Gold Torn between the Fed’s Tapering and the Syrian Conflict
The U.S. Comex gold futures fell 2.77 percent in the past two days to
finish at $1,372.60 on Thursday. The prices traded as low as $1,364.50
during the U.S. morning on Thursday and may experience the largest
weekly percentage drop since the end of June. The S&P 500 Index and
the Euro Stoxx 50 Index rose in the past two days and are up 1.35
percent and 1.94 percent respectively for the week. The Dollar Index
has rebounded 0.67 percent this week to 82.633 on Thursday. The U.S.
10-year government bond yield has jumped 21bp this week and reached
2.9993 percent on Thursday.
Weighing Better U.S. Data against the Threat of War
The U.S. August services sector ISM expanded to 58.6 compared to an
expectation of 55.0. The ADP showed that 176,000 jobs were added in
August while the jobless claims for the week ending 31 August declined
9,000, with the four-week average dropping to the lowest level since
October 2007. The U.S. government bond yield surged while the Dollar
Index climbed and the gold prices dropped upon the encouraging economic
data. The European bond yield has also been rising in reaction to the
Fed’s expected bond purchase tapering as well as the recent European
growth recovery. The German 10-year government bond yield has surged
above two percent on Thursday compared to 1.3 percent at the end of last
year. As President Obama persuades the Congress to vote and looks for
the international backing for war in the G20 meeting, the delay in the
Syrian strike has put a damper on gold prices. The expected Fed’s
tapering has led to currency turmoil in countries such as India, which
is suffering from high current account deficit, loose government
spending as well as a high inflation. As the Rupee plunges, the Indian
gold bar price has reached a recent high of Rupee 32,250 per 10 gram
before declining to 30,900 on Thursday.
Gold Premiums and Chinese Imports
According to Bloomberg, the net gold imports by China from Hong Kong
rose 12 metric tons to 113 metric tons in July. The World Gold Council
predicts that China will become the world's largest gold purchaser,
topping 1,000 tons in 2013. However, the gold price premiums in Hong
Kong and Singapore have fallen while the U.S. Mint sales in August have
dropped to the lowest level since July 2007.
What to Watch
On Friday, the market will closely watch the U.S. August non-farm
payrolls and unemployment rate. We will also monitor the August China
trade data on 8 September, the August China industrial production on 10
September, the ECB August monthly report on 12 September as well as the
August U.S. retail sales on 13 September.
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06 Sep 2013 | Categories: Gold
