Gold Touches 1-Year High

Daily Analysis - 05/09/2017

North Korea Tensions Spur Added Safe-Haven Demand


Gold prices spiked to their highest point in a year on Monday as safe-haven assets continued to benefit against the backdrop of the latest North Korean nuclear test. Bullion soared as much 0.90% during the previous session as the world prepares for the possibility of another imminent ballistic missile launch.

Gold Bulls Take a Breather

The appreciation in gold prices closely tracked those of fellow safe-haven assets including the Swiss Franc and Japanese Yen following North Korea's missile test over the weekend. The test was the sixth to have been conducted by the communist regime since President Donald Trump assumed office last January and is widely reported to have been the most powerful yet. The recent escalation in geopolitical tensions has enabled gold to breakout out from the $1200 - $1300 range, inside which the precious metal had been trading over the past year. XAUUSD is currently perched around $1336 per troy ounce. A close above the most recent high at $1340 could see gold launch an attempt to scale $1350 which represents the strongest immediate resistance level on the upside.


Chinese Services Growth Reaches 3-Month Peak

A leading private survey announced overnight showed that the Chinese services sector expanded at its faster pace in three months through the end of August as new business orders increased. The Caixin Services Purchasing Managers' Index gained to 52.7 last month from 51.5 in July. A reading above 50 points to growth, while any figure below signals contraction for the sector. New business orders grew at the fastest clip in three months with an August reading of 53.1, while corporate hiring’s also stood at a four-month high. Official Chinese government data showed the services sector, which accounts for close to one-half of the country’s economy, grew 7.70% during the first half of 2017, easily outpacing the overall annualized GDP growth rate of 6.90%. USDCNH is off of earlier session highs, with the pair currently hovering around 6.5490.


UK Construction Expansion Ebbs Near Slowest Pace in 1-Year

Growth in British construction firms unexpectedly slid to a one-year low in August, hit by a slump in commercial sector investment.  The widely followed Markit/CIPS UK Construction PMI announced on Monday fell to 51.1 last month from 51.9 in July while printing well below the consensus estimate of economists anticipated a 52.0 reading for the period. Civil engineering activity remained broadly flat, while commercial construction contracted at the fastest rate since July of 2016. Lead survey compiler Markit remarked that Brexit uncertainty weighed on commercial building activity, as clients either delayed spending decisions or scaled back on projects. Construction contributes roughly 6.00% to British economic output. FTSE 100 futures have been locked within a narrow range over the past few trading sessions, with the index last seen around the 7415-mark.


Euro Area Producer Prices Stall

The costs of raw materials and inputs tracked by the Producer Price Index rose less than expected in July, indicating sustained weakness in inflationary pressures.  According to data released by the European Union’s statistics office Eurostat, the prices of goods leaving factory gates were flat on a month-over-month basis in July after gaining just 2.00% versus the same period last year. Economists surveyed by the Wall Street Journal were expecting a 0.10% increase for the month. Producer prices in the 19-nation currency bloc have either stayed the same or fallen for six straight months. This continued weakness has contributed to a slower pace of consumer inflation, a metric which remains short of the 2.00% targeted by the European Central Bank. EURUSD is marginally higher in Tuesday morning trade, with the pair last seen slipping below 1.1900.


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