Gold steadies as dollar stalls; focus on Jackson Hole event

Aug 24 (Reuters) – Gold steadied on Wednesday as the dollar gave up some gains from earlier in the session, while investors await the Jackson Hole central bankers’ event for clues on rate hikes.

Spot gold was up 0.1% at USD 1,749.35 per ounce by 2:29 p.m. ET (1829 GMT). It rose as much as 1% in the previous session.

US gold futures settled unchanged at USD 1,761.5.

Helping gold reverse some initial declines, the dollar stalled around the 108.6 level, after climbing as high as 109.112 earlier in the session.

A stronger dollar tends to dull appetite for gold among overseas buyers.

“The market is relatively quiet. Metal traders are waiting to see what comes out of the Jackson Hole meet and want to know more about Fed’s rate hike path,” said Bob Haberkorn, senior market strategist at RJO Futures.

Market participants await US Federal Reserve Chair Jerome Powell’s speech at the Jackson Hole Economic Policy Symposium on Friday. The speech could throw some light on the Fed’s monetary policy tightening path.

Gold tends to perform poorly if rates rise, as it yields no interest.

“Whether gold breaks USD 1,730 or not may well depend on what Powell has to say as well as whether traders are in the mood to listen, should he stick to his colleague’s hawkish script,” Craig Erlam, senior market analyst at OANDA wrote in a note.

Investors also await estimates for US second-quarter gross domestic product, and July consumer spending data due later this week.

Spot silver fell 0.7% to USD 19.03 per ounce.

“A mix of negative factors, including fear of recession, rising interest rates and a strong dollar, hit the price of the industrial metal hard,” aid Carlo Alberto De Casa, external analyst for Kinesis Money.

Platinum fell 0.6% to USD 874.64 per ounce while palladium rose 2.5% to USD 2,029.21.

(Reporting by Ashitha Shivaprasad and Seher Dareen in Bengaluru; Editing by Shinjini Ganguli and Vinay Dwivedi)

China regulator warns banks against yuan selling – sources

SHANGHAI/BEIJING, Aug 24 (Reuters) – China’s foreign exchange regulator phoned several banks on Wednesday to warn them against aggressively selling the Chinese currency, people with direct knowledge of the matter said, in a new sign of official discomfort with recent yuan weakness.

The Chinese yuan has been dropping against the dollar, and market participants said the telephone calls suggested authorities may be getting uncomfortable with the speed of the slide. The yuan jumped to 6.8605 per dollar in offshore trade after Reuters published news of the calls.

The currency hit a two-year low at 6.8704 earlier on Wednesday and is down about 1.8% in August so far, partly a reflection of gains in the greenback as U.S. interest rates rise, but also in response to China’s slowing economy.

“Buying too heavily in the dollar ended up with a call from the central bank,” said one of the sources at a bank.

Four people familiar with the calls requested anonymity as they were not authorized to discuss them publicly. They did not provide further details about the calls, either.

Responding to a Reuters request for comment about the regulator contacting banks earlier on Wednesday, the State Administration of the Foreign Exchange (SAFE) said it had not seen institutions unreasonably buying large amounts of foreign exchange in August, when market supply and demand were stable.

It added the yuan remained resilient compared with other non-dollar currencies, following recent rapid dollar gains, while China’s robust trade surplus and utilisation of foreign capital continued to play a fundamental role in stabilising cross-border flows.

“Foreign exchange expectations are stable, which helps to keep the yuan exchange rate basically stable at reasonable and balanced levels,” the SAFE said in an emailed statement to Reuters.

The yuan’s August’s slide is the steepest since April, when China cut banks’ currency reserve requirements to support the yuan.

Earlier on Wednesday, Chinese state media cited market analysts as saying that the yuan has no basis for long-term depreciation, but officials have thus far been publicly quiet on the market moves.

Ken Cheung, chief Asian FX strategist at Mizuho Bank, said the regulator’s move suggested that yuan depreciation expectations had started to pick up.

“The authorities may want to stabilise the market expectations before guiding the yuan to weaken in an orderly manner,” Cheung said.

Recent economic indicators showed that the Chinese economy is in the doldrums, with the latest alarm bell a record surge in unemployment payouts for June.

The country’s robust exports – the sole bright spot – could also face pressure from faltering global demand.

Outflows from the bond market and surprise cuts to two key interest rates last week also have put mounting pressure on the yuan, as yields and policy rates diverge from other big economies, where inflation is prompting hikes.

(Reporting by the Shanghai and Beijing Newsroom; Editing by Toby Chopra and Hugh Lawson)

Euro edges back towards two-decade low as energy supply crunch adds to growth fears

LONDON, Aug 24 (Reuters) – The US dollar recouped some data-inspired losses on Wednesday and edged back towards recent peaks, while the euro remained under pressure amid growing recession fears fuelled by a possible energy supply crunch.

Disappointing US services and manufacturing surveys released on Tuesday and a plunge in new home sales saw the dollar take a breather, after a run that pushed the US currency to its strongest level against the euro in two decades.

But Europe has its own growth concerns, stemming from its greater exposure to Russian gas supplies as the region seeks to refuel ahead of winter.

Front-month Dutch gas, the benchmark for Europe, rose again on Wednesday morning as the prospect of a halt to supplies from the Nord Stream 1 pipeline kept investors on edge.

On Friday, Russian state energy firm Gazprom said Russia will halt natural gas supplies to Europe for three days through Nord Stream 1 due to unscheduled maintenance.

The euro briefly bought USD 1 on Tuesday, but was back under pressure at USD 0.9950 in early European trade – barely above Tuesday’s low of USD 0.99005.

“It’s very difficult for the market to push the euro back above parity,” said Simon Harvey, head of FX analysis at Monex Europe, citing Europe’s energy supply concerns and the prospect of a hawkish Federal Reserve later in the week.

The Kansas City Federal Reserve’s Jackson Hole Symposium kicks off on Thursday with all eyes on a speech from Fed Chair Jerome Powell scheduled on Friday.

The dollar index, which measures its performance against a basket of six currencies, was last up 0.1% at 108.66, within touching distance of July’s two-decade peak of 109.29.

“Market participants remain squarely focused on Friday’s Jackson Hole Symposium as this week’s main event,” said Michael Brown, head of market intelligence at Caxton in London.

“With a hawkish Chair Powell likely on Friday, I’d expect the buck to resume its recent rally before too long,” Brown added, saying he expects the dollar index to breach its July high.

Overnight, Minneapolis Fed Bank President Neel Kashkari repeated the need for more aggressive rate hikes to control inflation.

Meanwhile, cyclical currencies such as the Australian and New Zealand dollars were under pressure amid fears of a global growth slowdown.

The Aussie was down 0.15% at USD 0.6920 and the kiwi slumped 0.23% to USD 0.6199.

The British pound hovered above the 2-1/2 year low of USD 1.1718 reached on Tuesday, while the Japanese yen traded up 0.2% at 136.48 per dollar.

(Reporting by Samuel Indyk in London, additional reporting by Rae Wee in Singapore, Editing by Tomasz Janowski)

Oil steady as fears of imminent OPEC+ output cut fade

Aug 24 (Reuters) – Oil prices were little changed on Wednesday as the market grappled with supply concerns amid the sanctioning of Russian shipments and the initial shock of comments that major producers would cut output wore off.

Brent crude futures for October settlement were down 6 cents, or 0.06%, to USD 100.16 a barrel, after rising 3.9% on Tuesday.

US West Texas Intermediate crude for October delivery were up 9 cents, or 0.1%, at USD 93.83 a barrel, having jumped 3.7% the previous day.

Both contracts soared after the energy minister of Saudi Arabia, the de facto leader of the Organization of the Petroleum Exporting Countries (OPEC), flagged the possibility the group would cut supply to balance a market he described as “schizophrenic”, with the paper and physical markets becoming increasingly disconnected.

“While Abdulaziz bin Salman’s comment may have achieved more than putting a floor under crude prices, we expect it to follow the law of diminishing returns, unless it is followed up by more signals or action from OPEC+ to restrain output,” said Vandana Hari, founder of oil market analysis provider Vanda Insights.

With OPEC+ already delivering about 2.8 million barrels-per-day less than its monthly target, the maths of cutting production is going to be more complicated than usual, not to mention the politics of it, Hari added.

Potential output cuts from OPEC and its allies, known as OPEC+, may not be imminent and are likely to coincide with the return of Iran to oil markets should that country clinch a nuclear deal with the West, nine OPEC sources told Reuters on Tuesday.

A senior US official told Reuters on Monday that Iran had dropped some of its main demands on resurrecting a deal.

“Tuesday’s rally was overdone as many investors knew it would take several months for Iranian oil to flow into the international market even if an agreement to revive Tehran’s 2015 nuclear deal was made, meaning OPEC+ would not trim output so quickly,” said Kazuhiko Saito, chief analyst at Fujitomi Securities.

“Still, there is not much room for the market’s downside due to robust heating fuel demand for the winter,” he said, citing that the recent rally in the US heating oil market and surging natural gas prices boosted expectations for stronger heating oil demand and tighter crude supply.

US gas prices shot above USD 10 for the first time in about 14 years due to a surge in prices in Europe, where tight supplies persist.

Underlining tight supply, US crude stockpiles fell by about 5.6 million barrels for the week ended Aug. 19., according to market sources citing American Petroleum Institute figures on Tuesday, against analysts’ estimate of a drop by 900,000 barrels in a Reuters poll.

But gasoline inventories rose by about 268,000 barrels, while distillate stocks increased by about 1.1 million barrels.

(Reporting by Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by Christopher Cushing, Kim Coghill and Christian Schmollinger)

Oil ends higher on US response to Iran nuclear deal comments

Aug 24 (Reuters) – Oil prices ended Wednesday higher after a volatile trading session on concerns that the United States will not consider additional concessions to Iran in its response to a draft agreement that would restore Tehran’s nuclear deal – and potentially the OPEC member’s crude exports.

Iran said it had received a response from the United States to the EU’s “final” text for revival of Tehran’s 2015 nuclear deal with major powers.

Brent crude settled up USD 1.00 to USD 101.22 while US crude settled up USD 1.15 to USD 94.89 a barrel. Both benchmarks fell by more than USD 1 earlier in the session.

Oil was also supported after Saudi Arabia suggested this week that the Organization of the Petroleum Exporting Countries could consider cutting output, though bearish economic signals from central bankers and falling equities weighed.

Both crude oil benchmark contracts touched three-week highs earlier on Wednesday after the Saudi energy minister flagged the possibility of cutting production.

OPEC sources later told Reuters that any cuts by the producer group and its allies, known collectively as OPEC+, are likely to coincide with a return of Iranian oil to the market should Tehran secure a nuclear deal with world powers.

A US official on Monday said that Iran had dropped some of its main demands in negotiations to resurrect a deal to rein in Tehran’s nuclear programme.

OPEC+ is already producing 2.9 million barrels per day less than its target, sources said, complicating any decision on cuts or how to calculate the baseline for an output reduction.

“The oil price and supply outlook suggest that an OPEC+ cut is not currently warranted,” PVM analyst Stephen Brennock said.

“Global oil supply could take a hit as peak US hurricane season approaches. Elsewhere, future supply outages in Libya cannot be discounted while Nigeria’s oil fortunes show little sign of improving.”

Earlier in the session oil prices fell after US government data showed lackluster demand for gasoline, which augurs for a notable slowdown in economic activity. Gasoline demand data showed the four-week average of daily gasoline product supplied 7% below the year-earlier period.

“The plummeting demand for gasoline is dragging the market down,” said Andy Lipow, president of Lipow Oil Associates in Houston, Texas.

(Additional reporting by Shadia Nasralla in London, Mohi Narayan in New Delhi and Yuka Obayashi in Tokyo; Editing by David Goodman, Marguerita Choy and Hugh Lawson)

Gold tepid as dollar firms with focus on Jackson Hole symposium

Aug 24 (Reuters) – Gold prices were subdued on Wednesday, as the US dollar strengthened after hawkish comments from a Federal Reserve official kept investors cautious ahead of Jackson Hole symposium due later this week.

Spot gold was down 0.1% at USD 1,746.18 per ounce, , after rising 0.7% in the previous session.

US gold futures eased 0.1% to USD 1,769.20.

The dollar firmed near recent peak against its rivals, making gold more expensive for buyers holding other currencies.

Fed Chair Jerome Powell’s speech at the annual global central banking conference in Jackson Hole, Wyoming on Friday will be keenly watched for more cues on future interest rate hikes.

“We’re seeing the market digest the correction after six days of losses with speech from Powell on Friday being an important thing to markets at this point, expecting some kind of a guidance, or framework about the Fed policy,” said Ilya Spivak, a currency strategist at DailyFX.

“Overall, macro environment is materially not very much different. At this stage, the bias remains very much bearish for gold.”

Minneapolis Federal Reserve Bank President Neel Kashkari was the latest official to reiterate the US Fed’s focus on controlling inflation ahead of all else.

The US central bank has raised its benchmark overnight interest rate by 225 basis points in total since March to contain inflationary pressures and has noted that further tightening would depend on economic data points.

Sales of new US single-family homes plunged to a 6-1/2-year low in July, while a survey from S&P Global showed its measure of private sector business activity fell to a 27-month low, suggesting Fed efforts to tame inflation were working.

Higher interest rates increase the opportunity cost of holding non-yielding bullion.

Indicative of sentiment, holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% to 984.38 tonnes on Tuesday.

Spot silver fell 0.6% to USD 19.05 per ounce, platinum slipped 0.4% to USD 875.95, while palladium eased 0.2% to USD 1,976.28.

(Reporting by Brijesh Patel in Bengaluru; Editing by Subhranshu Sahu, Sherry Jacob-Phillips and Rashmi Aich)

S&P 500 seen a little higher by end of 2022 – strategists

NEW YORK, Aug 24 (Reuters) – The S&P 500 will end the year a little above its current level after a recent rally that has lifted the index from its bear market lows, according to a new Reuters poll of strategists.

Stronger-than-expected corporate earnings and forecasts, along with optimism the US Federal Reserve may avoid crippling the economy as it hikes interest rates in its fight against decades-high inflation, have lifted the S&P 500 about 13% from lows in mid-June.

The benchmark will end this year at 4,280, according to the median forecast of nearly 50 strategists polled by Reuters during the last two weeks. That is 3.4% higher than Monday’s close of 4,137.99.

That median forecast for 2022 was down from a forecast of 4,400 in a Reuters poll conducted in late May.

Strategists in the latest Reuters poll expected the S&P 500 to continue to rise in 2023, and hit 4,408 by mid-year, according to the poll’s median forecast.

Professional investors and analysts have historically had poor track records predicting stock market returns, but their forecasts provide a valuable glimpse of sentiment on Wall Street.

The S&P 500 remains down about 13% this year so far after tumbling into its second bear market since the 2020 global sell-off caused by the coronavirus pandemic.

Slightly over half the strategists in the poll expected more downside risks to their forecast than upside, while most strategists polled expected market volatility to rise rather than decline in the coming three months.

“Going into September, that’s a murky month for equities,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “I would suggest we could then see a pullback somewhat, but nothing that would suggest we would make new lows, because I believe the market has made a low.” Cardillo sees the S&P 500 ending the year at 4,350.

“Toward the end of the year, we could begin to rally. The Fed is not going to get overly aggressive. I see signs of inflation coming down, and I believe the labor market will soon begin to weaken, and that should alleviate the Fed from getting overly aggressive.”

The Fed has lifted its benchmark overnight interest rate by 2.25 percentage points this year as it tries to curb decades-high inflation, and investors continue to weigh how aggressive the US central bank may need to be going forward.

Investors are hoping the Fed may shed light on how big future rate hikes might be and how strong the economy is when central banking heavyweights, including Fed Chair Jerome Powell, meet this week for their annual symposium in Jackson Hole, Wyoming.

“We say there’s a 50/50 chance there’s going to be recession next year. Will the Fed stay active if we go into a recession? That’s what we don’t know,” said John Augustine, chief investment officer at Huntington National Bank in Columbus, Ohio. “We have to hear more from Powell.”

Recent corporate earnings have supported stocks. With results in from most of S&P 500 companies, second-quarter earnings are expected to have climbed 8.8% from a year ago, above the 5.6% estimated on July 1, according to IBES data from Refinitiv IBES.

Analysts’ estimates for full-year profit growth have come down slightly since the start of July, but they still forecast growth of 8% for 2022, the data showed.

Investors have worried whether profits can grow fast enough to support stock valuations, especially with the recent rally. The S&P 500’s forward 12-month price-to-earnings ratio is now at about 18 compared with 22 at the end of December and its long-term average of about 16, according to Refinitiv data.

Based on the poll, the Dow Jones industrial average will finish the year at 34,200, up about 3.4% from Monday’s close.

(Reporting by Noel Randewich in San Francisco, and Caroline Valetkevitch, Stephen Culp, Sinead Carew, Chuck Mikolajczak and Alden Bentley in New York; additional polling by Sujith Pai, Mumal Rathore and Sarupya Ganguly in Bengaluru; Editing by Tomasz Janowski)

Dollar slides as private sector activity data misses expectations

NEW YORK, Aug 23 (Reuters) – The dollar edged back from a fresh two-decade high against the euro on Tuesday after data showed US private sector activity was weaker than expected in August, prompting bets the Federal Reserve may be less aggressive in its rate hiking cycle.

Against a basket of six major currencies, the dollar index was down 0.376% at 108.58 at 3:30 p.m. Eastern time (1930 GMT). The index earlier touched 109.27, its strongest level since hitting a two-decade high in mid-July.

The S&P Global flash composite purchasing managers index (PMI) for August dropped to its lowest since May 2020, as demand for services and manufacturing contracted for the second-straight month in the face of high inflation and tighter financial conditions.

The drop in demand was exactly what the Fed has been trying to achieve with its stiffest run of interest rate hikes since the 1980s. The Fed has hiked rates from near zero in March to the current range of 2.25% to 2.50%, with more increases planned in the months ahead, as it tries to pull inflation back from a 40-year high.

“The manufacturing and services PMI came in well below expectations which are raising concerns about how strong this economy is and supporting the narrative that Fed Chair (Jerome) Powell might be more inclined to deliver that pivot and slow the pace of tightening,” said Ed Moya, senior market analyst at Oanda.

Traders are currently pricing in a 47.5% chance the Fed will raise interest rates by 50 basis points (bps) in September and a 52.5% chance it will raise them by 75 bps.

That could change when Powell speaks on Friday in Jackson Hole, Wyoming, where central bankers from around the globe will be gathered for the Fed’s annual economic symposium.

With inflation still running hot, Powell will likely lay out a fairly hawkish outlook for monetary policy that could prompt traders’ to more strongly favor the likelihood of a 75 bps rate hike for September, said Matt Weller, global head of research at Forex.com and City Index.

If “Powell comes off as hawkish as we expect on Friday, traders are likely to hop back on the bullish dollar bandwagon sooner rather than later,” he said.

The euro was up 0.19% against the greenback at USD 0.99625, rising off a fresh two-decade low of USD 0.99005 hit earlier in the session on renewed concerns that an energy shock continues to stoke inflation, making it more likely that Europe will fall into a recession.

PMI data showed that business activity in Europe contracted less than forecast in August, though the outlook was still bleak.

The single currency is down around 12% so far this year and has shed almost 3% in August.

China’s yuan meanwhile weakened to a two-year low and sterling briefly touched its weakest since March 2020.

Sterling recovered some ground after the PMI data and was up 0.49% against the greenback at USD 1.18255, after having fallen as low as USD 1.1718 earlier in the day.

China’s yuan CNY=CFXS fell to an almost two-year low of 6.853 per dollar as Beijing’s steps to easy policies to revive faltering growth and the Federal Reserve’s relentless tightening streak kept the pressure on the Chinese currency.

(Reporting by John McCrank in New York; Additional reporting by Dhara Ranasinghe in London; Editing by Clarence Fernandez, Nick Zieminski and Josie Kao)

US recap: Dollar’s PMI troubles lift EUR/USD from 20-year low

Aug 23 (Reuters) – The dollar index fell on Tuesday, tumbling from the brink of July’s 20-year peak of 109.29 after data showed US services PMI slid further into contraction and new home sales plunged, raising questions about the future of aggressive Fed tightening.

Caution ahead of the Fed Chair Jerome Powell’s Jackson Hole speech and PCE data limited the dollar’s descent, but the damage was done.

The dollar retreat was a reprieve for EUR/USD, which had earlier struck a 20-year low at 0.99005 on EBS following recessionary euro zone PMI data.

Shorts covered after EUR/USD held above the 0.9900 level, but its rebound ran out of steam at 1.0018.

ECB board member Fabio Panetta said the ECB must be prudent with rate hikes as recession risk is rising nF9N2Z000P.

Treasury yields and the dollar rebounded in late trading with the market unwilling to bet against the Fed raising rates by about 125bp by year-end, as a September hike of 50bp or 75bp remains a toss-up.

In addition to this week’s events, August non-farm payrolls, CPI, and retail sales reports will add to the data set before the Sept. 21 Fed meeting. Fed speakers have gone out of their way since the last meeting to emphasize their focus on taming inflation.

GBP/USD gained 0.46%, reversing most of its early losses down to 1.1718, its lowest low since March 2020’s pandemic plunge. UK data were also dreary, but markets see the BoE potentially overtaking the Fed in the rate-hike race.

USD/JPY was down 0.48%, after a fall from early 137.705 EBS session highs to post-US data miss 135.82 lows that drew in dip buying ahead of Friday’s lows and key converged 30- and 50-day moving averages. Its outlook hangs in the balance ahead of Jackson Hole.

The Canadian and Australian dollars gained about 0.75 and 0.6%%, largely on the US data misses, giving back only a modest portion of their gains.

AUD/USD found support for a third consecutive session by the 61.8% Fibo of the July-August rise at 0.6856.

Bitcoin was little changed after last week’s beating.

Wednesday features US durable goods orders and pending homes sales. There will also be some attention on Ukraine’s Independence Day, which some worry could trigger a Russian military response.

Oil prices surged on OPEC+ perhaps looking to cut production, while natural gas prices fell back from Monday’s extreme highs.

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

Gold rises as dollar, Treasury yields fall after poor US data

Aug 23 (Reuters) – Gold rose on Tuesday after six straight sessions of losses as the dollar and Treasury yields dropped following weak US business activity data.

Spot gold was up 0.7% at USD 1,747.00 per ounce by 1:43 p.m. ET (1743 GMT). Prices slipped in the last six sessions and hit USD 1,727.01 on Monday, the lowest since July 27.

US gold futures settled up 0.7% at USD 1,761.2.

Private-sector business activity in the United States contracted for a second straight month in August to its weakest in 18 months.

“The data indicates a major contraction, showing the economy has weakened quickly, opening the door to the idea that the Fed might not be that aggressive, further helping gold,” said Edward Moya, senior analyst with OANDA.

The dollar index slipped 0.5%, making gold cheaper for overseas buyers, while a decline in US Treasury yields made the yellow metal more attractive by lowering the opportunity cost of holding it.

Focus is now on Fed Chair Jerome Powell’s speech at an annual global central banking conference in Jackson Hole, Wyoming, on Friday.

Bullion tends to suffer in a high-rate environment as it yields no interest.

“If (gold) prices are able to breach USD 1,724, a selloff towards USD 1,700 is on the cards. Alternatively, a move back above USD 1,752 may open a path towards USD 1,770 and USD ,1800, respectively,” FXTM analyst Lukman Otunuga said.

Meanwhile, business activity across the euro zone contracted for a second straight month in August as the cost of living crisis forced consumers to curtail spending while supply constraints continued to hurt manufacturers, a survey showed.

“Europe is going into a recession, China is seeing a slowdown. Gold is eventually going to see some safe-haven trade again,” Moya added.

Spot silver rose 0.5% to USD 19.10 per ounce, platinum was also up 0.5% at USD 879.94, while palladium fell 0.6% to USD 1,983.37.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Shounak Dasgupta and Vinay Dwivedi)

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