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Gold Weekly Fundamental Analysis – Week of May 23, 2016

By:
Barry Norman
Published: May 21, 2016, 07:12 UTC

Gold is trading at 1252.70 falling 1.51% this week as the Federal Reserve turned hawkish and put rate increases back on the schedule. Gold steadied after

Gold Weekly Fundamental Analysis – Week of May 23, 2016

Gold is trading at 1252.70 falling 1.51% this week as the Federal Reserve turned hawkish and put rate increases back on the schedule. Gold steadied after two days of losses on Friday, but was on track for its biggest weekly slide in eight weeks on the back of a firmer dollar and indications from the U.S. Federal Reserve that it could raise interest raise rates as early as June.

The U.S. economy could be strong enough to warrant an interest rate increase in June or July, New York Federal Reserve President William Dudley said on Thursday, cementing Wall Street´s view that the Fed will tighten policy soon.

That came a day after the minutes of the Fed’s April meeting revealed that most policymakers felt a rate increase might be appropriate as early as next month, sending gold to a three-week low of $1,244. It has since bounced back, as ultra-low yields and concerns over economic growth lent support.

“Those minutes from the last FOMC meeting I think really gave quite a bit of light to the possibility for that June rate hike,” said Phillip Strebler, senior commodities broker at R.J. O’Brien in Chicago.

“I think that the Fed is now challenged and the market is getting more confident that it’s going to happen, provided that the data supports it.”

Gold is highly sensitive to interest rates, gains in which lift the opportunity cost of holding non-yielding bullion. The metal has rallied 18 percent this year as investors bet the Fed would hold off from further increases.

The dollar retreated from its highest in nearly two months against a currency basket, but cruised to its third week of gains, keeping up pressure on gold.

“The gold environment now is substantially different from what was apparent several weeks ago, when a weaker dollar and a benign rate environment were providing an element of support,” INTL FCStone said in a report. “This is no longer the case.”

Holdings of the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, rose by 4.5 tonnes on Thursday to their highest since November 2013.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

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Major Economic Events for the week:

 
Cur. Event Actual Forecast Previous  
Monday, May 23, 2016
  Canada – Victoria Day
Tuesday, May 24, 2016
  USD New Home Sales (Apr)   523K 511K  
Wednesday, May 25, 2016
    CAD Interest Rate Decision   0.50% 0.50%  
    USD Crude Oil Inventories     1.310M  
Thursday, May 26, 2016
    GBP GDP (QoQ) (Q1)   0.4% 0.4%  
    GBP GDP (YoY) (Q1)   2.1% 2.1%  
    USD Core Durable Goods Orders (MoM) (Apr)   0.3% -0.2%  
    USD Pending Home Sales (MoM) (Apr)   0.6% 1.4%  
Friday, May 27, 2016
  USD GDP (QoQ) (Q1)   0.9% 0.5%

Upcoming Government Bond Auctions

Date Time Country 

May 23 N/A UK Syndicated tap of 0.125% I/L 2046 Gilt

May 23 11:03 Sweden Sek 1.25bn 0.125% Jun 2019 I/L bond

May 23 11:30 Germany Eur 1.5bn May 2017 Bubill

May 23 12:00 Norway Details of bond auction on May 25

May 23 17:20 Italy Details of Zero‐coupon/BTP€i auction

May 25 11:03 Sweden Holds bond auction

May 25 11:05 Norway Holds bond auction

May 25 11:30 Germany Eur 1bn 2.5% Jul 2044 Bund

May 26 11:10 Italy Announces details of bond auction

May 26 11:10 Italy Holds Zero‐coupon/BTP€i auction

May 26 17:20 Sweden Details of I/L auction on Jun 02

 

 

 

 

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