Gold Edges Lower

Daily Analysis - 22/08/2017

Steadying Dollar Hurts Bullion Demand


Gold prices eased from the highs of the previous session on Tuesday amidst strength in the US dollar. Investors have turned cautious ahead of the annual central bankers’ conference held in Jackson Hole later in the week.

Bullion Turns Range-bound

Gold rose Monday to its highest settlement price since the first week of June as a spike in tensions between the United States and North Korea boosted demand for the precious metal. However, sentiment turned neutral early Tuesday, as investors look for clues about any potential monetary policy changes during the US Federal Reserve’s three-day symposium of global central bankers.

Gold last week briefly broke above the key level of $1300 per troy ounce following a terrorist strike in Barcelona. Data from the US Commodity Futures Trading Commission released Friday showed net long positions in gold contracts surged 30.00% during the week ended Tuesday. Gold was last seen trending around the $1285-mark. On the downside, $1280 is likely to provide support for prices, while any rally could face resistance around $1301 per ounce.


Chicago Fed Cautions US Growth is Slipping

The closely-watched Chicago Federal Reserve National Activity Index slipped to -0.01 in July from the higher revised 0.16 recorded a month prior. Economists surveyed by Econoday had forecast a consensus reading of 0.22. The three-month moving average of the index also fell to –0.05 in July from 0.09 in June.

The Chicago Fed National Activity Index is a monthly indicator designed to gauge the general trends and direction of the US economy. The index is constructed so that a reading of zero indicates the economy is expanding close to its historical pace of growth. Negative values point to below-average growth, while positive figures suggest growth is outperforming its historical average. S&P 500 futures rebounded from the strong support around 2410 to last trade around the 2435-mark.


Copper Prices Rally

Copper prices soared close to 2.00% on Monday as investors continued to bet that higher Chinese demand will boost base metals. Futures for August delivery hit a peak of $3.0020 per pound to reach the highest level since November of 2014. Copper has seen its value surge 3.50% in August alone, putting it on track to record its longest streak of monthly gains since last year. Due to its widespread use in manufacturing and housing, copper is considered a bellwether for global economic growth.

The most recent rally reflects global economic performance that has been stellar to this point. The Euro area economy expanded at an annual rate of 2.50% in the second quarter, easily topping economists’ expectations while similar Japanese metrics rose 4.00% on an annualized basis, also beating forecasts. In addition, copper prices have also benefited from the recent weakness in the US dollar.


UK FTSE 100 Rebounds in Early Tuesday Trade

FTSE 100 futures for September delivery rebounded from a key support area in Tuesday morning trade as bulls attempt to mount a comeback following yesterday’s weakness in equities around the globe amid rising tensions between the US and North Korea. UK stocks kicked off the week in negative territory after the US and South Korea started their annual joint military exercises.

North Korea had warned Sunday that the joint exercises could cause the ongoing crisis to deteriorate further, pushing the region towards “a nuclear war.” The heightened geopolitical jitters saw an outflow of investor capital from equity and futures markets to haven assets like gold, the Japanese Yen and Swiss franc. FTSE 100 futures suffered their third straight session of losses to close Monday at 7312.50 before bouncing overnight.


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