Gold stuck in a range as yields rise, rate hike bets increase

June 21 (Reuters) – Gold prices were hemmed into a range on Tuesday as rising US Treasury yields and aggressive rate hike bets dimmed bullion’s appeal despite a pullback in the dollar.

Spot gold fell 0.2% to USD 1,834.19 per ounce by 1:56 p.m. ET (1756 GMT). US gold futures settled down 0.1% at USD 1,838.8.

“Treasury yields are slightly higher and there is a small bounce back in US equities, both putting some pressure on gold. However, the dollar is down and is offering some support,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.

Denting bullion’s appeal, benchmark US Treasury 10-year rose.

The dollar index fell 0.3%, making greenback-priced bullion more attractive for overseas buyers.

Earlier this month, the US Federal Reserve announced its biggest interest rate hike since 1994. Following suit, other major central banks are also leaning towards aggressive monetary policy tightening to tame soaring inflation.

The Fed’s Thomas Barkin said an interest rate increase of 50 or 75 basis points at the US central bank’s next policy meeting in July is a good base case.

“Gold is now caught between expectations of sharper rate hikes, but also inflation remaining elevated if monetary policy fails to soften economic activity and bring inflation lower,” Standard Chartered analysts said in a note.

Inflation and economic uncertainties usually spur safe-haven buying of gold, but rising interest rates increase the opportunity cost of the non-yielding bullion.

Fed Chair Jerome Powell will testify in Washington D.C. later this week.

“The Fed in the last meeting was at its maximum hawkishness” and that should decelerate going forward, Blue Line’s Streible said.

Spot silver rose 0.6% to USD 21.70 per ounce, platinum also rose 0.6% to USD 936.99, while palladium was up 1.4% at USD 1,873.15.

(Reporting by Ashitha Shivaprasad in Bengaluru; Editing by Amy Caren Daniel)

Fed’s Barkin backs 50- or 75-bp rate hike in July

June 21 (Reuters) – Federal Reserve Chair Jerome Powell’s guidance that the US central bank will most likely raise interest rates by 50 or 75 basis points in July is “reasonable,” Richmond Fed President Thomas Barkin said on Tuesday, even as he cautioned against the bank moving so fast that it damages the economy.

“I am pretty comfortable with what Jay (Powell) said. …He gave a range that feels pretty reasonable,” Barkin said during a webinar held by the National Association for Business Economics.

The Fed is poised to deliver another bigger-than-usual rate hike at its next meeting in July as it seeks to tame inflation running at more than three times its 2% goal, with fears growing that the economy will tip into recession as a result.

Barkin repeated that the Fed will have to make monetary policy restrictive, but said data and judgment would guide the central bank as its tackles “high, broad based and persistent” inflation.

“You really don’t want to inadvertently break something and lead to a significant pullback in the reactions of economic actors that you weren’t anticipating. It is a fine balance and I think judgment plays a huge part,” Barkin said, noting that he is focused on trying to get to positive forward looking real, or inflation-adjusted, rates.

Last week on the heels of another report that showed price pressures escalating more than expected, the Fed raised interest rates by three-quarters of a percentage point to a range of 1.50%-1.75%. It now forecasts borrowing costs will more than double that level over the next six months.

Several policymakers, including some previously more wary about sparking a sharp rise in unemployment, have backed the new whatever-it-takes approach.

Powell’s pledge of an unconditional war against price increases that are draining American pocketbooks will be scrutinized by US lawmakers on Wednesday and Thursday during two days of regularly scheduled hearings, held semi-annually, before Congress.

Barkin said he remains hopeful that a lot of pandemic era price pressures will ease and inflation start to ease in short order, but gave no timeframe for when it might return to the central bank’s goal.

Research released by the San Francisco Fed on Tuesday showed supply issues account for around half of the run-up in current inflation levels, underscoring the difficulties Fed policymakers face in taming inflation due to factors outside their control.

Critics contend that the Fed has been too slow to act to bring down inflation which it argued last year was transitory. The more aggressive fight needed to quash surging price pressures will lead to a downturn as it cools demand across the economy, they added.

The clamor for a repeat of last week’s 75 basis point increase in borrowing costs, the biggest hike in more than 25 years, has already begun from some quarters. Fed Governor Christopher Waller has called for the same sized move at the next meeting in July, saying the central bank is now “all in” on restoring price stability.

(Reporting by Lindsay Dunsmuir; Editing by Richard Chang and Chizu Nomiyama)

Oil ticks higher on strong demand, tight supply

HOUSTON, June 21 (Reuters) – Oil prices edged up on Tuesday on high summer fuel demand while supplies remained tight because of sanctions on Russian oil after its invasion of Ukraine.

Brent crude futures settled 52 cents, or 0.5%, higher at USD 114.65 a barrel. The US West Texas Intermediate (WTI) crude contract for July expired on Tuesday, closing at USD 110.65, with a gain of USD 1.09, or 1%. The more active August contract was up USD 1.53 at USD 109.52.

Both benchmarks posted a weekly loss last week. For WTI it was the first weekly loss in eight weeks, for Brent the first in five.

“You have some people jumping in here to buy the bottom or what they hope is the bottom of the market,” said Robert Yawger, director of energy futures at Mizuho in New York.

The 50-day simple moving average of US front month futures touched its highest since 2008, and Brent’s touched its highest since 2013.

Prices drew support when Exxon Mobil Corp. (XOM) Chief Executive Darren Woods predicted three to five years of fairly tight oil markets.

Vitol’s head Russell Hardy flagged under-investment and a decline in production capacity for crude oil and a tight refining situation.

US crude and gasoline inventories likely fell last week, while distillate stockpiles were seen up, a preliminary Reuters poll showed. Weekly inventory data is delayed by Monday’s public holiday, with industry data due on Wednesday at 4:30 p.m. and government data scheduled for Thursday at 11 a.m.

On the demand side, UBS analyst Giovanni Staunovo said that despite concerns over economic growth, data continues to show solid oil demand.

“We expect oil demand to improve further, benefiting from the reopening of China, summer travel in the northern hemisphere and the weather getting warmer in the Middle East. With supply growth lagging demand growth over the coming months, we continue to expect higher oil prices,” he said.

The White House has asked the chief executives of six oil companies to a meeting on Thursday to discuss ways to reduce high energy prices.

On Monday, US President Joe Biden said a decision on whether to pause a federal gasoline tax could come this week. The United States is also in talks with Canada and other allies to further restrict Moscow’s energy revenue by imposing a price cap on Russian oil, Treasury Secretary Janet Yellen said on Monday.

The market has been supported by supply anxiety after sanctions on oil shipments from Russia, the world’s second-largest oil exporter, and worries Russian output could fall due to sanctions on equipment needed for production.

European Union leaders aim to maintain pressure on Russia at their summit this week by committing to further work on sanctions, a draft document showed.

“Supply concerns are unlikely to subside unless there is a resolution to the Russia-Ukraine war, or unless we see a sharp rise in supply from either the US or OPEC,” said Madhavi Mehta, commodity research analyst at Kotak Securities.

(Reporting by Arathy Somasekhar, additional reporting by Bozorgmehr Sharafedin in London, Sonali Paul in Melbourne and Koustav Samanta and Isabel Kua in Singapore; Editing by Marguerita Choy and David Gregorio)

Oil swings higher as tight supplies overshadow demand destruction

LONDON, June 20 (Reuters) – Oil prices swung higher in volatile trading on Monday, as traders focused on tight supplies over slowing global economic growth.

Brent crude futures settled up $1.01, or 0.9%, at $114.13 a barrel. The global benchmark tumbled 7.3% last week for its first weekly fall in five.

U.S. West Texas Intermediate crude last traded up 61 cents, or 0.56%, at $110.17 in subdued trade on the Juneteenth U.S. holiday. Front-month prices slumped 9.2% last week for the first decline in eight weeks.

“We’ve got two really competing narratives happening,” said Houston oil consultant Andrew Lipow. “One is sanctions on Russian supplies (supporting prices). On the other hand, we see the high prices resulting in some demand destruction.”

Brent prices on Monday touched their lowest in a month before recovering.

“Supplies will remain tight and continue supporting high oil prices. The norm for ICE Brent is still around the $120-mark,” said PVM analyst Stephen Brennock.

“The bullish case remains far more convincing,” said Craig Erlam, senior market analyst at OANDA.

Western sanctions have reduced access to oil from Russia after its invasion of Ukraine, which Russia calls a “special operation.”

Analysts and investors said they believe a recession is more likely after the U.S. Federal Reserve approved on Wednesday the largest interest rate increase in more than a quarter of a century to contain a surge in inflation.

Similar tightening approaches by the Bank of England and Swiss National Bank last week ensued.

“Friday’s steep price fall can be seen as a delayed reaction to the concerns about recession that have already been weighing on the prices of other commodities for some time,” said Commerzbank analyst Carsten Fritsch.

While China’s crude oil imports from Russia in May soared 55% from a year earlier to a record high, displacing Saudi Arabia as the top supplier, China’s export quotas have resulted in declining oil product shipments.

Tight refined products markets have supported oil prices.

Analysts expect limited summer increases from the Organization of the Petroleum Exporting Countries and its allies, a group known collectively as OPEC+.

Libya’s oil production has remained volatile following blockades by groups in the country’s east, with its output most recently pegged at 700,000 per day.

Meanwhile, prospects are dwindling for Iranian sanctions relief that could result in a meaningful increase in the country’s crude exports.

There has been some mitigation for tight supply with the release of strategic petroleum reserves, led by the United States. Weekly crude output in the United States, the world’s top producer, has also returned to pre-pandemic levels as the rig count slowly grows.

(Additional reporting by Florence Tan and Isabel Kua in Singapore; Editing by Marguerita Choy and Susan Fenton)

China Evergrande sticks to restructuring plan target of before end of July

June 20 (Reuters) – China Evergrande Group 3333.HK late on Monday said it will announce its preliminary restructuring plan before the end of next month, sticking to its original deadline even as the world’s most indebted property developer struggles to emerge from its financial crisis.

With more than USD 300 billion racked up in debt, Evergrande has been struggling to repay suppliers, creditors and complete projects, becoming the poster child of the country’s property sector crisis, stumbling from one missed payment deadline to the other.

In a stock exchange filing on Monday, Evergrande said it was “actively pushing forward with its restructuring work”, and expects to announce its plan before the end of July, in line with its original deadline announced in late January.

The embattled property developer also said it will have to conduct an independent investigation into 13.4 billion yuan (USD 2.0 billion) pledged by its property services unit to several banks and release its pending financial results for its shares – which have been suspended since late March – to resume trading.

Its units, China Evergrande New Energy Vehicle 0708.HK and Evergrande Property Services 6666.HK, issued similar releases separately. Shares of all the three entities are under suspension, and will remain so until further notice, they said.

(Reporting by Sameer Manekar in Bengaluru; Editing by Sandra Maler)

Morgan Stanley sees stronger yuan on possible US trade tariff relief

LONDON, June 20 (Reuters) – Morgan Stanley sees a tactical opportunity for investors to position for a stronger Chinese yuan in the next few weeks amid signs the United States could ease tariffs on Chinese goods.

Tariffs imposed by Washington and Beijing on billions of dollars worth of each other’s goods put pressure on the yuan when Donald Trump was U.S. president. Joe Biden said in May he was considering cutting tariffs on Chinese goods.

“Should the current administration decide to reduce tariffs by $10 billion, it would push CNY 1.8% stronger based on the USD 580 billion of China exports to the US in 2021, all things equal,” analysts at the US bank wrote.

The US imposed USD 70 billion tariffs on goods imported from China between 2018 and 2019, while total US imports from China were about USD 500 billion. During that time, the yuan weakened by 15% against the dollar, Morgan Stanley said.

(Reporting by Samuel Indyk; Editing by Edmund Blair)

Philippines’ president-elect Marcos assigns himself agriculture portfolio

MANILA, June 20 (Reuters) – Philippines’ President-elect Ferdinand Marcos awarded himself the post of agriculture minister on Monday, citing the urgent need to address challenges in the sector and boost production to prevent food shortages and price increases.

Ramping up agricultural production in a country known for being one of the world’s biggest importers of rice, its national staple, would be among his priorities, Marcos told a news conference.

Tempering food price increases has become even more crucial for the Southeast Asian country as it battles inflation that reached its highest in more than three years in May.

“From the very beginning, I have always said that agriculture is going to be a critical and foundational part of our economic development or economic transformation as we anticipate the post pandemic economy,” he said.

Though not unprecedented, it is unusual for a Philippines president to hold a post in their own cabinet.

Among his policy pledges in his election campaign, Marcos said slashing the price of rice by more than half to 20 pesos (USD 0.3704) per kilogram was his “aspiration”.

Marcos, who was elected in a landslide and will be sworn in on June 30, warned of a food shortage that will push prices higher in the coming quarters, driven by “outside forces”.

A food security crisis stoked by the Ukraine war has alarmed global leaders, including U.N. Secretary-General Antonio Guterres.

“The problem is severe enough that I have decided to take on the portfolio of secretary of agriculture at least for now, and until at least we can organise the department,” he said.

Rolando Dy, agriculture economist and executive director of the Center for Food and Agribusiness at the University of Asia and the Pacific, said cutting local rice prices to 20 pesos per kg was “impossible.”

“He has to rely on good advisers. He has to appoint competent undersecretaries for operations and high value crops,” Dy said.

(Reporting by Neil Jerome Morales; Editing by Martin Petty)

Dollar could be carried much higher this year

June 20 (Reuters) – After a series of interest rate hikes the dollar is worthy of a carry trade and the support of higher and rising interest rates could fuel big gains.

Unlike other currencies with higher yields the dollar is very liquid so investors can turn investments swiftly with less fear of the big moves that are a risk for investments in alternates.

This makes the dollar very appealing and with yields that can be achieved versus other major currencies above 2% and likely to head over 3% this year, and closer to 4% versus the yen, the dollar carry trade has enormous potential to grow.

The demand for dollars has thus far been negligible which is amazing because the dollar has gained 17% since the June, 2021 Federal Reserve meeting which ushered in the tightening cycle.

Those holding dollars could have made huge profits on FX movement when the dollar had no yield. Now it has a yield, they should see returns bolstered and bigger dollar gains.

(Jeremy Boulton is a Reuters market analyst. The views expressed are his own, editing by Ed Osmond)

Gold holds tight range, awaits more Fed cues

June 20 (Reuters) – Gold steadied into a tight range on Monday as an easing dollar and economic worries countered concerns around aggressive monetary tightening by the US Federal Reserve, with the focus on several central bankers’ views this week.

Spot gold was little changed in holiday-thinned trading at USD 1,837.46 per ounce by 1436 GMT. US gold futures were unchanged at USD 1,840.20.

The dollar index eased from near its highest level in about two decades, rekindling some demand for bullion among overseas buyers.

“The precious metal is likely to remain within a range, thanks to the conflicting forces empowering both bulls and bears. A fresh catalyst could be needed to tip the balance of power,” said FXTM senior analyst Lukman Otunga.

Gains were capped by hawkish comments from Fed Governor Christopher Waller over the weekend, Otunga added.

Waller on Saturday became the latest US central banker to pledge a whatever-it-takes approach to fight inflation, days after the Fed raised interest rates by three-quarters of a percentage point and signaled more hikes to come.

“It’s a public holiday in the US, which means liquidity – and therefore volatility – is likely to be lower, thus making directional moves on gold difficult without a fresh catalyst,” City Index senior market analyst Matt Simpson said.

A host of central bankers will be speaking this week, led by a likely hawkish testimony from Fed Chair Jerome Powell’s to the House on Wednesday and Thursday.

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

Spot silver fell 0.4% to USD 21.57 per ounce, while platinum rose 0.1% to USD 933.58. Palladium XPD= gained 2.2% to USD 1,855.11.

Commerzbank lowered its end-year platinum price forecast to USD 1,050 an ounce from USD 1,100 on expectations of a supply surplus. Palladium meanwhile, could recover in coming months as problems in the auto industry gradually ease, with prices hitting USD 2,100 by year-end, it added.

(Reporting by Arundhati Sarkar and Bharat Govind Gautam in Bengaluru; Editing by Uttaresh V, Shailesh Kuber and David Evans)

Banks, energy stocks fuel rebound in European shares

June 20 (Reuters) – European stocks rose strongly on Monday after a sharp selloff last week on recession worries, while gains in French shares were capped after President Emmanuel Macron lost an absolute majority in the country’s parliamentary election.

The pan-European STOXX 600 index closed up 1.0%, with battered banking, travel and energy stocks leading the gains, but volumes were crimped with US markets closed for a holiday.

The benchmark shed 4.6% and hit over one-year lows last week in a global sell-off that was fuelled by worries about aggressive interest rate hikes by the US Federal Reserve and other major central banks sparking a recession.

“Friday’s options expiry and the lack of big central bank decisions might help equity bulls to wrench back control this week, even if only for a short while,” said Chris Beauchamp, chief market analyst at online trading platform IG.

European Central Bank Chief Christine Lagarde on Monday reaffirmed plans to raise interest rates twice this summer, while fighting widening spreads in the borrowing costs of different euro zone countries.

France’s blue-chip CAC 40 rose 0.6%, the least among major regional indexes, after Emmanuel Macron’s centrist Ensemble coalition secured the most seats in the National Assembly over the weekend but fell well short of securing an absolute majority needed to control parliament.

“It will mean that there will probably be less structural reforms but we’re already underweight Europe and it does not significantly change our stance,” said Willem Sels, global chief investment officer, private banking and wealth management at HSBC.

The STOXX 600 has shed almost 17% this year so far, as a cocktail of worries from soaring inflation to China’s slowing economy and cost-of-living crisis in the UK dampen risk appetite.

“We’ll continue to see some volatility because inflation, in our view, is not going to start to come down until the end of this year,” Sels added.

Data showed German producer prices surged by a more-than-expected 33.6% in May, on a year-on-year basis.

Europe’s construction and materials index .SXOP dropped 1.8% after Irish building insulation specialist Kingspan KSP.I said the mood in most end markets deteriorated resulting in a dip in orders over the last two months.

Kingspan’s shares tumbled 11.4%, while Danish peer Rockwool and France’s Saint-Gobain fell around 4% each.

French carmaker Renault RENA.PA jumped 9.7% after Jefferies upgraded the stock to “Buy”.

Valneva (VLS) surged 29.3% after US healthcare giant Pfizer (PFE) agreed to invest 90.5 million euros (USD 95.24 million) for an 8.1% stake in the French vaccine company.

(Reporting by Sruthi Shankar and Susan Mathew in Bengaluru; Editing by Bernadette Baum)

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