Several economic data points in the U.S. are likely to impact the direction of the gold price

The gold price moved slightly lower Monday morning, by $3.43, or 0.2%, to $1,652.87 per ounce.  The spot price of gold fell to an overnight low of $1,642.36, but rebounded as the U.S. dollar pared its gains against a basket of foreign currencies.  The gold price held firm despite a better than expected report on U.S. retail sales, which increased 0.8% in March – above the 0.3% consensus estimate among economists.

Looking to the upcoming week, several economic data points in the U.S. are likely to impact the direction of the gold price.  In addition to this morning’s Retail Sales report, the Empire Manufacturing data for April will be announced on Monday.  Thursday’s schedule includes Weekly Jobless Claims, Existing Home Sales, the Philadelphia Fed Index, and a report on Leading Indicators.

Investors will also be keeping a close eye on Europe – particularly in Spain – where financial markets have come under significant pressure in recent weeks.  Credit default swaps on Spanish sovereign debt surged to a new record high last week, and the nation’s ten-year yield approached 6%.  Brian Barry, an analyst at Investec Bank Plc in London, commented that “Spain is viewed as the next most likely to be in need of a financing program.  It’s not surprising to see CDS widening.”

While the deflationary impact of Spain’s struggles could lead to widespread liquidation in financial markets and serve as a headwind for the price of gold, history suggests that policymakers will not sit idly by.  Instead, euro zone officials have on numerous occasions in recent years responded by boosting liquidity measures and/or printing money to combat the sovereign debt crisis – the effects of which have been largely positive for gold prices.

Comments

Post a Comment

Popular posts from this blog

Gold edges up on weaker dollar, dovish U.S. Fed policy bets

Image
 Gold edged higher on Monday, helped by a weaker dollar and expectations that the U.S. Federal Reserve will reiterate its dovish monetary policy stance this week. Spot gold was up by 0.1% at $1,943.58 per ounce. U.S. gold futures rose 0.1% to $1,950.10 per ounce. “Gold is firm on the basis that the Fed could adopt a further dovish message with respect to average inflation targeting,” said Michael Hewson, chief market analyst at CMC Markets UK. “If you want to have a policy of average inflation targeting, you’re going to have to go into detail as to how you are going to arrive at that particular outcome.” The dollar retreated on Mond ay, bolstering gold’s appeal for investors holding other currencies, ahead of the Fed’s policy decision due on Wednesday. “If inflation forecasts remain at 2% or below, this could offer gold a tailwind as the zero-yielding metal thrives in a low-interest rate environment,” said FXTM analyst Lukman Otunuga. Market participants are also waiting
Read more

For the gold price, two outcomes are possible.

Image
For the gold price, two outcomes are possible. First is a return to or near the April low ($1,277.40). Second is a drop to a lower low, $1,240 - $1,260. Yet a third possible outcome is that the June and December lows were not a double bottom and one further drop may come. I account that the least likely, and look for a low here by the end of the week, but I'm no more'n a nacheral born durnd fool from Tennessee, so what do I know?   You'd think that an institution charged with promoting the gold industry would produce reports that at least cast the best light on gold's prospects. You'd think wrong, if you're thinking about the World Gold Council. They've been negative on gold for, oh, the last 14 years or so. Today they issued a report that contained a nugget about Chinese business using physical gold as collateral for bank credit ($40 bn worth) but they managed to tease a gloomy forecast even out of this inventive monetary use. That and bad
Read more

India, not Trump, is the real reason behind the crash in gold prices

Image
If you have been puzzled about the crash in gold prices after Donald Trump's election, you are in the company of almost every analyst and media outlet in the western world. Gold and silver are a major part of the research at The Arora Report. A combination of our proven precious metal algorithms, extensive resources and knowledge of the emerging markets led us to alert subscribers to The Arora Report early that gold was about to crash and the reason behind it. Immediately after the election, the net position of The Arora Report in gold, silver and miners has been short as part of a sophisticated strategy.
Read more