The Count Down to Jackson Hole Begins – Gold Reacts

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As hopes faded from the Jackson Hole symposium scheduled this weekend, base metals continued to remain under pressure and are presently trading down by nearly 0 to 0.4 percent at London Metals Exchange.  Investor’s sentiment and expectations for Mr. Bernanke seem to change radically throughout the day, separate events, releases and statements all seem to be interpreted based on stimulus hope. Everything today seems to have an alternate meaning based on what the Fed may or may not do.

Asian markets are mostly trading slightly up on anticipation of better US releases and improving GDP. However, base metals are restricted possibly because China indicated no near term easing on risk of higher inflation.

From the Euro-zone, Italy is scheduled to auction bills and similar to yesterday the yields are likely to decline as investor’s hope that ECB may buy short-term debt in its bond-buying program and may continue to support gains in the shared currency.

The euro climbed after European Central Bank President Mario Draghi cancelled his attendance and a speech at the Federal Reserve’s Jackson Hole conference this weekend. Draghi said he was under terrible work pressures in the EU and could not afford the time at present. Markets understood this to mean that Mr. Draghi was hard at work developing a plan to save the euro prior to the Sept 6th meeting.

Further, the German consumer prices are likely to grow at a slower pace while the Italian and German leaders are likely to meet to discuss the crisis. Metals may gain slight strength in the European session from early morning lows while later; the US releases of mortgage applications is likely to remain at a blend while the pending home sales may improve and support gains in metals. The high voltage GDP and personal consumption is also likely to improve in the second quarter due to increased pace of economic activity and improving figures and may extend gains in metals pack. Therefore, base metals are likely to remain weak in the morning while as the day passes by, better Euro-zone equities and improving sentiment along with US economic releases with higher GDP may continue to add gains.

Precious metals staged a smart recovery to hover around its four months high, largely energized by heightened optimism of the Fed’s upcoming anticipated announcements at the Jackson Hole. Spot gold s although changed a little at the early Globex, signaled strength in its core. Despite equities drifting lower yesterday,

The Euro rose to almost eight weeks high against the dollar amid speculation of ECB’s steps in bond buying while Italy prepares selling six months bill today. The euro therefore may stay strong as The German Chancellor meets the Italian Prime minister today with an objective of setting measures in securities markets program. There are host of economic releases from the US today evening which are likely to have little pressure on the metal. The Q2 US GDP may improve although at a slower pace, it will be supported by comparative gains in labor sector and gradual improvement in housing sector. US trade deficit has lessened while foreign funds flow into the treasuries has improved. Although regional unemployment stayed at an elevated level, inflation cooled and bottomed out manufacturing sector has seen a lukewarm revival. All these may contribute to a better GDP than the prior. US markets may support and the dollar may get stronger and thereby may put pressure on gold.

Gold ETF holdings by the SPDR shares have improved by 3tons in a single day which shows strong investment demand is persisting. Silver holdings of iShares silver trust, the largest ETF backed by the metal, declined to 9,763.53 tons, as on August 28. Gold and gold receivables held by euro zone central banks remained unchanged at 433.779bn Euros in the week ending Aug. 24, the European Central Bank said on Tuesday

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About:FX Empire Analyst - Barry Norman

Barry produces a private Daily Market Review newsletter that is distributed around the globe to over 25,000 subscribers and recently published a book on Options Trading that is available from amazon.com

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