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Market News 【Market Morning】Gold breaks through 1900, Dollar slide continues, Oil prices post a modest gain

【Market Morning】Gold breaks through 1900, Dollar slide continues, Oil prices post a modest gain

25, May 2021-Gold price hits 1900 mark as dollar, U.S. yields weaken; Dollar hits fresh 4-1/2 month lows; S&P 500 erases gains.

TOPONE Markets Analyst
2021-05-26
975

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25, May 2021, Global Financial Market Review


1.Gold hits 1900 mark as dollar, U.S. yields weaken;

2.Dollar hits fresh 4-1/2 month lows as Fed speakers soothe inflation fears;

3.S&P 500 erases gains and ends day slightly lower as market rally stalls;

4.Oil prices post a modest gain as traders eye Iran nuclear talks;


Gold price breaks through 1900


Gold climbed on Tuesday, hitting $1,900 an ounce, a key price resistance level, as the dollar and U.S. Treasury yields slipped amid expectations that the U.S. Federal Reserve will keep its monetary policy accommodative.


The spot gold closed at $1898.62 per ounce; The silver closed at $27.961.


Data showed a U.S. consumer confidence index for May eased to 117.2.


“With the consumer confidence pulling back a bit, we’re getting a knee jerk reaction. Some may be thinking that the Federal Reserve will be more dovish for a longer period of time now,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago.


Gold is often considered a hedge against inflation.


Making bullion more affordable, the dollar index was pinned near 4-1/2 month lows, while U.S. yields touched a two-week low, reducing the opportunity cost of holding non-interest paying gold.


Fed policy makers in separate remarks have played down inflation concerns and reiterated the current easy monetary policy will remain in place.


ED&F Man Capital Markets analyst Edward Meir said “markets are getting a sense that inflation is more deeply embedded than what the Fed is currently expecting ... this is leading to money going into inflation hedges like gold.”


“Gold has a good chance of getting to $2,000 during the second half of this year.”


Forex - Dollar slide continues


The dollar extended its nearly two-month slide against major peers on Tuesday as U.S. interest rates fell on U.S. Federal Reserve arguments for easy monetary policy despite current inflationary forces.


The U.S. dollar index closed at 89.66.


The dollar weakness came as U.S. Treasury yields fell to fresh multi-week lows and the yield curve flattened after an auction of two-year notes attracted solid demand.


Benchmark 10-year Treasuries fell as low as 1.56% on Tuesday afternoon.


Since the end of March the dollar has declined on the belief that low U.S. rates will drive cash abroad to capture gains now that other economies are beginning to recover more quickly from the pandemic.


The euro climbed to January levels and was last up 0.3% on the day at $1.2253.

The British pound, which had run up about 2% against the dollar since April, was stalled at $1.4149 as though it could not break through $1.42.


Sterling needs fresh evidence of British economic strength to get back to the 2021 high of $1.4240 reached in February, traders and analysts said.


Oil price near one-week high 


Oil prices steadied on Tuesday, but were near one-week highs after jumping more than 3% the previous session as investors tempered expectations of an early return of oil exporter Iran to international crude markets.


West Texas Intermediate crude settled at $65.881; International benchmark Brent crude closed at $68.355.


Indirect negotiations between the United States and Iran are due to resume in Vienna this week. Talks were given another life after Tehran and the U.N. nuclear agency extended a monitoring agreement on the Middle Eastern country’s atomic programme.


U.S. Secretary of State Antony Blinken on Sunday said the United States has not seen yet whether Iran will move to comply with its nuclear commitments in order to have sanctions removed even as ongoing talks have shown progress.


“It seems that the market no longer expects the nuclear agreement between the US and Iran to be reinstated in the near future, or therefore that Iranian oil exports will quickly return to the global market,” Commerzbank said in a note.


Still, the global recovery from the COVID-19 pandemic is patchy, indicating a mixed outlook for oil demand.


Parts of Europe and the United States are recording fewer infections and deaths, prompting governments to ease restrictions, but in other areas such as India - the world’s third-biggest oil importer - rates are still high.


New coronavirus infections in India rose by 222,315, government data showed on Monday, the world’s biggest 24-hour increase, though numbers have fallen off highs of over 400,000 earlier this month.


The German economy shrank more than expected in the first quarter as coronavirus-related restrictions spurred householders to put more money than ever into savings, data showed on Tuesday.


Stocks - S&P 500 erases gains


U.S. stocks wiped out earlier gains and finished Tuesday’s session lower as the market struggled for a direction.


The S&P 500 dipped 0.2% to 4,188.13, dragged down by the energy sector. The tech-heavy Nasdaq Composite ended the day flat at 13,657.17. The Dow Jones Industrial Average fell 81.52 points, or 0.2%, to 34,312.46 after rising more than 100 points at its session high.


Big Tech shares Apple and Netflix both erased an earlier advance and dipped into negative territory. Amazon shares came under pressure after Washington, D.C., Attorney General Karl Racine said he’s suing the e-commerce giant on antitrust grounds. He alleged Amazon’s practices have unfairly raised prices for consumers and suppressed innovation. But shares eventually rose 0.4% on the day.


Airlines and cruise lines provided the broader market with some support. United Airlines jumped 1.5% after the carrier said yields on domestic leisure tickets purchased this month topped 2019 levels amid the reopening. Boeing also gained 1.4%. Norwegian Cruise Line and Royal Caribbean rose more than 3% each.


Bitcoin’s recent rout, which has hit tech stocks like Tesla and dented overall investor sentiment, stabilized on Monday. The cryptocurrency was back near $37,600 Tuesday after falling below $32,000 at one point on Sunday. Crypto prices rebounded as Elon Musk said he was having discussions with bitcoin miners regarding sustainability.


Tesla, a big holder of bitcoin, fell 0.3%. Crypto-exchange Coinbase gained 7.6% with the shares also getting a boost from a JPMorgan buy call.


The major averages rose on Monday, led by tech stocks and companies that benefit from a strong reopening from the pandemic as Covid cases dropped to their lowest level since June.


Monday “was driven by inflation anxiety relief,” Jim Paulsen, chief investment strategist at the Leuthold Group, told CNBC. “Evidence that inflation fears were calming in the bond and commodity markets began to drive the stock market late last week and has continued into today.”


“Growth stocks including technology have regained leadership as yield and inflation fears ease,” Paulsen added.


Focus Today


22:00(GMT+8): United States Fed Quarles Speech;


22:30(GMT+8): United States EIA Crude Oil Imports Change (21/MAY), Previous: -0.587M;

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