【Market Evening】Gold hovers below $1,800-mark, Oil edges higher, Asian markets decline amid inflation

Firmer dollar, rate-hike bets pin gold below key $1800 level

Gold prices edged higher on Wednesday, though the strength in the U.S. dollar and bets that the Federal Reserve could raise interest rates sooner than anticipated kept the safe-haven metal below the key $1,800 mark.

Spot gold rose 0.15% to $1791.56 per ounce and spot silver fell 0.08%to $23.61 per ounce by 17:30(GMT+8).

The metal has slumped about 4.5% from last week's five-month high on expectations that Fed Chairman Jerome Powell could accelerate the pace at which the central bank normalises monetary policy amid surging consumer prices.

Those bets helped strengthen the dollar index , which steadied near its highest level in 16 months on Wednesday, adding pressure on bullion as it raises the metal's cost for holders of other currencies.

"Although most of last week's fast-money long positions are probably now closed out, gold is unlikely to stage a meaningful recovery above $1,800 unless U.S. 30-year yields unwinds this week's gains," Jeffrey Halley, senior market analyst at OANDA, said.

U.S. 30-year Treasury yields were not far from their highest level since late-Oct hit earlier this month.

Investor focus has shifted to a deluge of U.S. data including the pivotal Personal Consumption Expenditures Price Index, quarterly GDP and the minutes from the Fed's latest meeting due later in the day.

Hareesh V, head of commodity research at Geojit Financial Services in Kochi, India, said although recent U.S. data including retail sales was positive, uncertainty over the recovery in jobs may prevent the Fed from accelerating taping over the next few months, supporting gold.

Platinum rose 1.3% to $981.86 and palladium gained 2% to $1,905.96.

The World Platinum Investment Council expects a much larger global platinum market surplus this year than its earlier forecast. 

Oil edges higher as investors sceptical about effectiveness of joint reserve release

Oil prices edged higher on Wednesday, extending gains from the previous day, as investors remained sceptical about the effectiveness of a U.S.-led release of oil from strategic reserves and turned their focus to the next step by oil producers.

Brent crude oil rose 0.3% to $81.54 a barrel, while U.S. West Texas Intermediate (WTI) crude rose 0.42% to $78.63 by17:30(GMT+8).

"Investors were disappointed by the small size of the joint oil release by the United States and other countries," said

Satoru Yoshida, a commodity analyst with Rakuten Securities.

"Also, the coordinated efforts by oil consuming countries raised fears that OPEC+ may slow their output increase pace," he said, adding that market's attention is now turned toward the next OPEC+ producer group meeting on Dec. 2.

The United States said on Tuesday it would release millions of barrels of oil from strategic reserves in coordination with China, India, South Korea, Japan and Britain, to try to cool prices after OPEC+ producers repeatedly ignored calls for more crude. 

Japan will release "a few hundred thousand kilolitres" of oil from its national reserve, but the timing of the sale has not been decided, industry minister Koichi Hagiuda said on Wednesday. The Nikkei newspaper reported Japan will hold auctions for about 4.2 million barrels of oil out of its national stockpile by the end of this year. 

Analysts said the effect on prices of the coordinated release was likely to be short-lived after years of declining investment and a strong global recovery from the COVID-19 pandemic. 

The coordinated release may add about 70 million to 80 million barrels of crude supply, smaller than the more-than-100 million barrels the market has been pricing in, analysts at Goldman Sachs said. 

"The threat of more supply in the short term certainly creates an artificially looser oil market for the next 1-2 month period," Louise Dickson, senior oil markets analyst at Rystad Energy, said in a report.

"However, the move by (U.S. President Joe) Biden and other leaders may just be pushing the supply issue down the timeline, as emptying out storage will put even further strain on already low oil stockpiles," he added.

All eyes are on how the Organization of the Petroleum Exporting Countries (OPEC), Russia and their allies, together called OPEC+, will react to the joint reserve release when they meet on Dec. 2 to discuss policy.

The United Arab Emirates energy minister said on Tuesday he saw no logic in the Gulf OPEC producer supplying more oil to global markets when all indicators pointed to a supply surplus in the first quarter of next year. 

Meanwhile, U.S. crude and gasoline stocks rose last week while distillate inventories fell, according to market sources citing American Petroleum Institute figures on Tuesday. 

Dollar rests after surging on Powell’s reappointment, kiwi weakens

The dollar paused on Wednesday after a surge that followed the reappointment of Federal Reserve chair Jerome Powell, who was seen as the more hawkish choice, while the New Zealand dollar eased after a smaller than expected rate hike.

The euro held just above a 16-month trough at $1.1238, having found a measure of support from stronger-than-expected European business surveys. The yen sat just above a four-year low at 115.13 to the dollar.

The kiwi was the biggest mover in an otherwise quiet Asian session and fell as far as 0.5% to $0.6915 after the Reserve Bank of New Zealand lifted rates 25 basis points (bps) and raised its long-term cash rate projection by 50 bps.

In emerging markets, the Turkish lira has collapsed and fell more than 11% in one session overnight, setting the scene for further capital outflows and possibly putting pressure on EM currencies globally.

Sterling touched an 11-month low of $1.3344 against the rising dollar on Tuesday and steadied at $1.3380 on Wednesday. The risk-sensitive Australian dollar hovered at $0.7255 after falling to a seven-week low of $0.7207 overnight.

Asian markets decline amid inflation

Asian shares fell Wednesday as worries about inflation set off expectations the U.S. Federal Reserve might raise interest rates.

Nikkei 225 fell 1.58% to 29,302.66.

Hang Seng Index rose 0.14% to 24,685.50.

Taiwan capitalization weighted stock fell 0.13% to 17,642.52.

S&P/ASX 200 fell 0.15% to 7,399.40.

South Korea KOSPI fell 0.10% to 2,994.29.

“Markets continue to shift their expectations toward a tighter Fed monetary policy,” said Yeap Jun Rong, a market strategist at IG, adding that investors will be watching for U.S. data being released later in the day.

Some Asian central banks have already begun to raise interest rates to tamp down inflation. New Zealand’s raised its benchmark interest rate by 0.25% Wednesday to 0.75%.

In October the Reserve Bank raised it from a record low 0.25% to 0.5%, the first such hike in more than seven years, removing some support it put in place when the coronavirus pandemic began.

The Fed will release minutes later in the day from its October policy meeting, potentially giving investors more details on the central bank’s plan to start trimming bond purchases that have helped keep interest rates low.

Investors have been watching to see if pressure from rising inflation will goad the Fed into speeding up its plans for trimming bond purchases and raising its benchmark interest rate.