MARKET UPDATE
Gold under pressure as dollar nears 6-month peak.
Gold prices moved little in Asian trade on Wednesday, pressured by overnight strength in the dollar and Treasury yields as markets awaited more cues on U.S. monetary policy from several Federal Reserve officials this week.
While the yellow metal recovered sharply from five-month lows over the past two weeks, it has struggled to make headway in recent sessions due to pressure from renewed strength in the dollar and yields.
The greenback traded near a six-month high on Wednesday, while 10-year Treasury yields hovered close to their strongest levels in over 20 years.
U.S. rates are widely expected to remain higher for longer this year, diminishing the prospect of any major gains in gold as high rates push up the opportunity cost of investing in the yellow metal.
Lower chances of a U.S. recession this year have also weighed on gold, which usually benefits from a risk-off environment.
Asia stocks slip, dollar firms on growth concerns.
Asia stocks fell on Wednesday after faltering growth in China and Europe heightened concerns about global economic momentum, while the dollar firmed as investors weighed the outlook for Federal Reserve interest rates.
London and U.S. markets are poised to open lower with FTSE futures and E-mini futures for the S&P 500 index down 0.42% and 0.13% respectively at 0520GMT.
MSCI’s gauge of Asia Pacific stocks outside Japan dipped 0.45%.
The Hang Seng Index lost 0.56% and China’s benchmark CSI300 Index fell 0.59%, ahead of China’s August trade data set to be released on Thursday, with analysts expecting exports and imports to continue their declines, but at a slower pace.
Investor sentiment was dampened by a private-sector survey on Tuesday that showed China’s services activity expanded at the slowest pace in eight months in August, reflecting weak demand.
China is also set to release lending and inflation data in the coming days.
Oil gains on supply woes after OPEC+ output cuts.
Oil prices ticked up in early Asian trade on Wednesday after rising over 1% in the previous session, as markets worried about a supply shortage after Saudi Arabia and Russia extended their voluntary supply cuts to the end of the year.
Brent crude futures rose by 14 cents to $90.18 a barrel at 0215 GMT. U.S. West Texas Intermediate crude (WTI) futures gained 12 cents at $86.81 a barrel.
Investors had expected Saudi Arabia and Russia to extend voluntary cuts into October, but the three-month extension was unexpected.
“These bullish moves significantly tighten the global oil market and can only result in one thing: higher oil prices worldwide,” Jorge Leon, senior vice president at consultancy Rystad Energy, said in a note.
The impact these cuts will have on inflation and economic policy in the West is hard to predict, but higher oil prices will only increase the likelihood of more fiscal tightening, especially in the U.S., to curtail inflation, Leon added.
Rystad estimated global liquids demand will surpass supply by around 2.7 million bpd in the next quarter.
Reflecting supply concerns in the near-term, the front-month Brent futures traded near 9-month highs at $4.10 a barrel above prices in six months.
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