Gold Near 10-Month High

Daily Analysis - 29/08/2017

North Korea Tensions Escalate

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Gold spiked in Tuesday Asian trade after North Korea launched a ballistic missile over northern Japan that rattled investors and saw them flock to the safe haven asset. The yellow metal surged close to 1.00% to $1,322.41 an ounce following the launch, its highest since last November’s U.S. presidential election.

Gold Breaks Key Resistance


Media reports from Japan said the missile, launched early Tuesday, flew over Hokkaido, before crashing in to the Pacific waters east of the northern Japanese island. The news led to a plunge in equities and saw the yen hitting a four-month high against the dollar. Bullion also drew support from the uncertainty surrounding President Donald Trump’s administration in the U.S. Trump said Monday that he hoped a government shutdown would not be necessary over his demand that the Congress approve his proposed $1.60 billion Mexican border wall.

Geopolitical risks and uncertainty tend to boost demand for safe-haven assets like gold and yen, which are considered relatively better store of value in times of volatility in other financial assets. Gold broke above the key psychological level of $1,300.00 an ounce on Monday. The metal was last trading around the $1,317.00-zone.

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Euro Zone Money Supply Growth Slows Sharply


The rate of growth in the amount of money circulating in the euro area decelerated sharply in July, even as bank lending remained strong, data from the European Central Bank showed Monday. The annualized growth pace of the M3 measure of money supply, which often acts as leading indicator of economic activity, declined to 4.50% from 5.00% in June, well short of economists’ expectations for 4.90%. Meanwhile, lending growth to corporate in the 19-nation currency bloc surged to 2.40% in July from 2.00% in the prior month.

Growth in household lending remained unchanged at 2.60% for the third consecutive month, matching its best pace since March 2009. EURGBP is consolidating in early Tuesday trade following the almost vertical rise since the start of August.

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Japanese Labour Market Strongest Since 1974


The ratio of open jobs in Japan per applicant soared to a 43-year high in July, but weak household spending figures indicate labour shortages are yet to fuel a surge in consumption.  Data from the Ministry of Health, Labour and Welfare showed early Tuesday that there were 1.52 jobs available for each applicant. That was the highest reading since February of 1974 when the country was in the midst of an economic boom.

However, household spending slipped 0.20% in July from a year ago after hitting a two-year peak in June, easily trailing a median forecast for a 0.70% rise. The latest spending data should maintain pressure on policymakers, who were betting that a tightening labour market would lift wages and boost consumption, helping the Bank of Japan to achieve its ambitious 2.00% inflation goal. USDJPY is off the lows of the session to last trade around 108.80000.

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Mexican Peso Tumbles


The Mexican peso sank in Monday trading after U.S. President Donald Trump renewed his threat to scrap the North American Free Trade Agreement (NAFTA). The peso slumped 1.20% in the previous session, leading losses among major and emerging currencies after Trump tweeted that both Canada and Mexico were being "difficult" during the current renegotiation of the agreement.

On the economic data front, Mexico registered a July trade deficit of $1.52 billion, compared to a $1.83 billion deficit in the same period last year, as exports outpaced the rise in imports. Exports gained 8.00% to $32.16 billion on increased shipments of crude oil and manufactured goods, while imports edged 6.60% higher to $33.69 billion. USDMXN was last seen around the 17.94900-mark.

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