Gold Topples Off Record High, Dollar Gets Respite
LONDON—Gold hit a record high on Tuesday before the sheer scale of its gains drew a burst of profit-..
LONDON—Gold hit a record high on Tuesday before the sheer scale of its gains drew a burst of profit-taking, which in turn helped the dollar up from two-year lows and kept equity markets subdued.
The precious metal had risen by almost $40 at one point to reach $1,980 an ounce only for a wave of selling to suck it back down as far as $1,915.
Gold is still up over $125 in little more than a week as investors bet the Federal Reserve will reaffirm its super-accommodative policies at its meeting this week, and perhaps signal a tolerance for higher inflation in the long run.
“Fed officials have made clear that they will be making their forward guidance more dovish and outcome-based soon,” wrote analysts at TD Securities. “The chairman is likely to continue the process of prepping markets for changes when he speaks at his press conference.”
One shift could be to average inflation targeting, which would see the Fed aim to push inflation above its 2 percent target to make up for years of under-shooting.
The retreat in gold took some steam out of stocks. Europes STOXX 600 and Wall Street futures both gave up modest gains to stand 0.25 percent to 0.5 percent lower after Asia-Pacific had eked out gains thanks to China, Hong Kong, and Korea.
Japans Nikkei finished down again, though, and E-Mini futures for the S&P 500 were back in the red after a 1.7 percent rebound from the Nasdaq had helped markets back up on Monday.
That rise was again led by technology stocks as investors wagered on upbeat earnings reports due this week. Analysts also noted the falling dollar helped, since more than 40 percent of S&P 500 earnings come from abroad.
The rest of the week will see 179 S&P 500 companies reporting second-quarter earnings, including Google, Amazon and Apple. Drug company Pfizer and fast-food chain McDonalds are among the big names reporting on Tuesday.
Shoqat Bunglawala, head of European and Asian portfolio solutions at Goldman Sachs Asset Management, said his firm was now “neutral” on a cross-asset basis but there had been some positives from earnings.
“We have seen around 81 percent of firms that have beat expectations (so far), so although the expectations have been very low, at least they have beaten them.”
Dollar In Decline
There were also hopes a stimulus extension could be agreed in the United States. U.S. Senate Republicans were trying to complete details of a $1 trillion to $1.5 trillion coronavirus aid proposal before enhanced unemployment benefits expire on Friday.
The proposal could cut unemployment benefits to $200 from $600, which would be a blow to household incomes and spending power.
Some 30 million Americans are out of work and states are tightening lockdown restrictions again, a trend that has also dragged on the U.S. dollar.
Alan Ruskin, head of G10 strategy at Deutsche Bank, noted currencies had been tracking the relative performance of their economies, so that high-ranked economic performance was associateRead More – Source
