【Market Evening】Gold rises but set for weekly loss, Dollar stays near 3-week high, Oil fall

Gold rises but set for weekly loss as dollar holds ground

Spot gold prices rebounded on Friday after sliding to an over one-month low in the previous session, though a firm dollar set the metal on course for a weekly decline as investors awaited next week’s U.S. Federal Reserve policy meeting.

Spot gold rose 0.68% to $1765.20 per ounce and spot silver rose 0.86% to $23.07 per ounce by 17:30(GMT+8).

“While support at $1,750 has so far held with some speculative short-covering lifting prices, the bounce looks anaemic and gold faces another test of $,1750 as the dollar remains firm,” said Jeffrey Halley, a senior market analyst for Asia Pacific at OANDA.

The dollar held close to a near three-week peak on Friday, increasing gold’s cost for buyers holding other currencies.

On the technical front, gold may end its bounce in a resistance zone of $1,763-$1,768 per ounce, and retest a support at $1,744, according to Reuters technical analyst Wang Tao.

Bullion slipped as much as 2.7% on Thursday, as the dollar index jumped after an unexpected increase in U.S. retail sales last month raised expectations of the Federal Reserve potentially reducing its stimulus sooner.

The Federal Open Market Committee’s two-day policy meeting is due to be held on Sept. 21-22.

Reduced central bank stimulus tends to lift bond yields, which raises the opportunity cost of holding non-interest bearing gold. It also helps boost the dollar, further weighing on bullion.

Michael Langford, director at corporate advisory AirGuide, also said “the unpublished European Central Bank inflation estimate has driven short term sentiment against gold at the prospect of rate rises potentially happening earlier than expected.”

Dollar stays near 3-week high

The dollar held near three-week highs against a basket of major currencies on Friday after a raft of strong U.S. economic data rekindled expectations for earlier policy tightening by the U.S. Federal Reserve.

U.S. retail sales unexpectedly increased in August, rising 0.7% from the previous month despite expectations of a 0.8% fall, while business sentiment survey by the Philadelphia Fed also showed a big improvement.

The figures helped to curb cautious views on the U.S. economy sparked after tame consumer inflation reading and soft job growth data published earlier this month, helping to revive expectations for early Fed tapering.

The US dollar index stood at 92.880, near Thursday’s three-week high of 92.965.

The euro hit a three-week low of $1.17505 overnight and last traded at $1.1765.

The common currency also hit a three-week low of 128.61 yen and one-month low of 0.8501 British pound, before recovering some losses.

The yen has so far shown limited reaction to ruling Liberal Democratic Party’s (LDP) leadership race, which will formally kick off on Friday ahead of Sept. 29 vote. The LDP’s parliamentary dominance means the party’s new leader will become prime minister.

Many investors see vaccine minister Taro Kono as a front-runner, followed by former foreign minister Fumio Kishida and former internal affair minister Sanae Takaichi.

“The world’s major macro players are not expecting big policy shifts. A lack of moves in the yen is a testament to that,” said Hiromichi Shirakawa, vice chairman and chief economist for Credit Suisse in Japan.

Still, former internal affairs minister Seiko Noda’s decision to join the race on Thursday increased uncertainties because that could mean no single candidate wins on the first round and the election goes to a run-off, which could work against Kono.

Oil fall as U.S. storm-hit supply makes slow return

Oil prices barely moved on Friday even as more supply came back online in the U.S. Gulf of Mexico following two hurricanes, with benchmark contracts on track to post weekly gains of around 4% as the output recovery is seen lagging demand.

Brent crude oil price fell 0.42% to $74.83 a barrel while U.S. West Texas Intermediate crude oil price was at $71.92 a barrel, down 0.58% by 17:30(GMT+8).

Both contracts were on course to climb about 4% for the week, with Brent near a seven-week high and WTI near a six-week high, as output in the U.S. Gulf of Mexico has recovered more slowly than expected after Hurricane Ida damaged facilities in August and tropical storm Nicholas hit this week.

As of Thursday, about 28% of U.S. Gulf of Mexico crude production remained offline two-and-a-half weeks after Hurricane Ida hit.

“It’s still taking longer than people thought in terms of that coming back. That’s been a supportive factor in the market,” Commonwealth Bank commodities analyst Vivek Dhar said.

“We’re going to go into more (supply) deficit conditions - that certainly seems to be the view.”

Preliminary data from the U.S. Energy Information Administration showed U.S. crude oil exports in September have slipped to between 2.34 million bpd and 2.62 million bpd from 3 million bpd in late August.

Dhar also pointed to data from the International Energy Agency this week showing OECD oil inventories falling to a low in November, as the recovery in fuel demand is expected to outpace supply.

The risk of weakened demand in Southeast Asia has abated as Covid-19 cases appear to have peaked in countries like Indonesia, Malaysia and Thailand, he said.

Asian markets show mixed trend

Asian stock markets are trading mixed on Friday, following the mixed cues overnight from Wall Street, with traders remaining cautiously optimistic about the pace of the global economic recovery from the pandemic on a strong boost in vaccinations in the region after a slow start. 

Nikkei 225 rose 0.58% to 30,500.05.

South Korea KOSPI rose 0.33% to 3,140.51.

S&P/ASX 200 fell 0.76% to close at 7,403.70.

Taiwan capitalization weighted stock fell 0.011% to 17,276.79.

Hang Seng Index rose 1.03% to 24,920.76.

New Zealand suspended quarantine-free travel with Australia for a further 8 weeks on Friday, extending a halt in the so-called travel bubble between both countries, as they deal with fresh outbreaks of the Delta variant of the coronavirus.

Focus Tonight

22:00(GMT+8):  United States Michigan Consumer Sentiment Prel (SEP), Forecast: 72, Previous: 70.3;