Gold Rebound Endures

Daily Analysis - 17/05/2017

Precious Metals Prices Rise on Safe-Haven Buying

Gold prices are rallying for the fifth straight session, holding ground around a two-week high as investors question recent US political moves. Troubles within the US Government alongside softening data point have continued to dent the dollar’s appeal, spurring demand for gold as a refuge.

Bulls & Bears Battle For Upper Hand in Precious Metals

After the selloff that transpired following the French election results, gold has gradually inched its way higher, reaching a 2-week high earlier as growing political risks send investors back into haven assets. Apart from the latest display of North Korea’s nuclear missile power, risk sentiment was also diminished after two anonymous officials reported that President Donald Trump shared classified information with the Russian Foreign Minister in a private meeting in the White House last week.

This led to the dollar index slipping to a 6-month low, supporting precious metals across the board. Investors further embraced caution amid fears that the effects of the "ransomware" cyber attack were far from over. Gold was last seen around $1245.00 per troy ounce, with the area between $1250.00 and $1260.00 representing significant resistance. If bullion prices manage to break above, a rally all the way to $1290.00 is possible.

US Industrial Output Soars

Factory production in the US expanded at its fastest rate in more than three years last month amid broad-based gains in manufacturing and mining. According to figures compiled by the Federal Reserve, industrial output grew 1.00% in April compared to March’s downwardly revised 0.40%. Output has been rising for three straight months, with the April figure easily topping the consensus estimate of a 0.50% rise.

Auto production led the expansion, growing 5.00% in April, while machinery output gained 0.90%. In addition, mining and utilities output increased 1.20% and 0.70% respectively last month. The manufacturing sector has only recently recovered from some of the damage inflicted by strength in the US dollar in 2015 and early 2016, however, business investment has picked up, which is welcome considering consumer spending is still weak. USDCAD is largely unchanged Wednesday, trending around 1.3600.

UK Inflation Highest Since September 2013

British consumer prices rose at their fastest pace in close to four years through the 12-months ending in April, underlining a growing squeeze on households as the country begins its exit from the European Union and heads into a general election. Data delivered by the Office for National Statistics on Tuesday showed annualized inflation stood at 2.70% last month, up from 2.30% in March. UK inflation has accelerated in recent months, buoyed by a weakening of the Pound and a rise in crude oil prices, sending the latest CPI print well above economist forecasts of a 2.60% CPI print for the period.

Last week, Bank of England Governor Mark Carney warned that this year could be challenging for consumers as wages are likely to fall in real, inflation-adjusted terms. GBPUSD has since reversed from a weekly low to hover around the 1.2930-mark.

Australia Consumer Confidence Dips

Consumer sentiment in Australia weakened for the second straight month during May, underscoring the Central Bank’s concerns about household indebtedness and weak employment fundamentals. The Westpac-Melbourne Institute’s Index of Consumer Sentiment declined -1.10% to 98.0 in May, from 99.0 last month.

The monthly survey tracks economic expectations and consumer trends among households, and is widely accepted as an important barometer of consumer spending, which accounts for over half of the domestic economy. An index reading below 100.00 indicates that the number of pessimists outweighs the optimists when it comes to the economic outlook. Consumer confidence has been hurt by jitters in the housing market, with economists warning of unsustainable prices in some of the country’s hottest property markets. After an early high spike, AUDUSD is falling in early Wednesday trade, with the pair last seen around 0.7415.