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PBOC to Maintain Prudent Monetary Policies

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PBOC

China’s central bank has pledged to continue prudent monetary policies while maintaining reasonable liquidity in the banking system.

According to a joint statement from the People’s Bank of China and monetary authority on Friday, Yuan exchange rates would be basically stable at reasonable equilibrium level in 2016. The apex bank promise to further promote the internationalization of the Chinese currency and would continue to offer credit support to some key areas of the economy with lower-social financing costs.

China Stocks Gain

Chinese stocks gained after the government suspended a controversial circuit breaker system. Shanghai Composite index gained 2 percent after falling 2.2 percent earlier on Thursday.

“The scrapping of the circuit breaker system will help to stabilize the market, but a sense of panic will remain, particularly among retail investors,” said Li Jingyuan, general manager at Shanghai Bingsheng Asset Management. “The ‘national team’ will probably continue to buy stocks significantly to stabilize the market.”

China’s decision to suspend circuit breaker system makes sense, but the timing and implementation is questionable, this is because China realized that it had very close-fitting limits, which is more harmful at the moment, said Mohamed El-Erian, the chief economic adviser at Allianz SE.

“They realized this, which is good news. The bad news is they took it off at a very peculiar time and did so without a whole set of compensating measures,” said El-Erian, who is also a columnist for Bloomberg View.

In Shanghai and Shenzhen, CSI 300 Index of large-cap companies advanced 2 percent, while Hang Seng China Enterprises Index gained 1.1 percent from previous four-year low.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

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Crude Oil

Brent Crude Oil Breaks $80 Price Level Amid Supply Concerns

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Brent crude oil - Investors King

Oil markets climbed for a sixth day on Tuesday, reversing earlier losses, on fears over tight supply while surging prices of liquefied natural gas (LNG) and coal also lent support.

Brent crude futures gained $1.05, or 1.3%, to $80.58 a barrel at 0645 GMT, after reaching its highest since October 2018 at $80.75 earlier in the session. It surged 1.8% on Monday.

U.S. West Texas Intermediate (WTI) crude futures rose $1.06, or 1.4%, to $76.51 a barrel, the highest since July 6. It jumped 2% the previous day.

“Investors remained bullish as supply disruptions in the United States from hurricanes are continuing for longer than expected at a time when demand is picking up due to easing lockdown measures and the wider rollouts of COVID-19 vaccination,” said Chiyoki Chen, chief analyst at Sunward Trading.

Hurricanes Ida and Nicholas, which swept through the U.S. Gulf of Mexico in August and September, damaged platforms, pipelines and processing hubs, shutting most offshore production for weeks.

Also weighing on supply, top African oil exporters Nigeria and Angola will struggle to boost output to their quotas set by the Organization of the Petroleum Exporting Countries (OPEC) until at least next year as underinvestment and nagging maintenance problems continue to hobble output, sources at their respective oil firms warn.

Their battle mirrors that of several other members of the OPEC+ group who curbed production in the past year to support prices when COVID-19 hit demand, but are now failing to ramp up output to meet soaring global fuel needs as economies recover.

The supply issues are occurring as countries ease their COVID-19 movement restrictions, potentially boosting demand.

Japan, the world’s fifth-biggest oil user, plans to lift a coronavirus state of emergency in all regions on Thursday as the number of new cases falls and the strain on the medical system eases, Economy Minister Yasutoshi Nishimura said.

Analysts also say rising prices of spot liquefied natural gas (LNG) and coal may support higher oil prices.

“Oil demand could pick up by an additional 0.5 million barrels per day, or 0.5% of global oil supply, as high gas prices force a switch from gas to oil consumption,” Commonwealth Bank commodities analyst Vivek Dhar said in a note.

He added that energy prices could rally from here if the Northern Hemisphere winter proved colder than expected.

China is in the grip of a power crunch as a shortage of coal supplies, tougher emissions standards and strong demand from manufacturers and industry have pushed coal prices to record highs and triggered widespread curbs on usage.

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Gold

Gold Prices Rise as Soft Dollar Supports Safe-haven Appeal

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gold bars - Investors King

Gold prices firmed on Monday, propped up by a subdued dollar and slight retreat in the U.S. Treasury yields, with investors gearing up for a week of speeches from U.S. Federal Reserve policymakers for cues on the central bank’s rate hike path.

Spot gold was up 0.5% at $1,759.06 per ounce, as of 0400 GMT, while U.S. gold futures were up 0.4% at $1,759.00.

While the dollar index softened, the benchmark 10-year Treasury yields eased after hitting their highest since early-July. A weaker dollar offered support to gold prices, making bullion cheaper for holders of other currencies.

“Gold is still looking slightly precarious where it is right now, and it’s probably bouncing off key technical level around $1,750,” IG Market analyst Kyle Rodda said.

“Gold remains an yield story and that yield story is very much tied back to the tapering story.”

A slew of Fed officials are due to speak this week including Chairman Jerome Powell, who will testify this week before Congress on the central bank’s policy response to the pandemic.

“There’ll be a lot of questions being put to Fed speakers about what the dot plots implied last week and weather there is higher risk of heightened inflation going forward and that rate hikes could be coming in the first half of 2022,” Rodda added.

A pair of Federal Reserve policymakers said on Friday they felt the U.S. economy is already in good enough shape for the central bank to begin to withdraw support for the economy.

Gold is often considered a hedge against higher inflation, but a Fed rate hike would increase the opportunity cost of holding gold, which pays no interest.

Investors also kept a close watch on developments in debt-laden property giant China Evergrande saga as the firm missed a payment on offshore bonds last week, with further payment due this week.

Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, increased 0.1% to 993.52 tonnes on Friday from 992.65 tonnes in the prior session.

Silver rose 0.9% to $22.61 per ounce.

Platinum climbed 1.3% to $994.91, while palladium gained 0.7% to $1,985.32.

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Crude Oil

Brent Crude Oil Near $80 Per Barrel Amid Supply Constraints

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Brent crude oil - Investors King

Oil prices rose for a fifth straight day on Monday with Brent heading for $80 amid supply concerns as parts of the world sees demand pick up with the easing of pandemic conditions.

Brent crude was up $1.14 or 1.5% at $79.23 a barrel by 0208 GMT, having risen a third consecutive week through Friday. U.S. Oil added $1.11 or 1.5% to $75.09, its highest since July, after rising for a fifth straight week last week.

“Supply tightness continues to draw on inventories across all regions,” ANZ Research said in a note.

Rising gas prices as also helping drive oil higher as the liquid becomes relatively cheaper for power generation, ANZ analysts said in the note.

Caught short by the demand rebound, members of the Organization of the Petroleum Exporting Countries and their allies, known as OPEC+, have had difficulty raising output as under-investment or maintenance delays persist from the pandemic.

China’s first public sale of state oil reserves has barely acted to cap gains as PetroChina and Hengli Petrochemical bought four cargoes totalling about 4.43 million barrels.

India’s oil imports hit a three-month peak in August, rebounding from nearly one-year lows reached in July, as refiners in the second-biggest importer of crude stocked up in anticipation of higher demand.

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