Gold Fundamental Analysis – week of July 25, 2016 -Forecast

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Updated: Jul 24, 2016, 11:30 UTC

Gold tumbled this week to close at 1322.00 down by .34% while it remains up almost 25% for the year. Traders are steady ahead of the two central bank

Gold tumbled this week to close at 1322.00 down by .34% while it remains up almost 25% for the year. Traders are steady ahead of the two central bank meeting this week and Europe stress testing data, but gold remains bearish. The Federal Reserve will meet for a policy meeting on July 27 but is unlikely to announce a rate cut at that time, given current economic conditions. Is the Federal Reserve leaning more towards a rate hike before the end of the year? The markets appear to think so, as the chances of a rate hike this year has been priced in at 47%, up from just 20% at the start of July. This positive sentiment is a result of strong retail sales and housing reports over the past week. Another rate hike will be data-dependent, so if key indicators beat expectations, speculation of a rate hike will continue to increase. However, the Fed will be hesitant to make a move if inflation remains stuck at very low levels, nowhere near the Fed’s target of around 2 percent.

The World Gold Council (WGC) believes that an “entirely new class of gold investor” could emerge because of the significant global increase in the interest in gold stocks, following the Brexit vote – the British exit from the European Union (EU).

“As a high-quality, liquid asset, we believe gold will provide investors with a hedge against market uncertainty, as well as economic, political and intervention risk,” states the WGC, adding, however, that there are no precedents for an economic scenario such as Brexit.

However, the council notes that other systemic risk events offer some insight into the role that gold can play in wealth preservation. For example, the value of gold rose by 12% as fears of a widespread meltdown increased during the European sovereign debt crisis of 2010.

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Major Economic Events for the week:

Date	Currency	Name	Volatility	Previous	Consensus
7/27/2016	AUD	Consumer Price Index (YoY)	3	1.3	1.1
7/27/2016	USD	Durable Goods Orders	3	-2.2	-1.1
7/27/2016	USD	Fed’s Monetary Policy Statement	3
7/27/2016	USD	Fed Interest Rate Decision	3	0.5
7/28/2016	JPY	BoJ Press Conference	3
7/29/2016	JPY	BoJ Interest Rate Decision	3	-0.1	-0.2
7/29/2016	JPY	BoJ Monetary Policy Statement	3
7/29/2016	EUR	Gross Domestic Product (YoY)	3	1.7	1.6
7/29/2016	EUR	Gross Domestic Product (QoQ)	3	0.6	0.3
7/29/2016	EUR	Consumer Price Index (YoY)	3	0.1
7/29/2016	EUR	Consumer Price Index – Core	3	0.9