·                     Gold rebounds as dollar dips after Fed unveils taper plan

 

Gold prices bounced back from a three-week low on Thursday as the dollar weakened after the U.S. Federal Reserve approved plans to unwind its stimulus program this month while retaining low interest rates for some time.

 

Spot gold was up 0.3% at $1,774.11 per ounce, as of 0106 GMT, after touching its lowest since Oct. 13 in the previous session.

U.S. gold futures rose 0.7% to $1,776.80.

 

The dollar index slipped 0.2% overnight and was trading little changed at 93.847 in early Asia trading.

 

The Fed said it would start trimming its monthly bond purchases in November with plans to end them in 2022, and held to its belief that high inflation would prove “transitory” and likely not require a fast rise in interest rates.

 

Gold, which pays no interest, tends to benefit when interest rates are low as it reduces the opportunity cost of holding bullion.

 

Data on Wednesday showed U.S. private payrolls increased more than expected in October, while U.S. services industry activity surged to a record high last month.

 

Share markets firmed on Thursday after the U.S. Federal Reserve engineered an orderly start to unwinding its massive stimulus program.

 

Focus now shifts to the Bank of England’s policy meeting on Thursday, where it is expected to either raise borrowing costs from an all-time low or say it is waiting to ensure the post-lockdown economy is ready for a rate hike.

 

Japan’s services sector activity grew for the first time in 21 months in October as consumer sentiment picked up after the coronavirus pandemic subsided, giving a broad-based boost to demand.

 

Spot silver edged 0.1% higher to $23.52 per ounce. Platinum gained 0.7% to $1,036.48, while palladium climbed 0.6% to $2,012.15.

 

·                     Gold Slips to $1,776, amid Hawkish FOMC & Tapering Concerns

Price activity of the XAU/USD pair remained around the $29 range, reaching a daily low of $1,759 before stabilizing at present levels. The daily moving averages (DMAs) remain above the current price, but with a flattish slope, indicating that gold is in a sideways trend. Furthermore, the yellow metal is reaching the previously specified levels, indicating that the negative bias is dissipating. Nonetheless, a clean breakout over the 200-day moving average (DMA) of around $1,800 might keep the gold bulls in command. In that case, the July 15 high of $1,834 would be the first point of resistance, followed by an empty road towards $1,900.

In contrast, if the USD bulls want to maintain dominance, they must keep prices below the 200-day moving average. In that case, the first level of support would be the November 3 low of $1,759. A breach of the latter would reveal a rising upslope trendline, running from the lows of August 9 to the low of September 29, within the $1,740-50 range.

 

·                     Sterling, euro gain on dollar after Fed announces taper

The dollar lost ground on the euro and sterling on Thursday after the U.S. Federal Reserve said it would not rush to raise interest rates even as it began unwinding its pandemic-era stimulus.  

Sterling climbed to $1.3695 in Asian hours on Thursday, extending Wednesday’s 0.51% gain due to the more dovish Fed, and recovering from Tuesday’s two-week low of $1.3603

The euro rose to $1.1614 also having rallied on Wednesday after the announcement, gaining 0.29% that day.

Market attention is now turning to how long the Fed can defer rate rises, given fears that high inflation could last longer than the Fed had initially projected.

·                     Fed's Powell and ECB's Lagarde to markets: Hold your rate hike horses

In the Fed's case alone, futures pricing had advanced since Oct 1 from firm expectations for the Fed to lift rates just once by the end of 2022 from the near-zero level they've been at for nearly 19 months to 50-50 odds of three quarter-point hikes by year end as of Tuesday.

Enough is enough, ECB President Christine Lagarde signaled in no uncertain terms on Wednesday, hours before her U.S. counterpart, Fed Chair Jerome Powell, was set to unveil his bank's first baby step toward a post-pandemic policy stance.

 

·                     China is rapidly expanding its nuclear arsenal, Pentagon says in new report

The Pentagon said Wednesday that China is rapidly expanding its nuclear arsenal and could have 1,000 nuclear warheads by 2030.

 

·                     Food prices in China climbed every week of October, commerce ministry says

Prices in China are rising quickly for food and other commodities, increasing pressure for policymakers tasked with keeping growth stable.

Food prices in China rose every week in October, according to data on edible agricultural products from the country’s Ministry of Commerce.

 

·                     China keeps close vigil at ports to cut COVID-19 risks

China is on high alert at its ports as strict policies on travel in and out of the country are enforced to reduce COVID-19 risks amid a fresh domestic outbreak, less than 100 days out from the open of the Beijing Winter Olympics.

 

·                     BOJ Kuroda signals no mood to rush stimulus exit even as Fed tapers asset buying

 

·                     EBRD ups regional 2021 growth forecast to 5.5%, warns of inflation, pandemic bumps

 The European Bank for Reconstruction and Development (EBRD) on Thursday lifted this year’s growth forecast for the 37 countries in its region, but warned rising energy costs and slow COVID-19 vaccination progress dampened prospects ahead.

 

·                     EBRD sees Russian economy growing 3% in 2022, notes sanctions risk

 

·                     UK new car sales fell around 25% in October- preliminary data

British new car registrations dropped by roughly 25% year-on-year in October, according to preliminary industry data released on Thursday, as a lack of semi-conductor chips continued to hit the sector worldwide.

 

·                     German industrial orders rebound less than expected in September

German industrial orders rose less than expected in September following an unusually big drop in the previous month, data showed on Thursday.

The figures published by the Federal Statistics Office showed orders for goods ‘Made in Germany’ were up 1.3% on the month in seasonally adjusted terms after a revised fall of 8.8% in August.

 

Reference: FXLeader, CNBC, Reuters