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Market News 【TOP1 Evening】Gold faces worst week in 10; Oil climbs to highest in a year

【TOP1 Evening】Gold faces worst week in 10; Oil climbs to highest in a year

Gold remains bearish due to U.S. economic recovery moves; Dollar set for best week in three months; Goldman says the bull market is still in the early stages.

TOPONE Markets Analyst
2021-02-05
497

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Gold 


Gold gained on Friday, recovering from a more than two-month low hit in the previous session, although prices were set for their biggest weekly drop since end-November as the dollar firmed.


Silver headed for its worst week in three after retreating sharply from multi-year highs hit earlier this week on the back of increased interest from retail traders. 


Spot gold rose 0.63% to $1804.95 per ounce, silver rose 0.85% to $26.538 per ounce by 18:00 (GMT+8).


 "There is some technical rebound as investors think Thursday's drop was overdone, but overall trend in gold remains bearish on rising dollar and yields," said DailyFX strategist Margaret Yang.


"The economic outlook is definitely brighter with vaccines bringing down the daily COVID-19 infections, and the macro data is improving, undermining the demand for precious metals as a store of value," Yang said. 

   

"Gold is about to endure some serious short-term pain," Jeffrey Halley, a senior market analyst at OANDA, said, adding that gold's role as an inflation hedge will return as the economic recovery starts accelerating by the late second-quarter.


 "Silver's fate will be similar to gold, and it can retest $22 over the next two weeks, although it'll find some support through Biden's solar push," Halley said.


Forex


The dollar was set for its best week in three months, while U.S. Treasury yields rose.  


The U.S. dollar index rose 0.15% to 91.41 by 18:00(GMT+8) on Thursday.


The dollar index was just shy of the two-month high reached overnight amid signs of resilience in the labor market, with closely watched nonfarm payroll figures due Friday.


"The U.S. economy is exceptionally strong relative to other countries, causing dollar short-covering," said Tohru Sasaki, J.P. Morgan's head of Japan market research in Tokyo, pointing to employment and manufacturing indicators as well as the pace f vaccinations.


The current bout of dollar strength could continue for "several weeks," he said, but the picture is murkier thereafter as Europe and Asia catch up with immunizations and the Federal Reserve's continued ultra-easy monetary policy caps a rise in long-term U.S. yields.


The dollar was little changed at 105.585 yen on Friday after earlier pushing as high as 105.70 for the first time since Oct. 20.


The euro was mostly flat at $1.1966, maintaining its first move below $1.20 since Dec. 1 from overnight.


Westpac strategists see Europe's vaccine rollout accelerating by the end of this quarter, which, coupled with the Fed's commitment to ultra-loose monetary policy, will put pressure back on the dollar.


Crude Oil


Oil prices climbed on Friday to their highest levels in a year, extending a run of strong gains this week, boosted by the continued commitment of producers to hold back crude supply and positive signs of economic growth in the United States.


U.S. West Texas Intermediate (WTI) crude was at $56.827 barrel, rose 0.87%, Brent was down to $59.456 a barrel, rose 0.99% by 18:00(GMT+8).


Markets were encouraged by stronger-than-expected orders for U.S. goods in December, pointing to strength in manufacturing, and hopes for swift approval by lawmakers of President Joe Biden's proposed $1.9 trillion coronavirus aid plan.


Chinese demand for crude oil is also helping support the market, as shown by industry tracking two tankers of North Sea crude oil heading to China for Mar. 22 and Mar. 24, said Axi global market strategist Stephen Innes.


"When demand drives commodity prices, it has a more bullish impact and leaves a more lasting reflection on price action," Innes said in a note.


Stocks


Stocks in Asia-Pacific were higher on Friday trade.


Nikkei 225 rose 437.24 points or 1.54%, close at 28,779.19.


S&P/ASX 200 rose 75.00 points or 1.11% to close at 6,840.50.


Hang Seng Index rose 175.18 or 0.60% to 29,288.68.


South Korea's Kospi rose 33.08points or 1.35% to 3,120.63.


Taiwan capitalization-weighted stock index rose 96.18 points, or 0.61%, at 15,802.40. 


The stock market's swift comeback to record highs opened a new chapter on Wall Street, and the fresh bull market has a long way to go, according to Goldman Sachs.


The S&P 500 quickly bounced back from its March bottom as investors looked past the coronavirus turmoil and focused on a brighter future. Unprecedented fiscal and monetary support in Washington also played a critical role in the market's resilience, which will drive stocks higher in the long run, the bank said.


"We believe that we are still in the early stages of a new bull market, transitioning from the 'Hope' phase to a longer 'Growth' phase as strong profit growth emerges," said chief global equity strategist Peter Oppenheimer said in a note.


"The changing mix of policy support in this cycle also suggests a possible inflection point towards a more reflationary environment than we have seen since the financial crisis," Oppenheimer added. "This regime shift is likely to drive the bull market higher over coming months and also have important implications for market leadership."


"The economic data is coming in very strong," Andrew Slimmon, fund manager at Morgan Stanley Investment Management, said on Bloomberg TV. "The market is going to struggle at some point this year, but at the moment it's too early because the numbers are still coming through."


On the virus front, restrictions are lifting around the U.S. as the outbreak eases. The Bank of England forecast that the U.K. economy is heading for a powerful rebound thanks to an aggressive push to vaccinate citizens. France said a new lockdown is not justified at the moment.


Focus Tonight


21:30 (GMT+8): United States Non-Farm Payrolls (JAN), Forecast: 50K, Previous: -140K;



21:30 (GMT+8): Canada Balance of Trade (DEC), Forecast: C$-3B, Previous: C$-3.34B;


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