Range-Bound Gold Market Looks to the Fed’s Guidance Next Week
The U.S. Comex gold futures jumped 1.09 percent on Tuesday, but tumbled
back down the next day, ending at $1,377.80 on Thursday. During Asia’s
Friday morning, the gold futures traded higher at around $1,385. The
Dollar Index has fallen 1.12 percent week-to-Thursday as the Japanese
Yen has surged 2.30 percent and the Euro has risen about 1 percent
versus the dollar. The Euro Stoxx 50 index dropped for four consecutive
days by 2.29 percent. The S&P 500 index rebounded 1.48 percent on
Thursday although it has fallen 0.43 percent this week. Since the peak
in early May, the U.S. high yield bond prices have fallen about 3
percent while the emerging market bond prices have dropped even more by 6
percent.
Slowing Growth Outside of the U.S.
The growth in the U.S. is holding up better than that in the rest of the
world, and its stock market is outperforming this month. The latest
U.S. weekly jobless claims dropped 12,000 to 334,000 while the May
advance retail sales rose 0.6 percent compared to the expected 0.4
percent. The World Bank lowered this year’s world GDP growth forecast
from 2.4 percent in January to 2.2 percent. In particular, it reduced
its growth expectations in China and Brazil, expected the Euro economies
to contract 0.6 percent, and revised up the growth in the U.S. and
Japan. As the market increasingly expects the Fed to reduce its bond
purchases, bond yields, especially in the emerging countries, have
backed up, sending investors’ money out of global bonds.
Investors Feeling Bearish Again
Based on the Bloomberg survey, the number of bearish gold traders has
increased the most since a month ago. The gold-backed ETP holdings fell
to a two-year low of 2,117.96 metric tons on Thursday. The Chinese may
lend support to the physical gold market after their three-day holiday.
Import demand in India has dropped significantly in June after the
government raised the import duty from 6 to 8 percent on 5 June and
imposed further shipments restrictions. Gold prices will be under
further pressure if investors continue to flee from the gold-backed ETPs
without a big enough offset by the physical demand.
What to Watch
Next week, the important events to watch will include the U.S. May CPI
and housing starts on 18 June, the U.S. FOMC rate decision and the Fed’s
press conference on 19 June, the Eurogroup meeting on 20 June as well
as the June “flash” PMI index for China, the E17 and the U.S. on the
same day.
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14 Jun 2013 | Categories: Gold