Gold Slips to 4-Month Low

Daily Analysis - 08/12/2017

Dollar Strength Hurts Demand for Haven Metal

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Gold prices are on track to notch their biggest weekly decline since May, weighed down by a stronger greenback amid investor expectations of progress on US tax reform and higher interest rates. XAUUSD slipped -0.80% to finish Thursday at $1247.04 a troy ounce, its lowest level since late July before rebounding modestly.

Gold Sheds $50 in Less than Two Weeks


Bullion is struggling to compete for investor attention as borrowing costs continue climb. The US Federal Reserve is widely-tipped to hike interest rates next week for a third time this year. Most economists also forecast multiple rate increases next year as well via a gradual normalization strategy. Tighter monetary policy has been one of the driving factors pulling gold lower by almost -7.00% off its 2017 highs touched in early September. The US dollar recovering from multi-year lows has also dented demand for gold and other dollar-denominated commodities as they become more expensive for buyers in other countries. Investors will be eyeing US Nonfarm Payrolls data slated for release later in session for any final clues before the FOMC policy meet next week. Gold prices are edging modestly higher in Friday trade amid an upside pullback after yesterday’s substantial decline.

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Chinese Exports Smash Expectations


After slowing in the prior month, Chinese exports unexpectedly accelerated in November while import growth continued to outpace outbound shipments, reassuring investors that a drastic slowdown in the world’s second-largest economy may not materialize. Figures from the General Administration of Customs released during the overnight session showed that exports surged 12.30% last month from a year earlier to record its fastest expansionary pace since March, topping analyst expectations of a 5.00% rise. Imports increased 17.70% year-over-year in November to expand at its quickest rate since September, also blowing past forecasts of 11.30% growth. The overall trade surplus narrowed last month to $40.20 billion from $44.24 billion in the same month a year ago, suggesting trade tensions with China's main trading partner, the United States, are unlikely to let up any time soon. Following a four-session winning streak, USDCNH has trimmed earlier session gains as the Yuan appreciates, sending the pair slipping to near 6.6200.

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UK House Prices Rise on Supply Scarcity


British house prices increased for a fifth straight month in November as a lack of properties for sale kept the market tight.  Data reported by mortgage lender Halifax on Thursday indicated home prices edged 0.50% higher month-on-month following a 0.30% gain in October, beating economist projections anticipating a 0.20% advance. However, on an annualized basis, increases in residential prices slowed to 3.90% compared to the 4.50% rise recorded in October. By comparison, rival mortgage lender Nationwide reported 2.50% growth in home prices over the past one year just last week, echoing Halifax’s results albeit a slightly slower pace. Halifax remarked that despite the deceleration in annualized growth, the imbalance between supply and demand continued to boost home prices. The GBPUSD pair is gaining in Friday Asian trade amid resurgent Brexit optimism to currently hover near 1.3485 after exceeding the 1.3500-level earlier.

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US Consumer Credit Increases More Than Forecast


New data from the US Federal Reserve published late Thursday confirmed that consumer borrowings in the country continued to rise in October. Outstanding consumer credit, a key gauge of non-real estate debt, grew by $20.52 billion from the previous month to rise by a seasonally adjusted annual pace of 6.51%following a lower-revised $19.21 billion recorded in September. Outstanding revolving credit, which mostly includes credit card debt, expanded at a 9.90% annual rate in October, while outstanding non-revolving credit, comprising mainly of auto and student loans, grew at a 5.30% annual rate, helping the total figure inch closer to $1 trillion. Elsewhere in the Central Bank’s report, household wealth stood at $96.90 trillion in the third quarter, compared to a downwardly revised $95.20 trillion in the previous quarter. Nasdaq futures have since broken above the key resistance at 6350 in Friday morning trade amidst a surge in bullish sentiment.

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