Gold listless as traders navigate steady dollar, Fed cues

Oct 25 (Reuters) – Gold prices were little changed on Tuesday, as the dollar steadied and offset limit support for bullion from lingering expectations that the US Federal Reserve may slow the pace of interest rate hikes.

Spot gold 0.1% to USD 1,646.79 per ounce by 0735 GMT, while US gold futures eased 0.1% to USD 1,652.50 per ounce.

The dollar index found some footing due to a plunge in China’s yuan, shaking off pressure from bets of a less hawkish Fed and a firmer sterling as Rishi Sunak prepared to become Britain’s prime minister.

Gold competes with the dollar a safe store of value and gains in the currency also make bullion unattractive for overseas buyers.

But propping up gold to some extent, the market is sensing that the Fed is leaning towards the end of the aggressive part of the rate hike cycle, Stephen Innes, managing partner at SPI Asset Management said.

The central bank might be prepared to take a wait-and-see stance after the next few hikes, Innes added.

While the Fed appears set to deliver another 75-basis-point interest rate hike at its next policy meet, policymakers are seen debating the size of future increases.

Higher interest rates increase the opportunity cost of holding the zero-yield bullion, while boosting the dollar and bond yields.

“Gold is at last finding some relative stability above USD 1,600,” said Clifford Bennett, chief economist at ACY Securities.

Should pressures from stronger dollar and some sovereign selling dissipate over coming months, gold could move significantly higher towards USD 1,850 to USD 2,200 over much of 2023, Bennett added.

Meanwhile, holdings of SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, recorded their first inflow after six straight days of declines.

Spot silver fell 0.7% to USD 19.12 per ounce, platinum eased 0.3% to USD 921.63 and palladium rose 1.2% to USD 1,991.27.

(Reporting by Eileen Soreng in Bengaluru; Editing by Rashmi Aich, Neha Arora, Editing by Louise Heavens)

Oil rises as US dollar loses steam though demand fears linger

Oct 25 (Reuters) – Oil prices rose on Tuesday as the US dollar eased against major peers but gains were limited by worries of slowing global fuel demand growth amid bearish economic data from key oil importing economies such as China.

International benchmark Brent crude futures gained 3 cents to USD 93.29 per barrel by 0652 GMT, after falling 0.3% in the previous session. US West Texas Intermediate crude futures for December delivery rose 11 cents to USD 84.69 per barrel, after a previous decline of 0.6%.

The greenback eased on Tuesday amid signs US Federal Reserve rate hikes are putting the brakes on the world’s biggest economy, while risk sentiment improved as Rishi Sunak prepared to become Britain’s prime minister.

A weaker U. dollar makes dollar-denominated oil less expensive for other currency holders and helps push prices higher.

However, signs of uncertain economic activity in the United States and China, the world’s two biggest oil consumers, limited the increase.

“The intraday price swings aside, Brent and WTI futures are stuck in a relatively narrow band since Thursday,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

Supply and demand fundamentals remain largely stable, leaving economic sentiment at the centre-stage for the oil market, Hari added.

“Much of the souring outlook on demand has already been baked in, so any further downward pressure may be slow-acting,” she said.

US business activity contracted for a fourth month in October, with manufacturers and services firms saying in a monthly S&P Global survey of purchasing managers published on Monday that client demand is falling .

That weakening could indicate that the Fed’s interest rate increases to fight inflation have been working and may persuade it to slow its rate hike policies, a positive signal for fuel demand.

Also on Monday, government data showed China’s crude oil imports in September were 2% lower than a year earlier, continuing a trend of lower imports at the same time it reported slowing retail sales.

US crude oil inventories are also expected to rise this week, which may limit price gains. Analysts polled by Reuters estimated on average that crude inventories rose by 200,000 barrels in the week to Oct. 21.

Analysts estimated stockpiles of gasoline fell by about 1.2 million barrels and distillate inventories, which include diesel and heating oil, were expected to have dropped by 1.1 million barrels last week.

Separately, International Energy Agency head Fatih Birol said on Tuesday the world will still need Russian oil to flow to the market despite a price cap, with between 80% to 90% an “encouraging level” to meet demand.

Many details of a price cap on Russian oil still have to be ironed out, Birol said during the Singapore International Energy Week.

(Reporting by Mohi Narayan and Stephanie Kelly; Editing by Kenneth Maxwell, Christian Schmollinger and Jamie Freed)

Oil prices rise on weaker dollar, supply worries

NEW YORK, Oct 25 (Reuters) – Oil prices edged higher on Tuesday, rebounding from an early fall of more than USD 1 a barrel, on a lift from a weaker dollar and supply concerns highlighted by Saudi Arabia’s energy minister.

Brent crude futures rose 26 cents to settle at USD 93.52 per barrel, while US West Texas Intermediate crude futures rose by 74 cents to USD 85.32.

Both benchmarks rose and fell by USD 1 during the session.

The US dollar index fell during afternoon trade, making greenback-denominated oil less expensive for other currency holders and helping to push prices higher.

Further support came from comments by Saudi Arabia’s Energy Mister Prince Abdulaziz bin Salman that energy stockpiles were being used as a mechanism to manipulate markets.

“It is my duty to make clear that losing emergency stocks may be painful in the months to come,” he told the Future Initiative Investment (FII) conference in Riyadh.

Meanwhile, tightening markets for liquefied natural gas (LNG) worldwide and supply cuts by major oil producers have put the world in the middle of “the first truly global energy crisis,” Fatih Birol, the head of the International Energy Agency (IEA), said.

The comments out of Riyadh and from the IEA are “a reminder that when it comes to the energy crisis, it’s far from over,” said Phil Flynn, an analyst at Price Futures Group. “There are still concerns the market is undersupplied.”

Uncertain economic activity in the United States and China, the world’s two biggest oil consumers, limited oil’s gains, however.

On Monday, government data showed China’s crude oil imports in September were 2% lower than a year earlier, while business activity contracted in the euro zone, Britain and the United States in October.

Goldman Sachs Chief Executive David Solomon said that he believes a US recession is “most likely,” while a recession could be occurring in Europe.

The US Federal Reserve could raise its benchmark overnight interest rate beyond the 4.50%-4.75% range if it does not see real changes in behavior, he said at the FII conference.

US crude stocks rose by about 4.5 million barrels for the week ended Oct. 21, according to market sources citing American Petroleum Institute figures on Tuesday. Gasoline inventories fell by about 2.3 million barrels, while distillate stocks rose by about 600,000 barrels.

US government data on crude stockpiles is due on Wednesday.

(Reporting by Stephanie Kelly; Additional reporting by Rowena Edwards and Mohi Narayan; Editing by Marguerita Choy, Paul Simao and David Gregorio)

Japan sees BOJ easing and gov’t FX intervention not contradictory

TOKYO, Oct 25 (Reuters) – Japanese Finance Minister Shunichi Suzuki said on Tuesday there was no policy contradiction between his ministry’s yen-buying to support the currency and the Bank of Japan (BOJ) printing money to sustain its ultra-loose monetary policy.

“Monetary easing aimed at sustainable and stable price hikes including wage growth, and currency intervention in response to excessive market moves, are different in terms of policy objectives, and thus they are not contradictory,” Suzuki said.

The central bank’s policy was aimed at achieving price stability, not targeting currencies, he said.

Suzuki made the remarks at a news conference when asked whether the BOJ’s monetary easing may cause excessive yen weakening and whether the policy mix between the government and the central bank was having the intended effects.

The BOJ is set to maintain ultra-low interest rates at its two-day policy meeting ending on Friday to support the fragile economy, even at the cost of accelerating an unwelcome fall in the yen to new 32-year lows.

Policymakers have voiced concerns about the impact of a weak yen on living costs. And investors regard the BOJ as an outlier for pursuing ultra-low rates while central banks elsewhere have raised rates to combat soaring inflation.

Global commodity costs stemming from Russia’s invasion of Ukraine and the weak yen account equally for rising prices, Suzuki said.

Japan has been conducting yen-buying interventions to defend the yen against sharp declines, which have been driven by the widening divergence between Japanese and US interest rates.

Japan likely spent up to 900 billion yen (USD 6 billion) on its second straight day of suspected currency intervention on Monday, bringing total yen-buying since last month to as much as 9.2 trillion yen, market estimates show.

Authorities’ so-called stealth intervention in rapid succession has underscored their resolve to fight what they have characterized as “intolerable and speculative” yen-selling, although the impact has proved short-lived.

IN TOUCH WITH US

Japanese authorities are in constant touch with US counterparts and stand ready to take appropriate action in the currency market against volatile yen moves, Suzuki said.

The minister repeated that the government would not tolerate excessively volatile yen moves driven by speculative trading.

Japan and the United States have reaffirmed a Group of Seven (G7) agreement on currencies, Suzuki said, adding that he and Yellen both believed currencies should be set by markets.

“If we leave unattended sharply volatile currency moves, driven by speculative trading, that would affect companies and households,” Suzuki said.

He also said Japan’s yen-buying intervention was aimed at smoothing market volatility, signaling that Tokyo was not targeting a specific currency level in deciding when to step into the market to buy yen.

(USD 1 = 148.8700 yen)

(Additional reporting by Daiki Iga; Writing by Leika Kihara and Tetsushi Kajimoto; Editing by Jacqueline Wong, Sam Holmes & Simon Cameron-Moore)

Unfazed by yen’s slump, BOJ seen keeping ultra-low rates

TOKYO, Oct 24 (Reuters) – The Bank of Japan is expected to raise its inflation forecasts on Friday but keep ultra-low interest rates steady in a show of resolve to support the fragile economy, even at the cost of accelerating an unwelcome fall in the yen to fresh 32-year lows.

Authorities have struggled to tame the yen’s relentless declines as investors focus on the BOJ’s ultra-low interest rates that make it an outlier among a global wave of central banks tightening policy to combat soaring inflation.

Given rising commodity prices and the boost to import costs from the yen’s slump, Japan’s core consumer inflation rate hit an eight-year high of 3% in September and is seen staying above the BOJ’s 2% target for the rest of this year, analysts say.

But with inflation modest compared with western nations and Japan’s economic recovery still fragile, the BOJ is set to leave intact its minus 0.1% target for short-term interest rates and the target for the 10-year bond yield at around 0% at its two-day policy meeting that ends on Friday.

“It’s hard to expect the BOJ to take monetary action to stem the yen’s fall as currency policy falls under the jurisdiction of the finance ministry,” said Mari Iwashita, chief market economist at Daiwa Securities.

Some market participants speculate the BOJ could tweak its dovish policy guidance amid growing public discontent over the weak-yen effect of its ultra-loose monetary policy.

“With the Fed determined to combat inflation, a minor policy tweak by the BOJ will do little to narrow the gap between US and Japanese monetary policy,” said Iwashita.

In fresh quarterly projections due on Friday, the BOJ is expected to slightly revise up its consumer inflation forecasts for the year ending in March 2023 and the following year, said five sources familiar with the bank’s thinking.

The upgraded forecast will still show core consumer inflation sliding below the BOJ’s 2% target next fiscal year as the impact of one-off factors, such as past rises in fuel costs, dissipate, the sources said.

The board will likely cut its growth forecasts for the current and following fiscal years, as global recession fears cloud the outlook for the export-reliant economy, they said.

Investors’ attention will be focused on Governor Haruhiko Kuroda’s post-meeting briefing for his views on the economic fallout from the yen’s sharp declines, and clues on the timing of an eventual exit from the ultra-loose policy.

In July, the BOJ forecast core consumer inflation to hit 2.3% in fiscal year 2022 before slowing to 1.4% the following year. It projects the economy to expand 2.4% in the current fiscal year and rise 2% in fiscal 2023.

(Reporting by Leika Kihara; Editing by Christian Schmollinger)

Dollar rises amid suspected BOJ intervention; pound choppy

NEW YORK, Oct 24 (Reuters) – The dollar edged higher on Monday despite another suspected foreign exchange intervention by Japan, while sterling was choppy after Rishi Sunak was picked to become Britain’s third prime minister in the last seven weeks, and China’s offshore yuan fell to a record low.

The yen hit a low of 149.70 per dollar overnight before surging to a high of 145.28 within minutes in a move that suggested the Bank of Japan (BOJ), acting for Japan’s Ministry of Finance, had stepped in again.

Yen overnight volatility surged to its highest since Sept. 21, the day before the BOJ stepped in to prop up the currency for the first time since 1998.

Japan likely spent a record 5.4 trillion to 5.5 trillion yen (USD 36.16 billion to USD 36.83 billion) in its yen-buying intervention last Friday, according to estimates by Tokyo money market brokerage firms.

The Japanese currency was last at 148.89, down 0.77% against the greenback.

The dollar held firm after the suspected BOJ intervention, but weakened, briefly turning negative, after S&P flash PMI data showed US business activity contracting for a fourth straight month in October, the latest evidence of an economy softening in the face of high inflation and rising interest rates.

The data may indicate that the dollar’s strong run is nearing its end, said Edward Moya, senior market analyst at OANDA.

“You had significant weakness in these flash PMIs. That to me was the big red flag,” he said. “The US economy has steadily been showing signs of strong resilience and now it seems like that is going away.”

In September, the Federal Reserve delivered its third straight 75-basis-point rate hike, and a fourth hike of that size is expected at next week’s policy-setting meeting, though how aggressive policymakers remain after that is up for debate.

The market is now waiting to see how much the economy is weakening and if the Fed will pause after hiking rates in December and February, Moya said.

At 3:30 p.m. EDT (1930 GMT), the dollar =USD was up 0.089% at 111.93 against a basket of six peer currencies.

Sterling GBP= see-sawed after Sunak, the country’s former chancellor,
was appointed leader
of Britain’s Conservative Party, clearing the way for him to become the next prime minister.

“However Sunak’s premiership unfolds, there are likely to be more difficult times ahead for the UK economy as it grapples its way out of a worsening downturn and even the prospect of a general election,” said Giles Coghlan, chief market analyst at HYCM.

“That said, there is one aspect of help for the GBP that is often overlooked. On the other side of the Atlantic, a slowdown in Federal Reserve policy would likely help lift the GBP as much, if even not more, than UK fiscal policy.”

Sterling was last down 0.16% at USD 1.12915, off an overnight high above USD 1.14.

The euro was last up 0.18% at USD 0.98805, while China’s offshore yuan plummeted to a new record low against the dollar of 7.3322.

Chinese President Xi Jinping secured a precedent-breaking third leadership term, picking a top governing body stacked with loyalists. Xi is likely to stick to his zero-COVID policy and could favor the state over private-sector growth, analysts say.

(Reporting by John McCrank in New York; additional reporting by Amanda Cooper in London; Editing by Bernadette Baum, Kirsten Donovan and Paul Simao)

US recap: EUR/USD overcomes PMI problems en route to marginal gains

Oct 24 (Reuters) – The dollar index gained 0.18% on Monday, mostly due to the USD/JPY rebounding from another round of suspected Japanese intervention and sterling slipping despite less political instability.

But euro zone nZRN005DP0, UK and US flash October PMI reports featured increasing stagflation, with recession and inflation risks rising simultaneously.

EUR/USD held onto gains of 0.1% after earlier trading up to 0.9899, its highest since Nov. 6, on follow-through risk-on flows from Friday, aided somewhat by tumbling gilts yields weighing on euro zone and US yields.

Gilts yields out to 10-years tumbled nearly 30bp in anticipation of ex-finance minister Rishi Sunak’s Tory leadership victory, which leaves him on a path to become Britain’s next prime minister.

His reputation for fiscal restraint helped gilts rise, because a less expansive fiscal policy in tandem with sharp BoE tightening reduces inflation expectations, but it may also increase recession risk.

The UK’s service sector contracted for the first time in 20 months. Thus, tumbling yields may no longer be supportive for sterling as the gilts yield premia versus Treasurys and bunds from late September has evaporated.

For the oversold dollar to reverse its Fed-led uptrend, top-tier US inflation, growth and labor data would have to signal a clearer pivot from Fed hikes to eventual rate cuts next year.

The S&P Global PMI data has bearishly diverged from the more heavily traded ISM reports, limiting the impact of Monday’s report.

The recent retreat in European nat gas prices toward June’s lows offers the euro some offset from the war in Ukraine, that now include Russia’s “dirty bomb” warnings amid a pitched battle for the highly strategic Kherson province.

USD/JPY gained 0.79%, with suspected Japanese intervention dips still being bought, but another run above 150 seemingly being guarded against by the MoF.

USD/CNH’s risk-off 1.3% rise after the Communist Party’s 20th Congress ended left the Australian dollar and other China-related currencies down sharply as well.

Tuesday brings German Ifo, US house prices and consumer confidence.

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

Gold dips as strong US dollar, yields dent appeal

Oct 24 (Reuters) – Gold prices slipped on Monday, weighed down by a firm dollar and elevated US bond yields, while expectations of another hefty rate hike by the Federal Reserve kept investors on the sidelines.

Spot gold fell 0.5% to USD 1,648.60 per ounce by 1:50 p.m. ET (1750 GMT). US gold futures settled 0.1% lower at USD 1,654.10.

The dollar gained 0.2% against its rivals, making greenback-priced bullion more expensive for overseas buyers, while benchmark 10-year Treasury yields hovered near their recent peak.

“The market is still in wait-and-see mode… what will the Fed signal as far as the weakness they’re seeing in the economy… that for the short term should be somewhat supportive for gold,” said Edward Moya, senior analyst with OANDA.

But “inflation is a hard beast to kill. The Fed is going to take its time with these rate hikes before signalling that pivot.”

Markets have priced in a 75-basis-point interest rate hike by the Fed in November, but are now scaling back bets for a similar hike in December after reports that Fed officials will likely debate the size of future increases.

A survey showed US business activity contracted for a fourth straight month in October, the latest evidence of an economy softening in the face of high inflation and rising interest rates.

“Gold could potentially rally to USD 2,250 per ounce in case of a sizable US recession and fall to USD 1,500 per ounce in an ultra-hawkish Fed scenario,” Goldman Sachs said in a note.

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

Elsewhere, spot silver shed 1.1% to USD 19.18 per ounce.

Palladium dropped 2.5% to USD 1,968.58, while platinum slipped 1.3% to USD 919.67.

“Within platinum group metals, we see the biggest downside risks in palladium, which remains elevated despite the lack of physical tightness and long-term demand risk from platinum substitution,” Goldman Sachs added.

(Reporting by Kavya Guduru in Bengaluru; Editing by Sandra Maler)

European stocks rise on hopes of Fed pause; eyes on ECB meeting

Oct 24 (Reuters) – European shares rose on Monday on hopes the Federal Reserve could slow its pace of interest rate hikes, while investors welcomed Rishi Sunak’s victory in Britain’s prime ministerial race and looked ahead to a key rate decision from the European Central Bank.

The continent-wide STOXX 600 index closed 1.4% up at its highest level in nearly a week, with utilities, media, and travel and leisure sectors leading the gains.

Wall Street’s main indexes rallied on Friday after a report said the Fed would likely debate a smaller rate hike in December.

“While it is encouraging that Fed officials have started to point to an end in sight for rate rises, such a pause will remain conditional on a fading inflation and a cooling labor market. This has yet to be seen in the data,” said Mark Haefele, chief investment officer at UBS Global Wealth Management.

“We believe the full effects of restrictive monetary policy for the economy and corporate profits are not yet well reflected in consensus forecasts – leading to potential disappointments ahead.”

Further boosting sentiment, Sunak looked set to become the Britain’s next prime minister after he won the race to lead the Conservative Party, which analysts said had relieved some of the nervousness around the outlook for the UK economy. Britain’s blue-chip FTSE 100 rose 0.6%, while gilts jumped.

“Time will tell how this plays out in the medium to longer term, but in the short run the rapid decision on Sunak is one the market seems to be applauding. At least we’ve checked that box and can move on to other things to be concerned about,” said Art Hogan, chief market strategist at B. Riley Wealth in New York.

A survey showed euro zone business activity contracted at the fastest pace in nearly two years in October as the cost of living crisis kept consumers cautious and sapped demand.

Focus this week will be on the European Central Bank’s policy meeting where it is likely to hike interest rates by another jumbo 75 basis points as it tries to contain inflation running at five times its target, a Reuters poll found.

Among individual stocks, Dutch technology investor Prosus tumbled 17.3%, tracking weakness in Hong Kong tech giants, after Chinese President Xi Jinping’s newly unveiled leadership team heightened fears that economic growth might be sacrificed for ideology-driven policies.

Asia-focussed insurer Prudential Plc slid 9.3%, while banks HSBC and Standard Chartered fell about 0.6% and 1% respectively.

Philips dipped 1.5% after the Dutch medical equipment maker said it expected to scrap around 4,000 jobs and warned supply chain problems would continue to weigh on sales in the last months of 2022.

(Reporting by Sruthi Shankar and Devik Jain in Bengaluru; Editing by Shailesh Kuber and Mark Potter)

Oil prices ease on Chinese demand data, stronger dollar

NEW YORK, Oct 24 (Reuters) – Oil settled lower in choppy trade on Monday as data showing demand from China remained lackluster in September and a strong US dollar weighed, while weakening US business activity data eased expectations for more aggressive interest rate hikes and limited price decline.

Brent crude futures for December delivery settled at USD 93.26 a barrel, down 24 cents, 0.3%, after rising 2% last week. US West Texas Intermediate crude lost USD 84.58 a barrel, losing 47 cents, 0.6%. Both benchmarks had fallen by USD 2 a barrel earlier in the session.

Although higher than in August, China’s September crude imports of 9.79 million barrels per day were 2% below a year earlier, customs data showed on Monday, as independent refiners curbed throughput amid thin margins and lackluster demand.

“The recent recovery in oil imports faltered in September,” ANZ analysts said in a note, adding that independent refiners failed to utilize increased quotas as ongoing COVID-related lockdowns weighed on demand.

Uncertainty over China’s zero-COVID policy and property crisis are undermining the effectiveness of pro-growth measures, ING analysts said in a note, even though third-quarter gross domestic product growth beat expectations.

Ongoing strength in the US dollar, which was up again for part of the trading session following another suspected foreign exchange intervention by Japan, also posed problems for oil prices. A stronger dollar makes oil more expensive for non-US buyers.

“Further dollar strength would weigh on WTI values with a test of our expected downside at the 79.50 mark likely by week’s end,” said Jim Ritterbusch of Ritterbusch and Associates.

Oil prices regained some ground after data that showed US business activity contracted for a fourth straight month in October, with manufacturers and services firms in a monthly survey of purchasing managers both reporting weaker client demand.

POSITIVE SIGNAL

S&P Global said its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, fell to 47.3 this month from a final reading of 49.5 in September.

That weakening could indicate that the US Federal Reserve’s interest rate increases to fight inflation have been working and may persuade it to slow its rate hike policies, a positive signal for fuel demand, said Phil Flynn, an analyst at Price Futures group.

“The miss on the PMI number is a sign that the economy may be slowing a bit, which turns out to be bullish,” Flynn said.

Brent rose last week despite US President Joe Biden announcing the sale of a remaining 15 million barrels of oil from the Strategic Petroleum Reserves, part of a record 180 million-barrel release that began in May.

Biden added that his aim would be to replenish stocks when US crude is around USD 70 a barrel.

But Goldman Sachs said the stocks release was unlikely to have a large impact on prices.

“Such a release is likely to have only a modest influence (<USD 5/bbl) on oil prices”, the bank said in a note.

(Adttional reporting by Noah Browning and Florence Tan; Editing by Marguerita Choy, David Holmes and Cynthia Osterman)

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