Gold Prices Fell Below $1,300 Before Next Week's U.S. FOMC
The U.S. Comex gold futures have dropped three days in a row by 1.76% to
end at $1,290.80 on Thursday and have declined 1.42% for the week.
During Friday morning in Asia, the gold futures rebounded two dollars.
The Dollar Index has risen 0.37% this week and ended at 80.823 on
Thursday. Week-to-date, the S&P 500 Index and the Euro Stoxx 50
Index have risen 0.50% and 1.77% respectively. Since April, the S&P
500 Index has not declined by more than 1.50% from peak to trough and
has reached an all-time high of 1,987.98 on Thursday. The U.S. ten-year
government bond yield rose 2bp this week to 2.503%.
Global Growth Scorecard
The latest weekly U.S. jobless claims unexpectedly dropped to the lowest
level since February 2006 while the four-week average fell to the
lowest level since May 2007 to 302,000. The June flash manufacturing
PMI Index in China rose to the highest level since January 2013 to 52
compared to 51 expected. The July Euro-zone composite PMI Index rose to
54 compared to 52.8 expected on the back of better economic growth from
China and the latest ECB measures of targeted long-term loans and
negative deposit rates. The IMF however has revised down some key
countries’ growth outlook in 2014 and said that the U.S. would grow at
1.7% instead of 2.8% as estimated in April, China would grow at 7.5%
instead of 7.4%, and Russia would grow at just 0.2% instead of 1.3%.
The prognosis is a prolonged monetary policy stimulus, which can
underpin the support for gold despite the short-term setback in prices
due to the reduction in safe-haven bids.
Watching Global Gold Demand
According to a recent report by Merrill Lynch, the world gold physical
demand surged from 3,180 tonnes in 2003 to 4,957 tonnes last year. Gold
jewellery demand accounted for 47% of the total demand in 2013, out of
which China and India represented almost 63%. While the ETF holdings
declined almost 900 tonnes last year, the outflow this year is only
about 30 tonnes.
What to Monitor
Next week, we will monitor the FOMC rate decision and the U.S. Q2
preliminary GDP on 30 July, the Eurozone June unemployment rate and the
July unemployment change in Germany on 31 July as well as the China July
NBS manufacturing PMI Index, the U.S. July non-farm payrolls and
unemployment rate, and the June U.S. core PCE price index on 1 August.
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25 Jul 2014 | Categories: Gold
