【TOP1 Morning】Gold fell to $1690, Dollar hit a three-month high, Oil prices jump 4%

Yesterday Market Review

Gold

Gold declined on Thursday, with bullion settling at its lowest in nine months, pressured by a strong rise in the U.S. dollar and strength in U.S. Treasury yields.

The spot gold closed at $1696.82 per ounce; the volatility within the day is $1690.37-$1723.09.

The silver closed at $25.330; the volatility within the day is $25.035-$26.287.

During a Wall Street Journal webinar Thursday, Federal Reserve Chairman Jerome Powell said he would be concerned about a disorderly move in the bond market but suggested that hadn’t yet had a material impact on financial conditions.

Against that backdrop, the dollar index was last up 0.53%, and Benchmark 10-year Treasury yields got as high as 1.555%.

A rising dollar and strength in yields can make gold less attractive to buyers seeking safe-haven investments.

“Gold is reacting, as are the rest of the major markets, to the rise in bond yields,” Brien Lundin, editor of Gold Newsletter, said. “And bond yields are of course, reacting to Chairman Powell’s remarks and the lack of any substantive commentary on rising yields or the Fed’s commitment to keep rates low.”

The precious metal is “having a terrible year, down almost 10%, and still looking very vulnerable,” said Edward Moya, senior market analyst at Oanda, in a market update ahead of Powell’s speech.

Forex

The dollar surged to three-month highs on Thursday after Federal Reserve Chairman Jerome Powell failed to express concern about a recent sell-off in U.S. Treasuries as some traders had expected, resulting in higher bond yields and demand for the greenback.

The U.S. dollar index closed at 91.63; the volatility within the day is 90.98-91.70.

Powell set aside concern that a recent move up in U.S. Treasury yields might spell trouble for the Fed as investors push up borrowing costs the central bank wants to keep low.

The dollar has gained along with U.S. government bond yields as impending U.S. fiscal stimulus adds fuel to expectations of higher inflation and the rollout of vaccines against COVID-19 heightens optimism that the economy headed for recovery.

“The traditional (funding currencies) like euro, yen and Swiss, look to be particular laggards in that environment under a higher U.S. yield backdrop,” said TD’s Issa.

The yen reached 107.93, its weakest since July 1.

Higher-risk currencies, including the Australian dollar, by contrast, are positioned to outperform as global growth improves. The Aussie gave back earlier gains on Thursday, however, as stocks fell. It was last down 0.57% on the day at $0.7730 and is holding below three-year highs of $0.8007 reached last week.

Crude Oil

Oil prices jumped on Thursday after OPEC and its oil-producing allies said the group would keep production largely steady through April. Saudi Arabia also said that it would extend its one million barrels per day voluntary production cut into April.

West Texas Intermediate crude settled at $63.873, the volatility within the day is $60.417-$64.710. International benchmark Brent crude closed at $66.768, the volatility within the day is $63.178-$67.532.

Crude have soared to pre-virus levels in recent weeks, driven higher by substantial OPEC+ production cuts and the mass rollout of Covid-19 vaccines in many high-income countries.

Amrita Sen, chief oil analyst at Energy Aspects said on Thursday that spare oil capacity would be the group’s “biggest challenge.”

“I understand that it is not just April that they are talking about. (Saudi Arabia is) essentially saying to everybody: ‘Look, it is April and May.’ Just like they did in January when they discussed Feb. and March output,” Sen said.

Saudi Arabia understands that oil producers, such as Russia, Iran and the United Arab Emirates, are willing to start pumping more oil into the market, she continued. However, Riyadh remains “laser focused” on bringing down global oil inventories to the industry’s five-year average and thus will push for the group to hold off on reversing cuts until May.

Stocks

U.S. stocks fell sharply on Thursday after Federal Reserve Chair Jerome Powell failed to reassure investors that the central bank would keep surging bond yields and inflation expectations in check.

The S&P 500 closed the wild session down 1.3% to 3,768.47 after dropping 2.5% at its session low. The Dow Jones Industrial Average slid 345.95 points, or 1.1%, to 30,924.14. At one point, the blue-chip benchmark tumbled more than 700 points. The Nasdaq Composite fell 2.1% to 12,723.47 as growth stocks led the declines amid rising rates. Tesla shares dropped nearly 5%.

With Thursday’s steep sell-off, the Nasdaq turned negative on the year with a 1.3% loss. The tech-heavy benchmark also fell into correction territory on an intraday basis, down more than 10% from its recent 52-week high.

Apple (AAPL-US) fell 1.58%; Facebook (FB-US) rose 0.87%; Alphabet (GOOGL-US) rose 1.12%; Amazon (AMZN-US) fell 0.91%; Microsoft (MSFT-US) fell 0.36% .

Some investors may have been disappointed that Powell didn’t make a strong hint of any changes in asset purchases by the Fed to contain the rapid increase in rates seen lately. Expectations were growing the Fed might implement an “Operation Twist” operation like it has done in the past where it sells short-term bills and buys longer-duration bonds.

“We’re back to good news (for the economy) is bad news (for the market) and as interest rates move higher on expectations of better economic growth it has been hurting the stock market,” Chris Zaccarelli, chief investment officer at Independent Advisor Alliance, said in a note.

Focus Today

21:30 (GMT+8): United States Non-Farm Payrolls (FEB),Forecast: 182K, Previous: 49K;