Will the Central Banker Speeches at Jackson Hole Help Gold?
The U.S. Comex gold futures have fallen for four consecutive days by
2.37% to end at 1,274.50 on Thursday, dropping below the 200-day moving
average. The Dollar Index has climbed 0.89% this week to 82.154 on
Thursday. While the U.S. ten-year government bond yield rose about 7bp
this week to 2.407%, the yield is still 15bp below that at the end of
July. The market is focusing on the V-shaped recovery in the S&P
500 Index, which recovered over four percent from the recent low to
reach a record high of 1992.37 on Thursday. The Euro Stoxx 50 Index is
heading towards a three percent rise this week after rising 0.89% last
week. The crude oil futures have declined 3.65% so far this week.
Central Banks in Focus
China’s August HSBC manufacturing PMI was much lower than expected at
50.3 compared to the consensus of 51.5. The culprit could be the
tighter money market rates at the end of Q2 although the interest rates
and the property market conditions have eased already in August. The
Eurozone flash Composite PMI declined from 53.8 in July to 52.8 in
August, consistent with a weak quarterly GDP growth of 0.3% according to
ING. The Bank of England minutes show that the committee voted 7 to 2
for no rate increase. With the recent low inflation data and little wage
pressure, rates may stay unchanged for longer. The market focus will
be on Janet Yellen’s speech on Friday morning at Jackson Hole on the
labour market. In the latest FOMC minutes, more participants would
prefer rates to rise sooner than expected to adapt to the incoming data.
The interest rate futures now show a 51% chance that the rates will
rise to 50bp by July 2015. If rates rise faster than expected, the
holding costs for gold could rise sooner, leading to more speculators
selling gold. Traders are looking for more dovish comments from the Fed
governor to buy back gold.
Plenty of Data and Events to Watch
Apart from watching the central bankers’ speeches at the Jackson Hole
Symposium this weekend, we will also monitor the August Germany IFO
business climate and the U.S. July new home sales on 25 August, the June
U.S. Case-Shiller housing prices and the August U.S. Consumer
Confidence Index on 26 August, the U.S. Q2 GDP and the consumer spending
second release and the July Japanese inflation data and the industrial
production data on 28 August as well as the Eurozone July unemployment
rate and the U.S. July personal spending rate and the Core PCE price
index on 29 August.
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22 Aug 2014 | Categories: Gold
