IGI Securities Limited – Commodity News

Karachi, June 25, 2018 (PPI-OT): Gold

Technical

Based on last week’s price action and the close at $1270.70, the direction of the August Comex Gold market is likely to be determined by trader reaction to the uptrending Gann angle at $1265.90. Gold’s weakness is really no surprise with the U.S Dollar near an 11-month high. August Comex Gold futures finished lower last week with the selling pressure primarily being driven by a stronger U.S. Dollar and increased demand for higher risk assets. Firm U.S Treasury yields also weighed on prices as well as the outlook for further increases in rates later in the year. Traditionally viewed as a safe-haven asset, gold showed little reaction last week to escalating trade tensions between the United States and China. The main trend is down according to the weekly swing chart. A trade through $1251.90 will reaffirm the downtrend.

Highlights

Speculators trimmed their net long position in COMEX gold to the weakest in 2-1/2 years in the week to June 19

Higher U.S interest rates make gold a less attractive investment since it does not bear interest

Gold prices hit a six-month low last week, weighed down by a firm dollar and as the Fed kept its outlook for higher interest rates

A fall in the dollar makes gold less expensive for holders of foreign currency

The US Dollar Index, which measures the greenback against a basket of six major currencies

Fundamentals

Gold prices edged lower today, pressured by a strong U.S dollar amid prospects of higher interest rates, while global trade tensions kept the metal buoyed above a six-month low hit last week.

Spot gold was down 0.3 percent at $1,264.70 an ounce. U.S gold futures for August delivery were 0.3 percent lower at $1,266.60 per ounce. The overhang of higher U.S interest rates and dollar continues to hold relatively firm as dealers sell on rally. The dollar to weaken significantly to get above $1,282.

There are specific factors that will actually push the dollar higher, given the trade tensions as well as the booming U.S economy versus other economies. Last week, U.S Federal Reserve Chairman Jerome Powell said the Fed should continue with a gradual pace of interest rate hikes amid a strong economy to balance its employment and inflation goals.

Gold prices are very much influenced by the dollar movement rather than anything else. It’s less of a safe-haven demand into gold but rather a reaction to USD strength.

U.S President Donald Trump on Friday threatened to escalate a trade war with Europe by imposing a 20 percent tariff on all imports of European Union- assembled cars.

Global shares fell on escalating trade tensions, while the dollar index against a basket of six major currencies was 0.1 percent higher at 94.585, having hit its highest since July 2017, at 95.529, late last week.

Gold usually gains from political and economic tensions, but has struggled this time around as the dollar has risen strongly, making the dollar-priced metal costlier for non-U.S investors.

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IGI Securities Limited – Commodity News

Karachi, June 25, 2018 (PPI-OT): Gold

Technical

Based on last week’s price action and the close at $1270.70, the direction of the August Comex Gold market is likely to be determined by trader reaction to the uptrending Gann angle at $1265.90. Gold’s weakness is really no surprise with the U.S Dollar near an 11-month high. August Comex Gold futures finished lower last week with the selling pressure primarily being driven by a stronger U.S. Dollar and increased demand for higher risk assets. Firm U.S Treasury yields also weighed on prices as well as the outlook for further increases in rates later in the year. Traditionally viewed as a safe-haven asset, gold showed little reaction last week to escalating trade tensions between the United States and China. The main trend is down according to the weekly swing chart. A trade through $1251.90 will reaffirm the downtrend.

Highlights

Speculators trimmed their net long position in COMEX gold to the weakest in 2-1/2 years in the week to June 19

Higher U.S interest rates make gold a less attractive investment since it does not bear interest

Gold prices hit a six-month low last week, weighed down by a firm dollar and as the Fed kept its outlook for higher interest rates

A fall in the dollar makes gold less expensive for holders of foreign currency

The US Dollar Index, which measures the greenback against a basket of six major currencies

Fundamentals

Gold prices edged lower today, pressured by a strong U.S dollar amid prospects of higher interest rates, while global trade tensions kept the metal buoyed above a six-month low hit last week.

Spot gold was down 0.3 percent at $1,264.70 an ounce. U.S gold futures for August delivery were 0.3 percent lower at $1,266.60 per ounce. The overhang of higher U.S interest rates and dollar continues to hold relatively firm as dealers sell on rally. The dollar to weaken significantly to get above $1,282.

There are specific factors that will actually push the dollar higher, given the trade tensions as well as the booming U.S economy versus other economies. Last week, U.S Federal Reserve Chairman Jerome Powell said the Fed should continue with a gradual pace of interest rate hikes amid a strong economy to balance its employment and inflation goals.

Gold prices are very much influenced by the dollar movement rather than anything else. It’s less of a safe-haven demand into gold but rather a reaction to USD strength.

U.S President Donald Trump on Friday threatened to escalate a trade war with Europe by imposing a 20 percent tariff on all imports of European Union- assembled cars.

Global shares fell on escalating trade tensions, while the dollar index against a basket of six major currencies was 0.1 percent higher at 94.585, having hit its highest since July 2017, at 95.529, late last week.

Gold usually gains from political and economic tensions, but has struggled this time around as the dollar has risen strongly, making the dollar-priced metal costlier for non-U.S investors.

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