Gold rebounds on heightened US-China tensions

Aug 3 (Reuters) – Gold prices rose on Wednesday drawing on support from escalating tensions between Beijing and Washington, although firmer US Treasury yields capped gains in the non-yielding asset and held it below a one-month high hit in the last session.

Spot gold rose 0.3% to USD 1,765.68 per ounce by 0839 GMT. On Tuesday, bullion rose to its highest since July 5, hitting USD 1,787.79 before closing down 0.6% on the day to break a four-session winning streak.

US gold futures fell 0.4% to USD 1,782.90.

“Apart from heightened geopolitical tensions caused by Pelosi’s Taiwan visit, the fact that gold is able to shrug off rising bond yields today is a positive sign,” said Commerzbank analyst Carsten Fritsch.

China condemned House of Representatives Speaker Nancy Pelosi’s trip, the highest-level US visit to Taiwan in 25 years, and responded with a flurry of military exercises, summoning the US ambassador in Beijing, and announcing the suspension of several agricultural imports from Taiwan.

Rupert Rowling, market analyst, at Kinesis Money, however, expected the impact of the tensions to be short-lived.

“Market focus will return to interest rates and the negative long-term impact that is likely to have on gold.”

A trio of Fed policymakers signaled on Tuesday that more rate hikes are coming in the near term, which has lifted benchmark US 10-year Treasury yields and taken some shine off gold.

In this environment of ever-rising interest rates, gold’s appeal diminishes due to its lack of yield, Rowling said, noting that the Bank of England was expected to raise its benchmark rate by 50 basis points on Thursday.

Among other precious metals, spot silver fell 0.3% to USD 19.89 per ounce, while palladium rose 0.3% to USD 2,069.70.

Platinum eased 0.1% to USD 892.94.

(Reporting by Arundhati Sarkar in Bengaluru; Editing by Tomasz Janowski)

Dollar dips as investors parse Fed hints on rate hikes

LONDON, Aug 3 (Reuters) – The US dollar edged lower on Wednesday but held on to most of the previous day’s gains, after leaping on Federal Reserve officials’ hints at aggressive rate hikes and drawing support amid a US-China flare-up over Taiwan.

The dollar index, which tracks the greenback against six major peers, has softened from a two-decade high in mid-July as investors reined in expectations of Fed rate hikes.

But a trio of Fed officials signaled on Tuesday the central bank remains “completely united” on increasing rates to a level that will put a dent in the highest US inflation since the 1980s, lifting the dollar index 0.8% that day.

The index pared back slightly on Wednesday, down a quarter of a percent at 106.160.

Frictions after the highest level US visit to Taiwan in 25 years are likely to help support the safe haven US dollar for now, currency analysts said.

China furiously condemned House of Representatives Speaker Nancy Pelosi’s visit and began six days of military drills surrounding Taiwan, as Pelosi hailed the self-ruled island as “one of the freest societies in the world”.

Barring a further escalation, US rate hike bets are likely to remain the key driver of dollar moves, analysts said.

“It was clear that Fed officials had thought market participants had gone too far in paring back rate hike expectations,” currency analysts at MUFG said in a note. “The hawkish Fed comments had an immediate impact.”

US monthly jobs data due on Friday will help set the tone for the greenback, analysts said.

The Japanese yen – which had lost more than 1% versus the dollar on Tuesday – was broadly flat on the day at 133.130 yen per dollar.

The euro gained 0.2% to USD 1.01855 EUR=EBS, despite fresh data showing business activity in the euro zone contracted slightly in July as consumers reined in spending in the face of soaring price rises.

Sterling also gained ground on the dollar, up 0.3% at USD 1.21940, retracing some of its losses after a nearly 1% slide the previous day.

(Reporting by Iain Withers, Additional reporting by Kevin Buckland in Tokyo and Rae Wee in Singapore, Editing by Andrew Cawthorne)

Shares steady amid geopolitical tensions

Aug 3 (Reuters) – Declines in mainland China stocks amid rising Sino-US tensions over Taiwan offset gains in most other emerging market bourses on Wednesday, while Turkey’s currency was flat after inflation rose less than expected, albeit at a 24-year high.

Geopolitical frictions grew after US House of Representatives Speaker Nancy Pelosi visited Taiwan, angering China which considers the island its own.

Mainland China shares, .SSEC, heavyweights on the broader emerging markets index, fell more than 0.7%. Taiwan shares inched up 0.2%.

The Taiwan dollar, which had hit April 2020 lows on Tuesday, was last down 0.1% against the greenback, while the Chinese yuan was flat.

“Concerns over geopolitical tensions shall continue to put pressure on Taiwanese assets broadly, but calmer heads on both sides are likely to prevent any unpleasant escalation,” Citigroup strategists said in a note.

While Indian and Malaysian shares fell, most other Asian indexes eked out gains. Elsewhere, Turkey’s BIST 100 stocks index jumped 1.0%, while South Africa’s main index rose for the first time this week. Hungarian stocks hit 10-week highs.

Risk sentiment has been severely dampened this year on the Russia-Ukraine war, surging inflation spurring aggressive monetary policy tightening by major central banks, and China’s COVID-19 curbs.

MSCI’s index of emerging markets shares has tanked 20% so far this year, while currencies have given up 4.5%, on track for their worst year since 2015.

On Wednesday, the Turkish lira was unchanged against a steady dollar after inflation rose to 79.6% in July from 78.62% in June, thanks to the currency’s continued weakness and global energy and commodity costs. The figure came in below expectations of 80.5%.

“The modest rise suggests that inflation (in Turkey) is nearing a peak,” said Jason Tuvey, senior emerging markets economist at Capital Economics.

“But it will remain close to these very high rates for several more months… There is no sign that Turkey’s central bank is about to hike interest rates and the risk of sharp and disorderly falls in the lira remains high.”

The lira is already down 26% so far this year.

South Africa’s rand rose 0.8% after having slumped 2% in Tuesday’s risk-off trade.

PMI data from the country showed private sector activity growth sped up for the third straight month in July on improving new orders, output and employment numbers.

(Reporting by Susan Mathew in Bengaluru; Editing by Andrew Cawthorne)

Oil prices dip ahead of OPEC+ meeting

LONDON, Aug 3 (Reuters) – Oil prices dipped on Wednesday ahead of a meeting of OPEC+ producers at which producers are expected to keep output steady with spare capacity limited and against the backdrop of fears that a slowdown in global growth will hit fuel demand.

Brent crude futures were down USD 1.34, or 1.3%, at USD 99.20 a barrel at 0815 GMT. West Texas Intermediate (WTI) crude futures fell USD 1.28, or 1.4%, to USD 93.14 a barrel.

The premium for front-month Brent futures over barrels loading in six months’ time is at a three-month low, indicating worries about current tight supply are abating.

Ministers for members of the Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, meet on Wednesday from 1130 GMT.

OPEC+ sources told Reuters last week that the group would likely keep output unchanged in September, or raise it slightly.

Saudi Arabia may be reluctant to beef up output at the expense of OPEC+ partner Russia, hit by sanctions due to the Ukraine conflict.

“Even if the OPEC+ group did declare a small increase, the gesture would be largely symbolic given that very few members have the capacity to materially increase production,” said PVM analyst Stephen Brennock.

“Either way, OPEC will be wary of rocking the boat given the current volatile and turbulent state of the oil market.”

Ahead of the meeting, OPEC+ trimmed its forecast for an oil market surplus this year by 200,000 barrels per day (bpd), to 800,000 bpd, three delegates told Reuters.

Meanwhile, data from the American Petroleum Institute, an industry group, showed US crude stocks rose by about 2.2 million barrels for the week ended July 29.Gasoline inventories fell by 200,000 barrels and distillate stocks by about 350,000 barrels.

Official data from the US Energy Information Administration (EIA) is due at 1430 GMT.

(Additional reporting by Sonali Paul and Emily Chow; Editing by Louise Heavens)

Gold falls as US dollar, yields rise on hawkish Fed comments

Aug 3 (Reuters) – Gold slipped on Wednesday as the dollar and US Treasury yields advanced after hawkish comments from Federal Reserve officials hinted at continuing aggressive interest rate hikes in the near term.

FUNDAMENTALS

* Spot gold was down 0.2% at USD 1,757.08 per ounce, as of 0105 GMT, after hitting a near one-month high of USD 1,787.79 on Tuesday.

* US gold futures dropped 0.9% to USD 1,772.80 per ounce.

* The dollar was up 0.1% against its rivals after rising 0.8% overnight, making greenback-denominated gold more expensive for other currency holders.

* Benchmark US 10-year Treasury yields rallied to 2.7740%, after hitting a four-month low of 2.5160 on Tuesday.

* A trio of Fed officials from across the policy spectrum signaled they and their colleagues remain “completely united” on getting US interest rates up to a level that will more significantly curb economic activity and put a dent in the highest inflation since the 1980s.

* St. Louis Federal Reserve President James Bullard said if inflation does not respond to the Fed’s interest rate increases by easing as expected, then rates will have to remain “higher for longer”.

* Traders now see a chance of about 44% that the Fed will hike rates by another 75 basis points at its next meeting in September.

* Although gold is considered a hedge against inflation, rising US interest rates reduce the appeal of non-yielding bullion.

* SPDR Gold Trust GLD, the world’s largest gold-backed exchange-traded fund, said its holdings fell 0.3% to 1,002.97 tonnes on Tuesday from 1,005.87 tonnes on Monday.

* The Biden administration wants to keep tensions between Washington and Beijing inflamed by a high level visit to Taiwan from boiling over into a conflict, White House national security spokesman John Kirby said.

* Spot silver fell 0.7% to USD 19.81 per ounce, platinum was down 0.3% at USD 891.32, and palladium eased 0.1% to USD 2,061.

(Reporting by Brijesh Patel in Bengaluru; Editing by Rashmi Aich)

Dollar climbs with US yields after Fed doves say expect more rate hikes

TOKYO, Aug 3 (Reuters) – The US dollar remained elevated on Wednesday following its biggest surge in three weeks against major peers overnight, with Federal Reserve officials talking up the potential for further, aggressive interest rate hikes.

The greenback continued its rise versus the safe-haven yen, extending its best gain for six weeks, as US Treasury yields also rebounded after House Speaker Nancy Pelosi’s arrival in Taiwan was met with a strong, but not off-the-scale response by China.

New Zealand’s dollar dropped following a surprise rise in the unemployment rate. Australia’s currency also tumbled.

The US dollar index, which gauges the currency against six major peers including the yen, was 0.05% higher at 106.50, after rebounding 1% overnight following its slide to a nearly one-month low at 105.03.

The dollar rose 0.51% to 133.84 yen, after jumping 1.2% on Tuesday. Earlier in the day it had sunk to a nearly two-month low of 130.40.

Benchmark long-term Treasury yields, which the dollar-yen pair tends to track closely, were around 2.75% in Tokyo, holding close to overnight highs following a 14 basis point surge.

On Tuesday, San Francisco Fed President Mary Daly and Chicago Fed President Charles Evans signalled that they and their colleagues remain resolute and “completely united” over getting rates up to a level that will more significantly curb economic activity.

The comments by “the normally very dovish Daly” and “the equally very dovish Evans” helped yields and the dollar higher, and the dollar index could top 108 “in the next few weeks,” according to Kristina Clifton, a strategist at Commonwealth Bank of Australia, writing in a note to clients.

Traders now see a chance of about 44% that the Fed will hike by another 75 basis points at its next meeting in September.

Pelosi’s safe arrival in Taiwan, which China considers a breakaway province, prompted anger in Beijing, with warplanes buzzing the Taiwan Strait and the announcement of live-fire military drills.

“In the lead up to the event there was some geopolitical risk premium being priced,” Tapas Strickland, an analyst at National Australia Bank, wrote in a note. But ultimately “with China making a strong, but importantly not an ‘unhinged’ response,” that risk premium was removed, lifting yields and the dollar-yen pair, Strickland wrote.

The euro slipped 0.1% to USD 1.01555, while sterling lost 0.12% to USD 1.2144.

The Australian dollar sank 0.44% to USD 0.689, extending a 1.52% slide from Tuesday, when the nation’s Reserve Bank hiked the key rate by another half point, as expected, but opened the door to slowing the pace of tightening.

New Zealand’s dollar dropped 0.58% to USD 0.62185 after a surprise rise in the unemployment rate to 3.3% in the second quarter, when economists had predicted it would ease to 3.1%.

(Reporting by Kevin Buckland; Editing by Kenneth Maxwell)

Oil falls on demand worries, stronger US dollar

MELBOURNE, Aug 3 (Reuters) – Oil prices fell about 1% in early trade on Wednesday, reversing gains from the previous session ahead of a meeting OPEC+ producers on fears of a slowdown in global growth hitting fuel demand and a firmer dollar.

Brent crude futures fell 94 cents, or 0.9%, to USD 99.60 a barrel at 0020 GMT, wiping out the previous session’s gain.

West Texas Intermediate (WTI) crude futures were down 68 cents, or 0.7%, at USD 93.74 a barrel, after climbing 53 cents on Tuesday.

The Organization of the Petroleum Exporting Countries and allies including Russia, together known as OPEC+, meet on Wednesday. OPEC+ sources told Reuters last week that the group will likely keep output unchanged in September, or raise it slightly.

Analysts are expecting no change due to a weak outlook for demand as recession fears grow, and said top producer Saudi Arabia may be reluctant to beef up output at the expense of OPEC+ partner Russia, hit by sanctions due to the Ukraine conflict.

Ahead of the meeting, OPEC+ trimmed its forecast for an oil market surplus this year by 200,000 barrels per day (bpd) to 800,000 bpd, three delegates told Reuters.

“The likelihood they announce an increase in output remains low amid the uncertain economic backdrop and signs of weakness in demand,” ANZ Research analysts said in a note.

Several factors are weighing on the demand outlook, including rising fears of an economic slump in the United States and Europe, debt distress in emerging market economies, and China’s COVID-zero policy curbing activity in the world’s top oil importer, Commonwealth Bank analyst Vivek Dhar said.

“We see growing downside risks to our oil price forecast of USD US100/bbl in Q4 2022 as global demand concerns continue to grow,” Dhar said in a note.

A stronger dollar, bolstered by comments from US Federal Reserve officials hinting at more interest rate hikes to cool inflation, also weighed on oil prices as a firmer greenback makes oil more expensive for holders of other currencies.

Adding to the bearish view on demand, data from the American Petroleum Institute, an industry group, showed US crude stocks rose by about 2.2 million barrels for the week ended July 29, against analysts’ expectations for a decline of around 600,000 barrels.

Gasoline inventories fell by 200,000 barrels, which was a smaller drawdown than analysts had expected, however distillate stocks fell by about 350,000 barrels against analysts’ forecasts for a build.

The market will be looking to see if official data from the US Energy Information Administration (EIA) at 1430 GMT confirms the inventory view.

(Reporting by Sonali Paul in Melbourne; Editing by Stephen Coates)

Gold steadies as lower US yields counter uptick in dollar

Aug 2 (Reuters) – Gold surrendered earlier gains to trade little changed on Tuesday as the US dollar inched higher, although a dip in Treasury yields and growing recession fears kept bullion near four-week peak.

Spot gold was flat around USD 1,771.29 per ounce by 0843 GMT, after hitting its highest since July 5 at USD 1,780.39 earlier in the session.

US gold futures were unchanged at USD 1,787.10.

Falling US real rates have supported gold in recent days, and the next data point important for the metal are US payrolls due on Friday, UBS Analyst Giovanni Staunovo said.

However, further interest rate hikes by the US Federal Reserve and declining inflation should weigh on prices over the next six months, Staunovo said.

Benchmark US 10-year Treasury yields hit a four-month low, decreasing the opportunity cost of holding the non-interest-paying bullion, while the dollar index =USD rose 0.2%, having earlier hit a four-week trough.

Gold has benefited from a host of dour economic data recently, with a survey on Monday showing that factories across the United States, Europe and Asia struggled for momentum last month.

Investors are keeping a close eye on macroeconomic indications since Fed Chair Jerome Powell said decisions on future rates will be determined by incoming data.

Rate hikes by major central banks to combat soaring inflation typically weigh on bullion’s appeal.

“Gold could push a little higher towards mid USD 1,800 because the dollar will continue to weaken over the course of August as a lot of the macro numbers in the US are starting to look worse,” said Edward Meir, an analyst with ED&F Man Capital Markets.

Traders are also keeping watch on possible escalation in Sino-US tension, with US House of Representatives Speaker Nancy Pelosi set to begin a visit to Taiwan amid objections from China.

Elsewhere, spot silver fell 0.5% to USD 20.23 per ounce, platinum edged 0.1% lower to USD 905.54, and palladium slipped 0.8% to USD 2,176.15.

(Reporting by Arundhati Sarkar and Brijesh Patel in Bengaluru; editing by Uttaresh.V)

Stocks slide as rising US-China tensions trigger risk aversion

Aug 2 (Reuters) – Emerging market stocks lost 1.1% on Tuesday as China’s warnings over a likely US visit to Taiwan raised worries about worsening Sino-US relations.

Sources said US House of Representatives Speaker Nancy Pelosi was expected to arrive in Taipei later on Tuesday, which Beijing said would undermine the relationship between China and the United States as it challenges Beijing’s self-claimed sovereignty over Taiwan.

The White House said Beijing’s responses could include firing missiles near Taiwan, large-scale air or naval activities, among others.

MSCI’s index of emerging market stocks was set for its worst session in three weeks, with Chinese blue-chips down 2%, while Taiwan’s main index slid 1.6% to a two-week low.

Shares of Apple (AAPL) supplier Taiwan Semiconductor Manufacturing Co. dropped 2.4%.

Most benchmark stock indexes in emerging Europe and Africa slid between 0.2% and 1%. Western European shares fell, as did US stock futures.

“The focus is going to shift on what sort of response China may make and it’s really difficult to price that in because we’ve had really strong rhetoric from China but no specific details in terms of what sort of response it may make,” said Piotr Matys, senior FX analyst at InTouch Capital Markets.

“So we are in a sort of wait-and-see mode at the moment.”

Global sentiment was already dour as weak factory activity data for July from China, Europe as well as the United States on Monday had heightened recession worries.

Michael Every, global strategist at Rabobank warned volatility would likely last far longer than this week with flows moving into safe haven currencies such as the dollar and yen.

MSCI’s index of developing world currencies was flat after a three-day rally.

“Asian currencies are more than likely going to be most vulnerable to risk aversion. To a less extent, central and eastern European currencies as they are not directly exposed (to Sino-U.S tensions),” said InTouch’s Matys.

But on the day, the Chinese yuan rebounded after hitting an 11-week low, while the Indian rupee extended gains to hit five-week highs.

“The price action indicates how difficult it is for investors to price in the risk.”

As the euro slipped, Hungary’s forint rallied 1.0%.

The rise in tension comes as the Biden administration debates whether to lift some tariffs on Chinese goods that were imposed under former President Donald Trump.

The tariff war that began in 2018 had slowed global growth and disrupted supply chains. Emerging market stocks fell almost 17% in 2018, while currencies dropped nearly 4%.

(Reporting by Susan Mathew in Bengaluru; Editing by Robert Birsel)

Risk-off mood hits European shares; Sino-US tensions weigh

Aug 2 (Reuters) – European shares fell on Tuesday as weak global factory data fanned economic slowdown fears, while markets were on edge as US House of Representatives Speaker Nancy Pelosi was expected to visit Taiwan.

The pan-European STOXX 600 slid 0.6% in morning trade.

Pelosi was set to visit Taiwan on Tuesday, three sources said, as the United States said it wouldn’t be intimidated by Chinese threats to never “sit idly by” if she made the trip to the self-ruled island claimed by Beijing. nL1N2ZD0VP

“After the best month for Stoxx 600 in July, European equities are giving back some of those gains to kick off August suggesting the rally was slightly overdone,” Victoria Scholar, head of investment at Interactive Investor, said.

“Although Pelosi’s visit could create a deeper strain between Beijing and Washington it is unlikely to result in actual military conflict.”

Global markets were jittery, with MSCI’s broadest index of Asia-Pacific shares ex-Japan down 1.3%, while US futures pointed to a lower open.

In Europe, semiconductor stocks such as ASML Holding, ASM International, BE Semiconductor and STMicroelectronics fell between 0.6% and 3.6%.

“Most of the chip production happens in Asia. If you get a conflagration between China and the US, that’s going to increase geopolitical uncertainty in that region,” said Michael Hewson, chief market analyst at CMC Markets UK.

Meanwhile, Moody’s Investors Service flagged an increased risk of stagflation in European Union countries.

European stocks ended lower in the previous session as energy shares fell following a drop in crude prices after weak factory data across the United States, Europe and Asia rekindled demand concerns.

The energy sector got a boost on Tuesday following strong results from BP, with the London-listed oil major up 4% as it reported a second-quarter profit that beat estimates.

(Reporting by Bansari Mayur Kamdar in Bengaluru; Editing by Shounak Dasgupta)

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