Advertisement
Advertisement

Gold Falls as Economic Concerns Ease, ECB Meeting in Focus

By:
Barry Norman
Updated: Jul 21, 2016, 08:20 UTC

As Wall Street hit new highs traders moved out of the safety of gold and silver. The yellow metal fell over 1% or $14.80 to trade at 1318.00 hits three

Gold Hits 3 week Low

As Wall Street hit new highs traders moved out of the safety of gold and silver. The yellow metal fell over 1% or $14.80 to trade at 1318.00 hits three week low while silver fell 445 points of 2% to trade at 19.568. The greenback continued to climb after a steady flow of better than expected economic data and further expectations of rate-hike. The US dollar index climbed to 97.19. Surprisingly platinum remains well above the $1000 price level falling $11 to trade at 1087.65. Losses continued in the Asian session on Thursday as prices fell to 1314.45. Gold bounces a bit in morning session trading at 1318.39 adding 0.47%.
[wibbitz]be14f94820f3a418d94f738d149cd3e69[/wibbitz]
The Dow industrials on track to log its seventh record closing high in a row, fueled by better-than-feared quarterly results. Notably, Morgan Stanley MS, +2.27% reported second-quarter results that beat Wall Street’s expectations, lifting the investment bank’s shares. The Dow Jones added 0.2% to 18,601, the S&P 500 index climbed 0.2% at 2,167, while the Nasdaq advanced 0.4% to 5,056.

Thursday will most likely see gold traders s
idelined ahead of the ECB rate decision and press conference released at 14:45 and 15:30 GMT respectively. Although no changes are expected the highlight will be Mario Draghi’s press conference where he is expected to address Brexit as well as the ECB bond buying program.

Global sentiment has recovered rapidly from the Brexit shock late in June, received a sobering reminder after the International Monetary Fund cut its global growth forecasts for the next two years on Tuesday, citing uncertainty over Britain’s looming exit from the EU.

Gold, which has risen 25% this year, is highly sensitive to rising rates, which increase the opportunity cost of holding non-yielding assets such as bullion, while boosting the dollar, in which it is priced.

gold silver
“Technically, it looks like gold’s recent weakness is slowly coming to a halt, with a base being formed around $1,325-35,” MKS analyst James Gardiner said in a note.

Gold is biased to fall to $1,313 per ounce after completing its consolidation within a small wedge, as per Reuters technical analyst Wang Tao.

Rising expectations that the Bank of Japan will muster additional easing steps sent the dollar index to four-month highs. As analysts, and presumably the Fed, grow ever more confident that the US economy is showing the signs of recovery it has threatened to display for a few months now, the chance of a US interest rate hike has grown.

US dollar growth

A rate hike would increase the opportunity cost of holding non-yielding assets like bullion, while also bolstering the dollar, which gold is priced in, making it more expensive to foreign currencies.

While the Fed is expected to leave rates as they are at its July policy meeting, analyst believes that it is more than possible that a rate hike will be on its way before the year is out.

Traders will be looking to the Federal Open Market Committee policy statement due next Wednesday for more clues.

The unexpected outcome of the UK’s referendum back on 23 June, and the subsequent uncertainty, sent the gold price rocketing even further.

US housing starts rose more than expected in June as construction activity increased broadly, but downward revisions to the prior months’ data pointed to a sector treading water in the second quarter.

About the Author

Did you find this article useful?

Advertisement