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Gold Prices Extend Declines to a 4-week Low

Gold Prices Dropped to $1,224 Yesterday, Extending Losses for 4th Week

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Gold prices pulled back sharply after only testing the highs above $1300 few weeks ago. With increasing bets on a Fed rate hike in June, gold prices eased back after posting one of the strongest quarterly rallies over the past 5-years. Federal Reserve Governor Janet Yellen is scheduled to speak tomorrow.

German Business Confidence Strengthens in May


Data from the Ifo institute released on Wednesday showed that German business confidence, measured by the Ifo business climate indicator, rose to 107.7 on the month, up from 106.6 in April. Economists were expecting a rise to 106.8. The Ifo's currency conditions index was at 114.2, up from 113.2 in the previous month.  The data suggested that business sentiment was improving with construction also posting a record high. Analysts expect that based on the current Ifo assessments, the German economy could be on track to extend its quarterly gains in GDP which is expected to rise to 1.50% on an annual basis, more than the 1.30% annualized growth recorded in the first quarter. However, government officials remain doubtful if Germany would be able to sustain the pace of growth seen in the first quarter which rose strongly due to domestic demand and moderate exports.

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US Flash Services PMI Falls in May


The US flash services PMI released by Markit yesterday slipped in May to 51.2 from 52.8 in April. Activity in the US services sector remained weak while business optimism fell to its lowest level in over six and a half years. The report showed that the growth in the preliminary services sector was at the slowest pace in nearly three months with businesses reporting the lowest rate of staff hiring since December 2014. The weak service PMI data follows the preliminary manufacturing PMI released earlier this week which also weakened significantly, raising doubts whether the US economy will rebound in the second quarter. In a separate report, the US housing price index for the month of March jumped 0.70%, up from 0.40% in February and beat estimates of a 0.50% increase, data from the US Federal Housing Finance agency showed.

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Bank of Canada Leaves Interest Rate Unchanged


The Bank of Canada kept interest rates unchanged at 0.50% as expected by most economists. In the statement, the BoC said that the Canadian economy continued to adjust to lower oil prices but remained uneven. On growth, the BoC said that while the first quarter growth remained in line with the bank's expectations, business investment disappointed. In reference to the Alberta wildfires, the BoC expects it to affect the second quarter GDP growth, shaving off nearly 1.25 percent points off the quarterly growth, which was previously estimated at 2.20%. The BoC however expects growth to recover in the third quarter.

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UK Quarterly GDP Expected to Remain Unchanged


The second revision to the first quarter GDP data from the UK is due for release today at 08:30 GMT. Data from the ONS is widely forecasted to show no change, confirming that Britain's GDP grew at a pace of 0.40% in the first three months of the year, rising to an annualized pace of growth at 2.10%. An unchanged print on the GDP is unlikely to dent the sterling which based on the recent moves is clearly focused on the upcoming UK referendum. GBPUSD extended gains earlier this week rising to 1.46 after opinion polls showed that the 'stay' camp took the lead.

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