Wednesday, November 10, 2021

Gold Shines for 4th Session, Inflation in Focus

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News shaping
the markets today

     

What’s happening: Gold futures settled higher on Tuesday, hitting their strongest level since early September.

What happened: Traders monitored the release of PPI (producer price index) data from the US and speeches from several Federal Reserve members for an indication of the central bank’s rate hike plans.

Consumer inflation data, scheduled for release later today, will remain in focus amid concerns over labour shortages and supply chain disruptions.

Why it matters: Gold typically rises with accelerating inflation in the world’s largest economies. High inflation in the US pushes gold even higher, as rising prices cause softness in the greenback, the yellow metal’s rival safe-haven option.

The US producer price index for October came in-line with market estimates, up 0.6% from a month ago, following a 0.5% rise in the previous month. The data did little to ease concerns around inflation easing anytime soon.

Several members of the Federal Reserve spoke on Monday, with their tone remaining mostly dovish. Fed chief Jerome Powell and Fed Vice Chairman Richard Clarida said rate hikes may not be in store till late 2022 or 2023. Federal Reserve Bank of St. Louis President James Bullard said he expects interest rates to be raised twice in 2022.

The US dollar edged lower versus its major peers on Tuesday, which made gold less expensive for people holding other currencies, boosting demand for the previous metal.

December gold rose $2.80, or around 0.2%, to close at $1,830.80 an ounce on Tuesday, after trading as low as $1,821 an ounce earlier in the session. The yellow gold rose for a fourth straight session, settling at its highest level since September 3.

“Gold prices are on the cusp of a breakout. Considering the extremely poor sentiment in precious metals across the last few months, the bar is low for prices to slice through trendline resistance,” TD Securities analysts said in a note to clients.

Treasury yields fell despite a rise in wholesale inflation, as the 10-year Treasury yield slipped to 1.425% on Tuesday, from 1.496% in the previous session.

In other metals trading, silver for December delivery lost 22 cents, or 0.9%, to settle at $24.318 an ounce, following a 1.6% gain in the previous session. December copper fell 0.6% to settle at $4.373 a pound, while January platinum rose by 0.1% to $1,061.40 an ounce. December palladium closed at $2,022.10 an ounce, down 2.7% on Tuesday.

What to watch: Traders await consumer inflation data from the US with labour shortages and supply chain issues likely to push prices higher. The annual inflation rate in the US is expected to rise to 5.8% in October, from 5.4% in the previous month.

The Markets Today

     

European stocks will be in focus today ahead of the ECB’s non-monetary policy meeting.

Context: European stocks settled mostly lower on Tuesday, with investors digesting a key reading of inflation data from the US.

Details: The STOXX 600 index eased on Tuesday after an eight-day bull run. During this period, France’s CAC 50 and Germany’s DAX 40 indices also hit new record highs, driven by upbeat earnings from major companies and a dovish stance from the European Central Bank.

Companies like Bayer, Porsche, and Munich Re released earnings results before the opening bell on Tuesday.

“The equity rally has been impressive. How long companies can keep profit margins elevated is going to be the key indicator for when the bull market is over, and, so far, all signs suggest profit margins should stay supported in the medium term,” analyst Ankit Gheedia of BNP Paribas said in a note to clients.

On the economic data front, Germany’s ZEW survey of economic sentiment surged to 31.7 in November, from 22.3 in October, exceeded market expectations of 20. The Eurozone’s ZEW indicator of economic sentiment climbed by 4.9 points to a reading of 25.9 in November.

However, Germany’s trade surplus narrowed to €16.2 billion in September and its current account surplus shrank to €19.6 billion.

The US producer price index for October came in-line with market expectations. The consumer price data, due for release later today, will remain in focus.

The pan-European Stoxx 600 settled lower by 0.19% at 482.71 on Tuesday, after trading in the positive territory earlier in the session. Stocks of basic resources were among the biggest losers, while retail stocks bucked the overall market trend and gained more than 1%.

Leading the European blue-chip index, shares of AB Foods climbed around 8% on Tuesday after the company released strong quarterly results.

London’s FTSE 100 fell 0.36%, while the DAX 40 and CAC 50 lost 0.04% and 0.06%, respectively.

What to watch: Traders await minutes of the European Central Bank’s non-monetary policy meeting.

The covid-19 pandemic remains one of the major concerns for markets, with total global cases reaching 251.5 million.

Other Markets: US indices closed lower on Tuesday, with the Dow Jones, S&P 500 and Nasdaq 100 down by 0.31%, 0.35% and 0.71%, respectively.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Japan’s machine tool orders, Germany's consumer price inflation rate, Turkey’s unemployment rate and labour force participation rate, Italy’s industrial production, Brazil’s inflation rate, America’s MBA mortgage applications, wholesale inventories, EIA’s crude oil inventories, gasoline stocks change, distillate stocks change, heating oil stocks change and natural gas stocks change, as well as Russia's gross domestic product.