%, higher at USD 76.95 a barrel, while US West Texas Intermediate crude futures gained 79 cents, or 1.1%, to USD 72.53.

Both benchmarks jumped more than USD 1 on Monday after Saudi Arabia’s decision over the weekend to reduce output by 1 million barrels per day (bpd) to 9 million bpd in July.

“Futures seem to be in a ‘tug of war’ with slowing demand for manufacturing, and lighter diesel demand, against expected production cuts coming from OPEC & Saudi,” said Dennis Kissler, senior vice president of trading at BOK Financial.

US crude stocks fell by about 450,000, according to data from the Energy Information Administration, compared with estimates for a 1 million build.

Diesel inventories rose by 5.1 million barrels, while markets had estimated a build of 1.33 million. Gasoline inventories also rose more-than-expected at 2.8 million barrels, compared with estimates for a build of 880,000 barrels.

The unexpected build in fuel inventories raised concerns over consumption by the world’s top oil user, especially as travel demand grew during the Memorial Day weekend.

Prices fell earlier in the session on weak Chinese economic data.

China’s exports shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

Wednesday’s data also showed that crude oil imports into China, the world’s largest oil importer, rose to their third-highest monthly level in May as refiners built up inventories.

A JP Morgan note said forward crude cover in the country has climbed, indicating refiners have not increased processing rates but are instead storing oil.

Also, supporting prices, the dollar dipped as chances faded for a Federal Reserve rate hike next week. A weaker greenback helps demand as oil becomes cheaper for foreign buyers.

Global economic growth will pick up only moderately over the next year as the full effects of central bank rate hikes are felt, the Organization for Economic Cooperation and Development said, the latest to flag the impact of monetary tightening.

(Reporting by Arathy Somasekhar in Houston, Ahmad Ghaddar in London; Additional reporting by Yuka Obayashi and Muyu Xu; Editing by David Goodman, Mark Potter, Bernadette Baum, and Sharon Singleton)

Gold dips on firm dollar, markets look for Fed cues

June 7 (Reuters) – Gold prices eased in a narrow range on Wednesday as the dollar held firm and traders refrained from taking big bets as they looked for clear signals on the US Federal Reserve’s rate path.

Spot gold ticked lower 0.2% to USD 1,959.19 per ounce by 06:37 GMT but held a USD 8 range. US gold futures fell 0.3% to USD 1,975.00.

“Gold traders are waiting for clear signals on the economy that will warrant either a pause or a continuation of the tightening cycle,” Craig Erlam, senior markets analyst at OANDA said.

Pockets of weakness, combined with resilient labor market figures and stubborn inflation, “don’t help gold one way or another,” he added.

Non-interest-bearing bullion tends to become less attractive in a high interest rate environment.

Supply gain pressures continued to abate in May, the New York Fed said in a report on Tuesday, further reducing what had been one of the key forces driving up inflation pressures around the world.

The US consumer price report for May, due on June 13, ahead of the Fed meeting, will provide investors more clarity about the health of the world’s largest economy.

“If the Fed ends up looking more hawkish because inflation is more durable, now that headwinds like the debt ceiling are out of the way… the risk is significant,” said Ilya Spivak, head of global macro at Tastylive.

Fed fund futures indicate traders have priced in an 81.7% chance that the US central bank will hold interest rates in the 5%-5.25% range, according to CMEGroup’s Fedwatch tool. However, they see nearly 53% odds of another hike in July.

Meanwhile, exports from top bullion consumer China shrank much faster than expected in May and imports fell, albeit at a slower pace, as manufacturers struggled to find demand abroad and domestic consumption remained sluggish.

Spot silver fell 0.5% to USD 23.4639 per ounce, platinum steadied at USD 1,031.40. Palladium flat at USD 1,412.22.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Rashmi Aich, Subhranshu Sahu, Janane Venkatraman and Sohini Goswami)

Nervous eyes on China trade

June 7 (Reuters) – Chinese trade figures for May top the Asia-Pacific economic data and events calendar on Wednesday with investors keen to see whether April’s shock slump in imports is repeated, which will offer clues on the health – or otherwise – of domestic demand.

Markets may get a tailwind from Tuesday’s global session – Wall Street ended higher and volatility fell to a pre-pandemic low, although the crypto world was rocked after the US Securities and Exchange Commission filed a second major lawsuit in as many days against industry giants.

First-quarter GDP growth figures from Australia are also due on Wednesday, potentially giving the Aussie dollar and other local assets a nudge after the surprise interest rate hike from the country’s central bank on Tuesday.

Analysts polled by Reuters reckon the economy grew by 0.3% from the previous quarter, and by 2.4% compared with the same period a year ago. Both would mark a slower pace of growth from the fourth quarter of last year.

The Australian dollar could be in for a bout of profit-taking on Wednesday after rallying strongly on Tuesday, a fourth straight rise, following the RBA’s rate hike and signaling more to come.

That’s the Aussie’s longest winning streak in a month, and the currency is up almost 1% this week. It has not appreciated two weeks in a row since January.

Chinese trade data for May will be the main focus, especially imports, which have been sluggish for over a year. The scrapping of pandemic-era restrictions and lockdowns earlier this year was supposed to spur a surge in domestic demand, but that hasn’t happened.

The surprise 7.9% slump in imports in April was a major red flag that the economic re-opening was not going according to plan. It was one of the main catalysts for investors turning bearish on Chinese assets and the economy in recent weeks.

Economists polled by Reuters predict an 8.0% fall in imports for May and a 0.4% decline in exports.

The Chinese yuan slid to a new low for the year through 7.10 per dollar on Tuesday. Further signs of a struggling economy will likely keep the yuan on the defensive, even if the overall trade surplus is relatively large.

Overall, markets go into Wednesday in pretty fine fettle. The CBOE volatility index – the so-called Wall Street fear index – closed below 14.0 for the first time since February 2020.

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

– China trade balance (May)

– Australia GDP (Q1)

– FX reserves – China, Japan, Indonesia

(By Jamie McGeever)

US stocks end up as Fed, CPI loom large next week

June 6 (Reuters) – US stocks closed up on Tuesday, helped by some advances in economically sensitive sectors, as investors awaited inflation data and the Federal Reserve’s policy meeting next week.

Inflation data is expected to show consumer prices cooled slightly on a month-over-month basis in May but core prices are likely to have remained elevated, and the Fed is widely expected to hold interest rates.

Major indexes wavered as investors took a breather after pushing the S&P 500 up almost 20% from its October 2022 lows, boosted by gains in megacap stocks, a stronger-than-expected earnings season, and hopes that the US central bank is nearing the end of its interest rate-hike cycle.

The Dow Jones Industrial Average rose 10.42 points, or 0.03%, to 33,573.28, the S&P 500 gained 10.06 points, or 0.24%, to 4,283.85 and the Nasdaq Composite added 46.99 points, or 0.36%, to 13,276.42.

“It looks like investors are gaining a little optimism,” said Cresset Capital CIO Jack Ablin.

“The narrowness in the market where everyone was focused on the top seven names or so is starting to dissipate a little bit and that’s good news.”

Financials rose 1.33% to lead gains among the 11 major S&P 500 sectors, while the KBW regional banking index jumped 5.41%. The Russell 2000 index of small-cap companies added 2.69%.

Recent economic data and dovish remarks from Fed officials have raised the odds of the Fed holding interest rates at its June 13-14 meeting.

Fed fund futures indicate traders have priced in a near 80% chance that the central bank will hold interest rates in the 5%-5.25% range, according to CMEGroup’s Fedwatch tool. However, they see 50% odds of another 25-basis-point rate hike in July.

Coinbase Global (COIN) plunged 12.09% after the US Securities and Exchange Commission sued the crypto exchange, accusing it of illegally operating without having first registered with the regulator.

Apple Inc (AAPL) extended losses to slip 0.21%, a day after the iPhone maker unveiled a costly augmented-reality headset called the Vision Pro, barging into a market dominated by Meta (META).

Advanced Micro Devices (AMD) rose 5.34% after Piper Sandler raised the price target on the stock to USD 150, the second highest on Wall Street, as per Refinitiv data.

Advancing issues outnumbered declining ones on the NYSE by a 3.47-to-1 ratio; on Nasdaq, a 2.59-to-1 ratio favored advancers.

The S&P 500 posted 17 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 98 new highs and 69 new lows.

(Reporting by Sruthi Shankar and Shristi Achar A in Bengaluru; Editing by Vinay Dwivedi and Deepa Babington)

Gold in wait-and-see mode as Fed rate path stays cloudy

June 6 (Reuters) – Gold prices traded in a tight range on Tuesday, as investors awaited more cues to assess the Federal Reserve’s interest rate path ahead of its policy meet next week.

Spot gold was up 0.1% at USD 1,964.27 per ounce by 1:49 EDT (1749 GMT).

US gold futures settled up 0.4% at USD 1,981.50.

The dollar index and benchmark 10-year Treasury yields ticked up, making dollar-priced, zero-yielding bullion less attractive.

“There’s nothing out there on the surface that says, gold should be positive … It’s a wait-and-see type of moment,” said Phillip Streible, chief market strategist at Blue Line Futures, in Chicago.

Investors now expect a 79% chance that the US central bank will hold interest rates at its June 13-14 policy meet, according to CME Group’s FedWatch tool, following 10 straight rate increases.

World shares edged higher as investors mulled whether a recent rally in stocks has legs to run further.

Gold was stabilizing in light of the jobs report on Friday and with an eye on the Fed policy-setting meeting next week, said Craig Erlam, senior market analyst at OANDA, adding that there was still uncertainty on the rate-hike path as the ISM data showed weakness across the board.

Traders will closely watch the Consumer Price Index data due on June 13, before the Fed’s rate decision.

“Next week is jam-packed with a ton of market-moving data … I am taking a more calculated risk approach,” Streible added.

The World Bank raised its 2023 global growth forecast as the US and other major economies have proven more resilient than forecast but said higher interest rates would cause a larger-than-expected drag next year.

In other metals, spot silver was little changed at USD 23.57 per ounce, platinum gained 0.2% to USD 1,032.80, while palladium eased 0.1% to USD 1,412.81.

(Reporting by Ashitha Shivaprasad and Deep Vakil in Bengaluru; Editing by Vinay Dwivedi, Aurora Ellis, and Shilpi Majumdar)

US interest rate swap market embraces new rate as LIBOR deadline nears

LONDON, June 6 (Reuters) – New trades in the enormous US dollar interest rate swap market have almost entirely stopped using the London Interbank Offered Rate (LIBOR) as the deadline for its demise approaches.

A record 91% of new dollar swaps executed in May used the Secured Overnight Financing Rate (SOFR), the newly accepted US benchmark, as their reference rate.

Just 5% of new swaps used LIBOR, down from 91% two years earlier, according to data from post-trade services provider OSTTRA, which has figures on around 85% of dollar trades.

Investors and companies use interest rate swaps to hedge against risks and to bet on the direction of rates. The Bank for International Settlements estimated that turnover in the US market was about USD 2 trillion a day in 2022.

LIBOR will cease to exist in the coming months after a years-long push by regulators to move away from a rate that bank traders were caught manipulating. It was once used in pricing everything from derivatives to student loans.

Dollar LIBOR quotes will end on June 30, although regulators have said a “synthetic” rate will continue for a period.

SOFR is calculated by the Federal Reserve and is based on the cost of borrowing cash overnight in US repurchase markets.

It was used as the benchmark rate for 53% of the notional amount of US dollar interest rate swaps traded in May, OSTTRA’s data showed.

LIBOR had a 4% share, down from 67% two years earlier, while the Fed funds rate had a 43% share.

The two main derivatives clearing houses, the CME Group and LCH, have been converting US dollar LIBOR swaps into cleared SOFR swaps this year, with the process due to finish in July.

Many existing issues across financial markets are still linked to LIBOR, however. In February, around 80% of institutional loans and collateralized debt obligations were still tied to the tarnished rate, according to private equity firm KKR.

(Reporting by Harry Robertson; Editing by Christina Fincher)

Oil prices ease as economic fears overshadow Saudi output cut

NEW YORK, June 6 (Reuters) – Oil prices eased about 1% on Tuesday as worries that sluggish global economic growth could reduce energy demand outweighed Saudi Arabia’s pledge to deepen output cuts.

Brent futures fell 42 cents, or 0.6%, to settle at USD 76.29 a barrel, while US West Texas Intermediate (WTI) crude fell 41 cents, or 0.6%, to settle at USD 71.74.

Prices rose on Monday after Saudi Arabia said over the weekend it would cut output to around 9 million barrels per day (bpd) in July from about 10 million bpd in May.

Saudi Arabia, the world’s top oil exporter, also unexpectedly increased the official selling price
of its crude to Asian buyers.

However, the Saudi supply cut is unlikely to achieve a “sustainable price increase” into the high USD 80s and low USD 90s due to weaker demand, stronger non-OPEC supply, slower economic growth in China, and potential recessions in the US and Europe, Citi analysts said in a note.

The US dollar rose to its highest level against a basket of currencies since hitting a 10-week high on May 31 as investors waited on fresh signals on whether the US Federal Reserve will raise or hold interest rates in June.

A stronger dollar can weigh on oil demand by making the fuel more expensive for holders of other currencies.

One of those signals came from the US services sector, which barely grew in May as new orders slowed.

“Crude prices are heavy as global growth concerns continue to suggest a much weaker crude demand outlook,” said Edward Moya, senior market analyst at data and analytics firm OANDA.

The mood was further dented by data showing German industrial orders fell unexpectedly in April.

The World Bank, however, raised its 2023 global growth outlook as the US, China, and other major economies have proven more resilient than forecast, but said higher interest rates and tighter credit will take a bigger toll on next year’s results.

Higher interest rates boost borrowing costs, which can slow the economy and reduce oil demand.

The market is awaiting data from the US and China that could provide fresh demand indications in the world’s two biggest oil consumers.

China, the second-biggest oil consumer, will release its May trade data on Wednesday.

The Energy Information Administration (EIA) projected US crude output will rise from 11.9 million bpd in 2022 to 12.6 million bpd in 2023 and 12.8 million bpd in 2024, That compares with a record 12.3 million bpd in 2019.

EIA also projected US petroleum demand would rise from 20.3 million bpd in 2022 to 20.4 million bpd in 2023 and 20.7 million bpd in 2024. That compares with a record 20.8 million bpd in 2005, according to EIA data going back to 1973.

The market is also waiting for US oil inventory data from the American Petroleum Institute (API), an industry group, at 4:30 p.m. EDT on Tuesday and the EIA at 10:30 a.m. EDT on Wednesday.

Analysts forecast US energy firms added about 1.0 million barrels of crude into storage during the week ended June 2, according to a Reuters poll.

That would be the second weekly increase in crude stocks in a row and compares with a rise of 2.0 million barrels in the same week last year and a five-year (2018-2022) average increase of 2.3 million barrels.

(Reporting by Scott DiSavino in New York; Additional reporting by Rowena Edwards in London, Arathy Somasekhar in Houston, and Trixie Yap in Singapore; Editing by David Goodman, Matthew Lewis, Chizu Nomiyama and Richard Chang)

Gold trades in narrow range as markets hunt for rate cues

June 6 (Reuters) – Gold prices traded in a narrow range on Tuesday as investors sought more clarity around the US Federal Reserve’s policy outlook, while a softer dollar kept a floor under prices.

Spot gold held steady at USD 1,960.39 per ounce by 0639 GMT, while US gold futures rose 0.1% to USD 1,976.10.

The dollar index eased 0.2%, making bullion less expensive for investors holding other currencies.

“The Fed’s data-dependent stance will mean that rate expectations may continue to see huge swings due to its higher sensitivity to incoming economic data, with a key look-ahead being the US May CPI report next week,” IG market analyst Yeap Jun Rong said.

A survey from the Institute for Supply Management showed the US services sector barely grew in May as new orders slowed, pushing a measure of prices paid by businesses for inputs to a three-year low, which could aid the Fed’s fight against inflation.

Lower interest rates tend to lift gold as it reduces the opportunity cost of holding the non-yielding asset.

“(But) the constantly-shifting narrative around how high the terminal rate will have to be and the timeline for rate cuts could challenge gold prices’ upside for now, until greater clarity is being presented on that front,” Jun Rong said.

Traders have priced in a 74.2% chance that the Fed will hold interest rates at its June 13-14 policy meeting, according to CME Group’s FedWatch tool.

Reuters technical analyst Wang Tao said spot gold may retest a support at USD 1,938 per ounce, as the bounce triggered by this level seems to be ending around a resistance at USD 1,964.

Spot silver fell 0.1% to USD 23.556 per ounce, platinum was flat at USD 1,029.88. Palladium rose 0.4% to USD 1,418.9.

Sentiment among gold investors in the short term is negative, said Michael Langford, director at corporate advisory firm AirGuide.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Rashmi Aich and Sherry Jacob-Phillips)

US recap: EUR/USD recovers some payrolls losses on weak ISM services

June 5 (Reuters) – The dollar index fell 0.1%, shedding early follow-on gains from Friday’s robust payrolls report after ISM services data showed roughly 80% of the US economy struggled to avoid outright contraction, with the manufacturing sector already repeatedly signaling recession.

Treasury yields and the dollar traded earlier gains for losses as traders took note of the ISM’s employment index slide to 49.2 from 50.8, new orders retreat to 52.9 from 56.1 and prices paid at 56.2 from 59.6 and its lowest since May 2020.

The bigger concern is that the overall index at 50.3 leaves almost no margin of error before seconding the recessionary message from seven straight months of well below 50 manufacturing index readings, the worst streak since the global financial crisis.

Monday’s disinflationary data lent credence to Fed guidance last week that the board might skip a rate hike this month, at least interrupting the series of tightening moves since last March.

Friday’s payrolls beat, by 242k net of revisions, had made a skip seem somewhat premature, as did the surge in April job openings. But the unexpected 0.3% rise in May’s jobless rate, 310k rise in unemployment in the household survey and dips in average hourly earnings and hours worked kept the market pricing in a June skip, followed by most of a 25bp hike in July before rate cuts set in.

Those expectations haven’t changed much since the ISM services missed, but there’s now less willingness to forge ahead with new Q3 Treasury yield and dollar highs before next week’s CPI and Fed events.

EUR/USD finishing about flat, despite the ECB saying more hikes are coming.

Sterling recovered from 1.2370 to 1.2443 on the ISM news, losing 0.18%.

USD/JPY lost 0.25%, well off its 140.45 high and shy of 2023’s 140.93 peak.

(Editing by Burton Frierson; Randolph Donney is a Reuters market analyst. The views expressed are his own.)

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