Risk sentiment remained cautious, with European stocks edging lower on Thursday, underperforming on fears of a renewed regional lockdown. The dollar hit a four-month high on the day and spot gold remained range-bound, trading around $1,730. A number of top Fed officials will make their voices heard during the trading session, while the market will keep an eye on the most timely employment data, U.S. initial jobless claims. In addition, Biden will hold his first presidential press conference since taking office, which will also be the focus of media attention.
Spot gold traded in a tight range around $1,730 on Thursday, with little intraday movement.
Gold prices have maintained a tepid performance in recent days as a surge in new cases in Europe has raised concerns about the pace of economic recovery, but a stronger dollar has kept gains in check.
“Gold at these levels is probably attracting some safe-haven buying right now, which is different from what we saw a few days ago,” said Michael McCarthy, chief market strategist at CMC Markets in London.
“One of the big problems with gold is that there seems to be two camps of opinion, one group of people who are worried about the new European blockade… The other group is very optimistic about the economic outlook, “McCarthy said, adding that the two opposing views are modestly supporting gold prices.
Phillip Streble, chief market strategist at Blue Line Futures in New York, said gold is unlikely to break out of the $1,700 to $1,750 range until later this year, when growth and inflation are likely to stall and investors may favor assets and commodities that track higher inflation.
“Stabilizing bond yields and upbeat comments from Fed officials have left gold range-bound with no clear direction,” said Michael Langford, director at consultancy AirGuide.
European stocks had fallen earlier as concerns about a new outbreak in Europe offset Fed Chairman Colin Powell’s forecast for a very strong rebound in the U.S. economy this year.
The resurgence of COVID-19 in Europe is a cause for concern. Investors consider the consequences of a surge in coronavirus cases in the region, and European Union leaders are discussing a possible ban on vaccine exports.
The main focus of European markets on Thursday will be a virtual meeting between European Union leaders to discuss the alarming pandemic situation in Europe and the slow vaccine rollout. At the top of the agenda is a possible restriction on EU vaccine exports, a move that could have the worst impact on neighbouring Britain and could hamper its so far successful immunization programme.
The European Union and Britain have sought to ease tensions over vaccine exports over the past 24 hours and said on Wednesday they wanted to find a “win-win” solution to increase vaccine supplies across the continent.
Eurozone business activity unexpectedly rose this month, according to a preliminary survey, but the momentum may not last until April as much of Europe is hit by a third wave of coronavirus infections and a new round of blockades.
Shares of AstraZeneca (AZN) will also be in the spotlight on Thursday after the Anglo-Swedish drug maker reported lower efficacy (76% from 79%) of its Novel Coronavirus vaccine after filing updated data with US health regulators. The announcement came after an independent oversight committee criticized the company’s previous disclosure of 79 percent efficacy based on outdated information.
While the recovery in Europe has given gold some safe-haven support, the rising dollar has also weighed on the metal, leaving it in a long and boring consolidation.
The dollar index remained firm in Europe on Thursday, hitting a 4-month high around 90.70 at one point in the day. Crucially, the U.S. index just hit the crucial 200-day moving average, a level that would provide more compelling reasons to be bullish if it held steady.
For now, the dollar’s rising strength is being helped by the fact that the US economy will recover faster than most developed countries expect.
The United States has vaccinated 39 percent of its population, compared with 13 to 14 percent for Europe’s four largest economies, Germany, France, Italy and Spain, according to The New York Times Vaccination Tracker.
“The dollar is set to appreciate further and our vaccinations are moving forward,” said Ronald Simpson, managing director of global currency analysis at Action Economics. “Europe is holding back on the vaccine.”
In addition, Federal Reserve Chairman Colin Powell’s comments also further strengthened the U.S. economic recovery expectations.
“The most likely scenario is that it will be a very, very strong year,” Mr Powell said in testimony to Congress on Wednesday in response to a senator’s question about the economic outlook. “
U.S. Treasury Secretary Janet Yellen said financial institutions look healthier than ever and that banks should be able to deliver returns to shareholders, including dividends and buybacks.
At a House hearing on Tuesday, the two men acknowledged the inflated value of assets in the market, but dismissed the threat to financial stability and predicted that the economic recovery would catch up as vaccines became more widely available.
In the session, the market is also focused on U.S. initial jobless claims, which are expected to rise 730,000 from 770,000 last week.
In addition, the market will be focused on speeches by New York Fed President William Williams, Fed Vice Chairman Larry Clarida, Atlanta Fed President Richard Bostic and Chicago Fed President Charles Evans.
Meanwhile, US President Joe Biden will hold his first official press conference since taking office on March 25, 64 days after he was sworn in, making him the latest US president to hold a press conference in more than a century.
The press conference is expected to include issues such as COVID-19, economic bailouts, border security and gun control. “This is an opportunity for him to speak to the American people through press coverage, through reporters,” White House spokeswoman Jen Psaki said Wednesday.