IGI Securities Limited – Commodity News

Karachi, June 21, 2018 (PPI-OT): Gold

Technical

Gold markets have gone sideways in general, dancing around the $1275 level. That’s an area that of course is important, based upon previous action. It had recently have broken down below a trend line, so that of course was a negative sign, but at the end of the day it does not look like we are facing some type of meltdown. At this point, it’s simply a function of the strengthening US dollar, something that it could see for the better part of the summer. However, it recognize that if it was to break above the $1283 level, the market is very likely to go looking towards the $1300 level again. There is the possibility that gold will pick up a bid from those looking for safety, but at the same time it typically will strengthen the US dollar overall. If that happens, it could get bearish pressure at the same time. Longer- term that gold rallies, clearly it has a lot of things to work through in the meantime.

Highlights

Gold pressed down further by a firm dollar and FED confirmed an outlook for higher interest rates

Rising bond yields can also dull the luster of gold, which offers no yield

The dollar held near an 11-month high against a basket of currencies today, supported by a rise in U.S yields n Strength in dollar eroded appetite for the precious yellow meta

A stronger greenback makes dollar-denominated gold more expensive for holders of other currencies

Fundamentals

Gold prices edged up today, but hovered close to a six-month low touched in the previous session as a firm U.S dollar curbed gains. Precious metal gold is firmly in a downtrend and this is mainly due to the strength in the dollar index which is trading at a significant level.

Spot gold was up 0.1 percent at $1,269.05 an ounce. It touched $1,267.40 yesterday, its lowest since Dec. 22. U.S gold futures for August delivery were down 0.3 percent at $1,271.30 per ounce.

The dollar index, which measures the greenback against a basket of six major currencies, stood at 95.102 after rising to 95.299 overnight, its highest since mid-July 2017. The dollar strength follows a remark from Fed Chairman Jerome Powell yesterday and that is driving gold down.

The U.S jobs market does not appear overly tight and the Federal Reserve should continue with a gradual pace of interest rate rises amid a strong economy to balance its employment and inflation goals.

Concerns about U.S trade policy are increasing among business officials who are beginning to hold off on hiring and investment decisions given the level of uncertainty.

A developing trade war between the world’s biggest economies is weighing on business confidence and could force central banks to downgrade their outlook, the world’s most powerful policymakers argued. Gold prices, which can benefit in times of uncertainty, failed to gain so far this week, despite the ongoing trade war.

A strengthening dollar weighs on commodities pegged to the monetary unit, because it makes those assets more expensive for buyers using other currencies.

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