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Market News 【Market Evening】Asian markets muted, Gold edges higher as dollar eases, Oil weakens

【Market Evening】Asian markets muted, Gold edges higher as dollar eases, Oil weakens

Gold edges higher as dollar eases; hawkish Fed limits gains; Oil weakens, focus on OPEC+ response to U.S.-led crude release; Most Asian stocks weaken on quicker U.S. rate hike bets.

TOPONE Markets Analyst
2021-11-25
383

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Gold edges higher as dollar eases; hawkish Fed limits gains


Gold prices edged up on Thursday as the dollar eased slightly, but comments from U.S. Federal Reserve policymakers suggesting the central bank could accelerate stimulus tapering weighed on the metal and kept it well below the key $1,800 mark.


Spot gold rose 0.32% to $1793.86 per ounce and spot silver fell 031%to $23.59 per ounce by 17:30(GMT+8).


A growing number of Fed policymakers indicated they would be open to speeding up the elimination of their bond-buying program if high inflation held and move more quickly to raise interest rates, minutes of the U.S. central bank’s last policy meeting showed..


An increase in interest rates should reduce bullion’s appeal as higher rates raise the non-interest bearing metal’s opportunity cost.


The number of Americans filing new claims for unemployment benefits fell to their lowest level since 1969 last week, suggesting economic activity was accelerating.


A separate report from the U.S. Commerce Department on Wednesday showed gross domestic product rose at a 2.1% rate in the third quarter


Price pressures heated up in October, with the U.S. personal consumption expenditures (PCE) price index, excluding the volatile food and energy components, increasing 0.4%,


The European Central Bank must keep borrowing costs in check as the coronavirus pandemic drags on and there is no sign that inflation is getting out of control, ECB board member Fabio Panetta said on Wednesday.


Dollar consolidates after strong gains


The dollar edged lower Thursday, consolidating after hitting 16-month highs after the minutes from the last Federal Reserve meeting pointed to the potential of a faster tapering pace.


The Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower at 96.733, just below Wednesday's high of 96.938, the strongest level since July 2020.


USD/JPY fell 0.1% to 115.35, not far removed from the overnight high of 115.53, a level not seen since January 2017. GBP/USD edged 0.2% higher to 1.33485, EUR/USD rose 0.2% to 1.1218 after falling below 1.12 on Wednesday  and AUD/USD rose 0.1% to 0.7204.


San Francisco Fed President Mary Daly added to the reasons to be bullish about the dollar, saying on Wednesday that she could see a case being made to speed up asset tapering.


“We find increasing evidence of a new leg of inflationary pressures in the U.S., increasing our conviction of a hawkish shift from the Fed during 2022,” said analysts at Nordea, in a note.


There’s little in the way of news expected from the U.S. to influence the foreign exchange markets Thursday due to the Thanksgiving holiday, but the minutes from the European Central Bank's meeting at the end of October are due for release.


“Despite the fourth [Covid] wave in Europe, the ECB seems to be sticking to the view that the PEPP [pandemic emergency purchase program] scheme will end in March,” said analysts at ING, in a note.


Oil weakens, focus on OPEC+ response to U.S.-led crude release


Oil prices edged down on Thursday with investors waiting to see how major producers respond to the emergency crude release by major consuming countries designed to cool the market, even as data pointed to healthy U.S. fuel demand.


Brent crude oil fell 0.11% to $80.91 a barrel, while U.S. West Texas Intermediate (WTI) crude fell 0.16% to $77.98 by17:30(GMT+8).


"The release of oil from strategic reserves ramps up competition for control of the oil market amongst the world's biggest producers," ANZ analysts said in a note.


"We don't expect OPEC will stand by idly as the market enters a critical period."


All eyes are now on the Organization of the Petroleum Exporting Countries, Russia and allies, together called OPEC+, who are due to meet next week to discuss oil demand and supply.


"The bold move from the oil importers has opened the door wide open for OPEC+ to adjust its supply policy downwards at its next (meeting on) 2 December 2021," Rystad Energy analyst Louise Dickson said in emailed comments.


The group has been adding 400,000 barrels per day of supply since August unwinding record output cuts made last year when pandemic curbs slammed demand. OPEC+ will meet on Dec. 1-2 to decide whether or not it will raise output by another 400,000 bpd in January.


Three sources told Reuters OPEC+ is not discussing pausing its oil output increases, despite the decision by the United States, Japan, India and others to release emergency oil stocks.


The United Arab Emirates is fully committed to the OPEC+ agreement and has no "prior stance" ahead of next week's meeting, state news agency WAM reported on Thursday. read more


High oil prices have added to inflationary concerns. A coordinated release from state oil reserves led by the United States could add around 70 million to 80 million barrels of crude supply to markets, analysts at Goldman Sachs said.


However, ANZ said the release of 70 million barrels of oil reserves could push the market into surplus. The bank expects OPEC+ to suspend a scheduled plan to increase supplies in January that could buffer markets from demand headwind and support Brent at $80 a barrel.


The U.S. Department of Energy has launched an auction to sell 32 million barrels of strategic petroleum reserves(SPR) for delivery between late December to April 2022. It plans to release another 18 million barrels soon.


Traders are also looking out for whether China will follow through on plans to release oil from its reserves. 


Analysts said U.S. Energy Information Administration data on Wednesday showed gasoline and distillate stockpiles fell more than expected even as crude stocks rose indicating the market needed more crude.


Asian markets muted after Fed suggests it’s ready to act on inflation


Asian stock markets fell Thursday after Federal Reserve officials indicated they were ready to raise interest rates sooner than expected if needed to cool inflation.


Nikkei 225 rose 0.67% to 29,499.28.

Hang Seng Index rose 0.22% to 24,740.16.

Taiwan capitalization weighted stock rose 0.06% to 17,654.19.

S&P/ASX 200 rose 0.11% to 7,407.30.

South Korea KOSPI fell 0.47% to 2,980.27.


Wall Street markets are closed Thursday for the Thanksgiving holiday. They reopen Friday for a shortened trading session.


Fed officials at their October policy meeting said they “would not hesitate” to respond to inflation, according to notes released Wednesday. They foresaw the possibility of raising rates “sooner than participants currently anticipated.”


That fueled investor fears the Fed and other central banks might feel pressure to withdraw economic stimulus that has been boosting stock prices. Fed officials earlier indicated they might raise rates late next year.


Higher prices combined with stronger U.S. hiring suggest the attitude at the next Fed meeting might be “unabashedly more hawkish,” said Tan Boon Heng of Mizuho Bank in a report.

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