【TOP1 Evening】Gold hits 1-week low and dollar rebounds as robust yields, Oil rises on optimistic demand outlook

Gold

Gold prices fell to a one-week low on Wednesday, weighed down by firmer U.S. Treasury yields with investors awaiting policy cues from the Federal Reserve’s statement, while palladium eased after scaling a record high in the last session.

Spot gold fell 0.58% to $1766.11 per ounce, silver fell 1.09% to $25.945 per ounce by 18:00 (GMT+8).

“Strong U.S. consumer sentiment data... and higher commodity prices are pushing yields up and gold prices down as a result,” said IG Market analyst Kyle Rodda.

Benchmark U.S. 10-year Treasury yields jumped to their highest since April 15. While gold is considered a hedge against inflation, higher yields challenge that status as they increase the opportunity cost of holding bullion.

Investors now await the Fed’s statement due later in the day which is expected to provide cues on the central bank’s monetary policy outlook.

The market will be “looking for signals that maybe the Fed is starting to think about tapering or when they should taper”, said IG Market’s Rodda.

Analysts and traders have slashed their gold price forecasts, with many believing a return to last year’s record highs is unlikely as economic recovery tarnishes the safe-haven metal’s appeal, a Reuters poll showed.

Forex

The U.S. dollar edged higher on Wednesday as investors moved to the sidelines ahead of a U.S. Federal Reserve policy statement and a speech by Joe Biden later in the day where the U.S. president is set to announce more stimulus plans.

The US dollar index rose 0.15% to 91.00 by 18:00(GMT+8).

Though the greenback recovered from a one-month low hit earlier this week, investors expect the U.S. central bank to maintain its policy settings and Fed Chairman Jerome Powell is seen as likely to repeat his dovish message.

The greenback’s gains were also bolstered by higher U.S. Treasury yields with benchmark yields on 10-year notes rising above 1.60% after tepid auction results.

Investors’ inflation expectations, measured by the break-even inflation rate calculated from U.S. inflation-linked bonds, rose above 2.40% on Tuesday, the highest level since 2013.

But analysts expect the Fed will remain unperturbed by the prospects of more stimulus plans and rising inflation expectations, holding the prospect of more losses for the greenback in the coming weeks.

“We still expect Powell to remain ultra-dovish and emphasise the long period ahead in which the Fed plans to maintain loose monetary policy, which will leave open the prospect of further USD weakness,” MUFG strategists said.

The euro slipped 0.2% to $1.2070, off Monday’s two-month high of $1.2117.

The dollar stood at 108.97 yen, having jumped 0.59% overnight and extending its recovery from a seven-week low of 107.48 touched last week, in tandem with rises in U.S. bond yields.

Elsewhere, the Australian dollar dropped 0.3% to $0.77415 after the country’s consumer price index came in weaker than expected.

Crude Oil

Oil prices rose on Wednesday amid optimistic forecasts of global fuel demand recovery, while the rapid spread of COVID-19 infections in India and a bigger-than-expected build in U.S. crude stocks capped gains.

U.S. West Texas Intermediate (WTI) crude was at $62.080 a barrel, rose 0.06%, Brent was up to $62.981 a barrel, rose 0.01% by 18:00(GMT+8).

An OPEC+ decision to stick to plans for a phased easing of oil production restrictions from May to July underscored the producers’ confidence in a recovery in global demand.

U.S. bank Goldman Sachs expected “the biggest jump in oil demand ever, a 5.2 million barrels per day (bpd) rise over the next six months,” according to a Wednesday research note, citing an acceleration of vaccinations in Europe and an unleashing of pent-up travel demand.

The easing of international travel restrictions in May will lead global jet demand to recover by 1.5 million bpd, Goldman said.

“The oil cartel remains confident about the demand outlook as the economies of the U.S. and China rebound strongly. This helped to offset concerns about growing coronavirus cases in India, Japan and Brazil,” DailyFX strategist Margaret Yang noted.

Stocks

Stocks in Asia-Pacific were mixed on Wednesday.

Nikkei 225 rose 62.08 points or 0.21%, close at 29,053.97.

S&P/ASX 200 rose 30.90 points or 0.44% to close at 7,064.70.

Hang Seng Index rose 129.80 points or 0.45% to 29,071.34.

South Korea's Kospi fell 33.95 points or 1.06% to 3,181.47.

Taiwan capitalization weighted stock index fell 28.37 points or 0.16% to 17,567.53.

Europe stock markets opened higher on Wednesday, At press time: 

FTSE 100 Index rose 14.46 points or 0.21% at 6,959.43.

Germany DAX 30 rose 44.60 points or 0.29% at 15,293.87.

France CAC 40 rose 21.45 points or 0.34% at 6,295.21.

A pill that treats coronavirus in the earliest stages of the disease could be available by the end of the year, the CEO of Pfizer has said.

The oral antiviral theurapeutic works to stop COVID-19, as well as other coronaviruses, from replicating inside the human body.

Phase one studies of the drug, currently named PF-07321332, began in early March.

Pfizer CEO Albert Bourla told CNBC he was optimistic it would be available for use soon.

"If all goes well, and we implement the same speed that we are, and if regulators do the same, and they are, I hope that by the end of the year," Mr Bourla said.

Music, games and pictures all contributed to a doubling of full year net profits at Sony, the Japanese electronics and entertainment group, despite disruptions caused by the coronavirus.

Reporting its financial results for the January to March quarter and 12-month results from April 2020 to March 2021, Sony said that annual sales increased by 9% to JPY9.00 trillion ($83.3 billion). Annual net income increased from JPY582 billion ($5.38 billion) in 2019-20, to JPY1.17 trillion in 2020-21 ($10.8 billion).

Focus Tonight

22:30(GMT+8): United States EIA Cushing Crude Oil Stocks Change (23/APR), Previous:-1.318M;