Gold Supported By Safe Haven Moves

Gold opened flat on Monday morning, much to the surprise of investors who thought that many short term traders would be selling off to book profits after gold’s rally on Thursday and Friday. Gold is trading at 1158.80. Silver fell 156 points to 15.14 while platinum dipped $3.30 to 1016.50 in the Asian session. Markets and investors remained freaked over the news out of China late last week which showed manufacturing falling deeper into contraction. The dollar index, which measures the greenback against a basket of currencies, touched its lowest in almost two months after last week’s release of the minutes to the Fed’s July meeting stoked speculation officials may refrain from raising interest rates in September.

Investors concerned that weak equity markets and slowing growth in China may weigh on the Fed’s path to normalizing monetary conditions, could gain some confidence from Fed officials speaking this week and from an expected upward revision to US second quarter gross domestic product.

Atlanta Fed president Dennis Lockhart is scheduled to speak in the US today, while New York Fed president William Dudley speaks on Wednesday and Fed vice chairman Stanley Fisher will speak this Saturday at Jackson Hole, Wyoming, during the Fed’s annual conference of global central bankers, finance ministers, academics and financial market participants.

While Fed chair Janet Yellen won’t attend this year, investors and traders will eye comments from other key members of the Fed for fresh clues about the rate outlook. US second-quarter GDP, due Thursday, is expected to be revised higher to an annualized 3.2 percent from a previous reading of 2.3 percent.

Weak factory growth in China fanned worries that the world’s second largest economy may be slowing sharply, sparking safe-haven demand for the metal. Activity in China’s factory sector shrank at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled, a private survey showed.

As global investors dump stocks and risky emerging market assets, the safe haven yen and gold prices have rallied. The daily gold chart could soon confirm a bullish technical signal that might encourage more speculative buying. If the price of gold – denominated in U.S. dollars – closes Monday above $1,173.04, it will be inside the daily Bollinger uptrend channel and also above the Ichimoku Cloud resistance zone. Gold hovered near its highest level in almost seven weeks early on Monday after scoring its biggest weekly gain since January as worries over a slowing Chinese economy spurred appetite for safe-haven assets.

Markets will be watching for China’s next move as signs of a slowdown in the world’s second-largest economy stack up, raising expectations it will act to stoke growth.

Data on Friday showed activity in China’s factory sector shrank at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled. On Sunday, China allowed pension funds managed by local governments to invest in the stock market for the first time, potentially channeling hundreds of billions of yuan into the country’s struggling equity market.

You also might be interested in: “Currency Traders Run For The Hills“