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Gold Fundamental Forecast – July 25, 2016

By:
Barry Norman
Published: Jul 22, 2016, 12:20 UTC

Gold dipped $5 to trade at 1326.00 on a low volume session while traders prepare for next week’s FOMC and BoJ meetings. Yesterday the ECB made no attempt

Gold Fundamental Forecast – July 25, 2016

Gold dipped $5 to trade at 1326.00 on a low volume session while traders prepare for next week’s FOMC and BoJ meetings. Yesterday the ECB made no attempt to change rates or stimulus. HSBC cautions that gold could pull back to around $1,300 an ounce, but the retreat would be limited. The August futures did fall back as far as $1,310.70 an ounce in overnight screen trading.

“Thin summer trading conditions may be as important a reason for gold edging lower than renewed expectations for a (U.S.) rate rise this year,” HSBC added.

“In quiet conditions, the gold market may gravitate to the vicinity of large round numbers, with $1,300 the closest and most obvious. That said, there may be limits to further gold declines. The U.S. presidential election is moving into full swing. Geopolitical risks remain, Brexit notwithstanding. This should help cushion declines,” analysts at HSBC added.

Gold headed for a second weekly decline, with gains in equity markets and the dollar hurting prices as investors return to riskier assets and weigh the possibility of additional economic stimulus.

Gold has pared this year’s rally as Asian stocks reached an eight-month high this week and the dollar strengthened. European Central Bank president Mario Draghi signaled on Thursday that the bank stands ready to take further measures if needed after the UK vote to quit the European Union. The Federal Reserve’s next policy meeting ends July 27.

“Gold is definitely in consolidation phase, with a stronger dollar and rising equity markets curtailing demand,” Jordan Eliseo, Sydney-based chief economist at trader Australian Bullion Company, said by e-mail. “That said, we expect the ECB to add fresh stimulus soon, whilst all eyes will be on the Fed’s monetary policy statement due out next week.”

Holdings in gold-backed exchange-traded funds fell 1.05 metric tons to 2 004.4 tons on Thursday, data compiled by Bloomberg show. In China, bullion of 99.99% purity added 0.5% to 284.78 yuan a gram ($1 328.03 an ounce) on the Shanghai Gold Exchange.

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Upcoming Economic Events that you should be monitoring:

Monday, July 25, 2016

Country Name Volatility Previous
JPY Adjusted Merchandise Trade Balance 2 269.8
JPY Merchandise Trade Balance Total 2 -40.7
JPY Imports (YoY) 2 -13.8
JPY Exports (YoY) 2 -11.3
EUR IFO – Expectations 2 103.1
EUR IFO – Business Climate 2 108.7
EUR IFO – Current Assessment 2 114.5
USD Dallas Fed Manufacturing 2 -18.3

 Government Bond Auctions

Date/Time Country Type

Jul 25 11:30 Germany Eur 1.5bn Jul 2017 Bubill

Jul 25 17:20 Italy Announces details of bond auction

Jul 26 11:10 Italy Holds zero-coupon/BTP€i auction

Jul 27 11:30 Germany Eur 1bn 2.5% Aug 2046 Bund

Jul 28 11:10 Italy Holds bond auction

 

 

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