【TOP1 Morning】Gold gains as dollar comes down,Oil prices post 3rd straight decline

Yesterday Market Review

Gold

Gold hovered on Thursday close to a more than four-month peak it scaled in the previous session, fueled by a dip in the dollar and U.S. yields as investors shrugged off the Federal Reserve’s hints on possible tapering of economic support measures.

The spot gold closed at $1876.72 per ounce; The silver closed at$27.732.

Fed minutes showed “a number” of officials thought that if the recovery holds up, it might be appropriate to “begin discussing a plan for adjusting the pace of asset purchases.”

Wednesday’s Fed minutes were “effectively the first introduction of official talk of tapering but gold is up, driven by the fact that we’ve seen yields and the dollar reverse a little bit,” said Bart Melek, head of commodity strategies at TD Securities.

“The view out there is though the Fed was talking about tapering, in reality, it’s very unlikely that we’re going to have an imminent reduction in monetary accommodation,” Melek added.

Benchmark U.S. Treasury yields eased, while the dollar dropped, making bullion cheaper for holders of other currencies.     

Gold’s gains came despite a drop in the number of Americans filing new claims for unemployment benefits.

Inflation expectations are working in favor of the metals market, said Kitco Metals senior analyst Jim Wyckoff.

“A problematic price inflation has been a bullish element for the metals markets because then investors will buy hard assets like the metals as a hedge against inflation,” Wyckoff added.

Forex 

The dollar lost ground on Thursday, hovering just above a multi-month low following Wednesday’s bounce prompted by the release of U.S. Federal Reserve meeting minutes.

The U.S. dollar index closed at 89.75.

In those minutes, from the Fed’s most recent monetary policy meeting, several policymakers said a discussion about reducing the pace of asset purchases would be appropriate “at some point” if the U.S. economic recovery continues to gain momentum.

That gave a boost to the greenback, which had been on the decline in recent weeks on repeated Fed reassurances that it is too soon to tighten its accommodative policy and that current price spikes will not morph into longer-term inflation.

But weakening Treasury yields helped pull the dollar back down.

“The only reason we saw yesterday’s pop is the Fed is open to the possibility of starting the tapering debate sooner than expected,” said Peter Cardillo, chief market economist at Spartan Capital Securities in New York. “(But) the dollar remains on a downward trend in the immediate future.”

That weakness helped boost the Australian dollar which also got a lift from strong April employment data. It was up 0.61% at $0.7773.

The euro gained 0.3% to $1.2211 and the dollar fell 0.42% to 108.765 Japanese yen.

Oil

Oil prices fell more than 2% and were on track for a third day of losses on Thursday after diplomats said progress was made toward a deal to lift sanctions on Iran, which could boost crude supply.

West Texas Intermediate crude settled at $61.741; International benchmark Brent crude closed at 64.784.

Iranian President Hassan Rouhani said in a televised speech that sanctions on oil, shipping, petrochemicals, insurance and the central bank had been dealt with in the talks.

“That really weighed on sentiment and that pushed us down a little bit,” said Phil Flynn, senior analyst at Price Futures Group in Chicago. “There’s room in the global market for more Iranian oil but in the short term that’s what is weighing on us today.”

But European diplomats said success was not guaranteed and very difficult issues remained, while a senior Iranian official contradicted the president.

Indian refiners and at least one European refiner are re-evaluating their crude purchases to make room for Iranian oil in the second half of this year, anticipating that U.S. sanctions will be lifted, company officials and trading sources said.

“With global oil demand growth projected to be healthy for the balance of this year and in 2022, the (OPEC+) producer group is in a relatively comfortable position to deal with increasing Iranian output without undermining the oil rebalancing,” PVM analysts said.

Concerns about the demand outlook in Asia also dragged prices down. Almost two-thirds of people tested in India show exposure to the coronavirus.

Speculation that the U.S. Federal Reserve might at some point start to tighten policy weighed on the outlook for economic growth and has prompted some investors to reduce exposure to oil and other commodities.

The Organization of the Petroleum Exporting Countries said that a stark warning from International Energy Agency to stop new fossil fuel funding could lead to oil-price volatility if it is acted on.

The IEA on Tuesday said investors should not fund new oil, gas and coal supply projects if the world wants to reach net zero emissions by mid-century.

Stocks

U.S. stocks rose on Thursday, rebounding from three straight days of losses as technology shares staged a comeback, while the latest jobless claims totaling a fresh pandemic-era low also boosted sentiment.

The S&P 500 gained nearly 1.1% to 4,159.12 with tech being the biggest gainer among 11 sectors. The Nasdaq Composite climbed 1.8% to 13,535.74 as Microsoft, Facebook and Alphabet all gained more than 1%. Netflix and Apple rallied more than 2% each. The Dow Jones Industrial Average rose 188.11 points, or 0.6%, to 34,084.15.

Tesla, chip stocks and other speculative parts of the market, which took a big hit in the previous session, bounced back on Thursday amid a recovery in bitcoin prices. The world’s largest cryptocurrency jumped as high as 9% to above $42,000, a rebound from when it had dropped as low as nearly $30,000 Wednesday, according to Coin Metrics.

However, bitcoin cut its gains and briefly turned negative after the Treasury Department said it is taking steps to crack down on cryptocurrency markets and transactions, and said it will require any transfer worth $10,000 or more to be reported to the Internal Revenue Service. Bitcoin last traded up 3% at around $40,000.

Coinbase shares popped 3.8% after Wedbush said to buy the crypto-exchange despite the volatility. Tesla rose 4.1%, while MicroStrategy climbed nearly 4%.

“Crypto, after all, is the poster child for liquidity-induced speculation and the fact that this is now deflating ... lends credence to the sense that risk markets are now starting to adjust to the looming prospect of peak-liquidity,” a JPMorgan strategist said in a note.

Oatly shares soared nearly 19% during the company’s public market debut on Nasdaq Thursday.

Focus Today

21:45(GMT+8): United States Markit Manufacturing PMI Flash (MAY), Previous: 60.5;

22:00(GMT+8):Euro Area Consumer Confidence Flash (MAY), Previous: -8.1;