Gold Prices Achieve Solid Gains

Daily Analysis - 08/08/2017

Easing Dollar Lifts Bullion

Gold prices rose in Tuesday morning trade, buoyed by an easing in the U.S. dollar. The yellow metal ended in positive territory on Monday to halt a slide that started early last week.

Gold Hangs in Balance

The dollar is edging lower, as investors consolidate their bets before key U.S. inflation data later this week that may reverse the currency's weakness this year. Typically, a weaker greenback supports commodities such as gold, which are priced in U.S. dollar, lowering the cost for overseas buyers. Gold shed close to 1.00% on Friday after better than expected U.S. employment data increased the likelihood of a December rate hike from the Federal Reserve.

Any tightening in monetary policy decreases the relative demand for gold. Bullion prices were last seen around $1259.50 an ounce. $1250 represents the immediate downside support from where the metal rebounded yesterday. An hourly close above $1261 could see gold mount a climb back to levels of $1270 an ounce.

U.S. Consumer Credit Rises Less Than Expected

U.S. consumer borrowings increased at a slower pace in June, hit by weak growth in student and auto loans, which recorded their smallest gains in a year, per government data released Monday. The Federal Reserve said that total consumer credit expanded by $12.40 billion in June, down from May’s increase of $18.30 billion. The consensus economist forecast was for an incline of $16.00 billion.

Non-revolving credit, which includes student and auto loans, grew by $8.30 billion - the weakest growth rate since a $7.00 billion expansion in June 2016. The Fed credit report is closely monitored to gauge consumer spending trends, which accounts for roughly 70.00% of U.S. economic activity. S&P 500 September futures were last trading around the 2475-mark.

China Export Growth Slows

China’s trade growth weakened in July, official data from the General Administration of Customs showed early Tuesday. July exports rose 7.20%, while imports grew by 11.00%. Analysts polled by Reuters had forecast a 10.90% year-over-year gain in Chinese exports. July imports were projected to increase by 16.60%. Trade surplus contracted by 10.70% from a year ago to $46.7 billion. The country’s surplus with the United States rose 2.00% in July to $25.2 billion.

Economists reckon Chinese economy will likely cool this year, hurting demand for foreign goods, as state controls imposed to curb rising debt take root. The International Monetary Fund expects Chinese economic growth to slip to 6.60% this year from last year’s 6.70%. USDCNH is tumbling Tuesday morning to last trade around 6.70300.

U.K. House Price Growth Weakest in 4 Years

British house prices grew at their slowest pace in four years in the three months to July, data from mortgage lender Halifax showed Monday. Average house prices between May and July were 2.10% higher from a year earlier, slowing from a 2.60% growth rate in June, Halifax said. Economists surveyed by Reuters were expecting a 2.00% rise. During the month of July, house prices gained 0.40%, rebounding from a monthly decline of 0.90% in June and topping a median forecast of 0.20% growth in the Reuters poll.

The U.K. housing market has decelerated sharply since the “Brexit” vote in June 2016, as households feel the pinch of inflation, which is increasing faster than average wages. GBPUSD has bounced off the strong support at 1.30100 to currently hover around 1.30500.