Markets seem difficult to trade

After weeks of relative stagnation, gold traders were suddenly awoken to a rise in trade volume and price volatility. In a span of one minute, gold futures contracts equaling more than 2 million ounces traded -- about 20 minutes before Federal Reserve Chair Janet Yellen was to address a gathering of policy makers in Jackson Hole, Wyoming.

The occurrence shook the market after a measure of 60-day volatility on the metal touched the lowest since 2005.

 Gold had been lying stable amid political disharmony in Washington, worries about rising U.S. interest rates and escalating geopolitical tensions between the U.S. and North Korea.

Investors were not expecting Yellen to make a policy statement anyway, but some market participants were hoping for some signal on the Fed's planned balance sheet reduction, if not on the outlook for U.S. interest rate hikes.

Yellen’s speech, which lacked clear rate cues, did little to calm the price swings and damped expectations of a rate hike this year.

Federal Reserve Bank of Dallas President Robert Kaplan helped fuel the sharp move before Yellen’s speech Friday by saying the central bank can afford to be patient on raising interest rates even while noting it should shrink the balance sheet soon.

These comments were dovish and pushed gold prices higher. But then when Yellen didn’t mention monetary policy, things started to stabilize again.

The dollar fell to a three-week low against the euro and a one-week trough versus the yen on Friday after Federal Reserve Chair Janet Yellen made no reference to U.S. monetary policy in her speech at the annual central bank research conference in Jackson Hole, Wyoming.

Instead, Yellen focused on U.S. regulations, saying those put in place after the 2007-2009 crises had strengthened the financial system without impeding economic growth, and any future changes should remain modest.

Dollar had weakened because Yellen "didn't say anything positive for the U.S."

The dollar has been trading higher for most of the week after sharp losses in recent months.

The dollar fell to a one-week low of 109.23 yen after Yellen's speech. It was last down 0.2 percent at 109.33.

The euro, meanwhile, hit a three-week high against the dollar and was last up 0.6 percent at $1.1862.
Focus now shifts to the coming week wherein a few interesting events are lined up.
The yellow metal may remain range-bound in the $1,290s ahead of the U.S. Labor Day holiday on September 4th.

Labor Day can mark a variation point in various economic parameters, including the gold price.  There are also U.S. Fed and ECB policy meetings that will be held in the second half of September and the U.S. FOMC one in particular will be viewed with particular interest vis-à-vis gold given observers will be looking for clues on the likely date for the next interest rate rise decision and/or Fed balance sheet reductions.  The U.S. economy is not showing positive developments as well as forecast by the Fed so there are some who believe any rate increase will now likely be put off until next year.

The period that lies between the Labour Day and The FOMC meeting will be crucial for gold as the markets reactions all depend on this interim period.

Market reaction after Labor Day, and before the FOMC meeting will probably see gold react positively or negatively to economic data (fact or supposition)  coming out in the interim, which may hold gold back from bursting through $1,300, which it would likely do if the FOMC looks like delaying any interest rate rise decision beyond the calendar year end.  An indication that the Fed will indeed continue its tightening programme in December may pull down the gold price , but perhaps not affect its on-going progress in the medium term.

Similarly the ECB policy meeting in Frankfurt, which comes just after the FOMC meeting, will also be followed with strong interest, but may not see any further tightening while the Euro remains at current levels against the dollar.

We still see gold rising through $1,300 and perhaps hitting $1,350 by the year-end, but sometimes Q4 can prove to be a weak period for precious metals, so we are not wholly confident on this prediction.  Currently markets seem difficult to trade!

Weekly Gold Forecast

The week began on a silent note for precious metals. Gold was up +0.1% which probably reflects a lull in the haven demand as investors appear risk-on at the beginning of the week. It was strange to see that demand for the yellow metal wasn’t much despite of the on-going geopolitical tensions.

OVER THE WEEKEND, North Korean leader Kim Jong-un warned of a second “Korean War” as US- South Korea military exercises, viewed as “reckless behavior” by the North Korean leader. But reactions in the market were contradictory as the market layers stayed calm. Hence the news which could have had strongly pushed gold prices further proved to be non-influential for gold.

After a firm price movement on Monday, precious metals were more or less stable on Tuesday morns. Spot gold prices were down by 0.2% at $1287.90.

On Wednesday, Gold prices edged slightly higher after news that sales of new U.S. single-family homes fell by 9.4% in July to a seasonally adjusted and annualized pace of 571,000, which was below forecasts.

Consensus estimates compiled by various news organizations called for sales to be around 610,000 to 620,000. The Commerce Department revised sales for June upward to 630,000 from the originally reported 610,000.

Apart from the geo political tension, the focus now shifts on host of global economic data that will be released throughout the week

Gold expected to cross $1375 mark

Gold prices have risen to the highest level since November last year as investors shift away from risky assets in the wake of geopolitical uncertainty.

Futures for the yellow metal rose to $1,303.90 per ounce, while spot gold remained just below $1,300 per ounce.

A market that was once worried about the nuclear war has now moved on a host of other factors that are creating concerns for various market players.

Let’s have a look at the various factors that created jitters in the market in the past week.

Barcelona Attacks - Heightened terror fears added to the risk off sentiment after at least 13 people died when a van plowed into pedestrians in Barcelona. The terror attack was a reminder of lingering geopolitical risks, with nerves still raw after last fortnight’s escalation of tensions on the Korean peninsula.

Investors fled into German and U.S. Treasury bonds and bought gold for the third day in a row, as the appeal of such top-notch assets grew further due to this deadly attack.

US Data - The global risk-off mood accelerated overnight on Trump "stability concerns", coupled with fallout from the Spain terrorist attack and lingering North Korea tensions.

Data released showed that Jobless claims for the week ending Aug. 12 came in at 232,000, versus expectations of 240,000. The Philadelphia Fed Index, gauging overall manufacturing conditions, came in at 18.9 for August, compared with consensus estimates of 18.5.

Industrial production grew 0.2% on the month in July, slipping below estimates of 0.3%.Concerns that Trump’s stimulus is in peril spiked following speculation that his top economic advisor, former Goldman COO Gary Cohn, was set to resign roiled markets on Thursday until reports that he’d opted to stay on board steadied the ship, however the weak dollar and dialling back of US Federal Reserve (Fed) monetary tightening expectations has given a modest lift to the precious metals, which stood up high.

US Dollar - The dollar was pulled lower on Wednesday as traders grappled with the prospect that the Federal Reserve might not raise interest rates again this year following the release of the Fed’s July meeting minutes.

The U.S. dollar retreated against haven currencies like the Swiss franc and the Japanese yen Thursday, following a day of negative headlines.

Earlier on Thursday, the greenback was propped up by weakness in the euro EURUSD, -0.0850% following the release of dovish minutes from the European Central Bank’s last meeting. The U.S. unit also remained stable as initial jobless claims and the Philadelphia Fed Index came in better than expected, but was weaker than the prior period, while industrial-production data missed expectations.

FED comments - The metal started its rise from $1268 on Thursday afternoon after the release of Fed minutes from the July FOMC policy meeting, according to which policymakers grew increasingly concerned about the sluggish inflation numbers. Whilst also on Thursday US President Donald Trump fell out with business leaders over his response to the recent turmoil in Charlottesville.
This followed a mixed session on Thursday in which gold strengthened a little while the rest of the complex was under downward pressure in spite of a friendlier macro backdrop (i.e. lower US real rates, equity losses) due to the release of dovish US Federal Open Market Committee minutes on Wednesday and dovish Fed speech.

Geo political uncertainty - Gold’s status as a safe-haven asset has seen investor demand surge during periods of heightened risk. In recent times, however, President Trump's combative style has seen safe-haven buying reach a sustainable high level. With tensions around North Korea and Iran rising, this is unlikely to subside any time soon.

Gold Supply - political uncertainty has been impacting investment in supply. In fact, global mine supply has fallen in 2017. According to World Bureau of Metal Statistics, gold production is down 2% y/y in the first five months of the year. Production in May alone was down 3.1% y/y. Growth in mine output is at its lowest point since the financial crisis, with risks only getting greater

Although Gold failed to break above $1300/oz today (Friday), it remains in position to do so because of its renewed strength in real terms. As long as the US$ index does not rally hard, we expect Gold to break above $1300 and reach $1375. The gold stocks as a group have been lagging recently but in the event of a Gold breakout, we foresee significant upside potential as the group could play catch up.

Fundamentals for Gold are strong

As we have noticed in the past months, it was mainly the dollar and Fed actions that were influencing gold prices. But last week geopolitical tensions were fueling gold prices.

Gold was on the move in the past week after a display of threat of the military force by the U.S. and North Korea pushed the safe-haven metal back onto investors' radar.

President Trump said on Tuesday that threats by the Hermit Kingdom would be met by "fire and fury," which was followed up a day later by a North Korea threat to bomb the U.S. territory of Guam.
The yellow metal climbed to $1,285/oz as tensions rose this week, the best level in about two months, driving year-to-date gains to around 11.5%.

Gold has always been considered as a safe haven asset in times of uncertainty. The current rally in gold prices is because of the rise in safe haven demand for gold.

President Donald Trump intensified up his orotundity toward North Korea and its leader on Thursday, warning Pyongyang against attacking Guam or U.S. allies after it disclosed plans to fire missiles over Japan to land near the U.S. Pacific territory.             

Gold prices rose early Wednesday amid rising tensions between the United States and North Korea after the North responded to warnings from U.S.

President Donald Trump with a threat to strike the U.S.territory of Guam.   

Though prices rose on Wednesday and Thursday, by the end of the week, prices more or less stabilized. 

Gold prices held steady after touching their highest in more than two months on Friday, as rising tensions between the United States and North Korea triggered safe-haven buying.

Geopolitical risks can boost demand for assets considered safe-haven investments, such as gold. Although more hostile magniloquence between the U.S. and North officials would temporarily boost gold prices, we see outright military action as unlikely and upward pressure on gold prices stemming from the confrontation as limited.

Meanwhile, a lower-than-expected rise in U.S. consumer prices in July suggesting benign inflation could persuade a cautious Federal Reserve to delay raising interest rates until December.                

Gold is seen being stable over easing out of the geopolitical tensions. But still, a minor escalation over the tensions can once again trigger gold prices. Hence the situation currently is quite unpredictable. 

On the other hand, The Fed expects "very weak" U.S. inflation to rebound thanks to a slide in the dollar and to a labour market that keeps getting hotter, one of the Fed's most influential officials said in comments that reinforce its gradual policy-tightening plan

Gold edged down from two-monthhighs on Monday, 14th August, , as the dollar inched up from last week's lowsand investors kept a close watch on any developments on tensionsover the Korean peninsula.

Summing it up we can say that though the threats from the Koreans have lowered, the fundamentals for gold still seem to be strong.

Bullish trends for Gold

Gold prices were holding well up during the past week breaking the long term downward trend that started off in 2011.  A weaker dollar and lower treasury yields has been supporting gold prices lately.
Gold steadied on Thursday after nearing a seven-week high in the previous session as investors awaited U.S. jobs data for further clues on the outlook for interest rate rises.Spot gold was 0.1 percent higher at $1,267.30 per ounce.

Gold rallied through most of July as the dollar fell on reduced expectations for a third U.S. rate rise this year. Inflation has been contained even though the labor market appears to be in its best shape in many years and despite double-digit U.S. earnings growth in the second quarter.

Reduced rate rise expectations tend to weaken the dollar, making dollar-priced gold cheaper for non-U.S. investors.

But by the end of the last week, gold prices were slightly bullish after the release of U.S labor report.
The latest non-farms payroll report on the US employment market was published, showing the economy added 209,000 jobs last month and that unemployment was low at 4.3 per cent, its lowest since March 2011.

This smashed economist estimates that 183,000 new jobs would be added. In response the dollar has popped higher, says Reuters.

The dollar is inversely correlated to the gold price, which is often held as a hedge as the global benchmark reserve currency.

Stronger economic data also raises the prospect of the Federal Reserve voting for a third rate rise this year in either September or December (rate rises tend to hurt non-income yielding assets like gold).
In the two hours after the report came out the gold price slumped by around $13, or one per cent, to $1,255 an ounce.

Gold's recent trend has been largely defined by the fortunes of the dollar, which is good news for gold bugs as the greenback was languishing near 15-month lows earlier this week.

The safe haven metal dropped from $1268 as the July non-farm payrolls figure came-in at 209K, beating the estimated figure of 180K. The jobless rate dropped to 4.3%, while the June trade deficit narrowed more than expected. Wage growth rose to 0.3% as expected.

Now the influential factor for gold remains that whether the dollar continues to strengthen or it may go weaker, which is likely to mean the US Federal Reserve has to remain less than hawkish. Apart from these financial drivers, any pick up in geopolitical issues could also fuel the rally.

Gold loses its shine ahead of jobs data

Gold drifted away from its seven week high hit earlier this week.  Gold futures settled lower on Wednesday—kicking their typically inverse relationship to a weaker dollar—as sentiment remained cautious following a recent rally on top of expectations that the Federal Reserve could further tighten interest rates going forward.

Gold prices on Thursday lowered, as the dollar firmed on expectations that the U.S. Federal Reserve could trim its bond holdings in September.

As markets await the data to be released on Friday, a snapshot of the examination of the jobs marketsrevealedthat private-sector hiring remained strong in July as employers added 178,000 jobs, slightly more than expected.

In the Friday report, the U.S. is expected to have added 180,000 jobs last month, keeping unemployment near a 16-year low of 4.4%, according to a Market Watch survey. The pace of hiring in the U.S. has already slowed sharply since hitting a post-recession peak of 250,000 a month in 2015, but continues to churn ahead, so far showing few red flags for wage-induced inflation.

The U.S. economy will likely be strong enough for the Fed to trim its bond holdings in September.
Gold and the U.S. currency unit typically move inversely as a cheaper dollar is beneficial to gold investors using another currency. Both markets are affected by interest-rate policy as higher rates support the dollar but also dull the appeal of non-yielding gold in favour of interest-bearing assets.

Green back gives backing to gold

It was a quiet Monday for gold on 24th July followed by a little change in gold and silver prices on Tuesday. Spot gold prices were at $1,255.60 per oz and silver at $16.46 per oz, while the PGMs were looking stronger with gains of 0.6%.

Gold’s rebound has found new vigor on the combination of the weaker dollar and the less hawkish US Federal Reserve stance. Dollar weakness has stemmed from the weak political scene in Washington which has resulted in a push in gold prices. Gold is sensitive to moves higher in both U.S. rates and the dollar. Weaker dollar makes gold less expensive for holders of foreign currency, while a rise in U.S. rates lifts the opportunity cost of holding non-yielding assets such as bullion.

Gold prices held steady on Friday as investors locked in profits from the precious metal's rally to six-week highs on Thursday and as markets awaited the release of U.S. second-quarter growth data due later in the day.

U.S. 2Q GDP figures released on Friday showed the economy grew at an annualized pace of 2.6% q/q, slightly missing consensus, with the Core Personal Consumption Expenditure (PCE) topping expectations with a print of 0.9% q/q. The data did little to shift expectations for a December interest rate hike with markets still pricing a roughly 50/50 chance the Fed will hike again this year.

Gold prices rallied for the third consecutive week with the precious metal rallying 1.9% to trade at 1268 ahead of the New York close on Friday. The advance comes alongside continued weakness in the greenback.

The dollar remained under pressure after the Fed said on Wednesday that inflation remains below its 2% target even as near-term risks to the economic outlook appear "roughly balanced". In the past, the Fed judged that weakness in inflation was transitory. The central bank's cautious tone on inflation sparked fresh uncertainty over the possibility of a third rate hike this year.

The greenback was also weakened by data on Thursday showing that initial jobless claims rose by 10,000 to 244,000 last week. Analysts expected jobless claims to rise by 7,000 to 241,000 last week.
Gold prices have done well, especially with equity markets setting fresh highs, but the weaker dollar of late has no doubt helped fuel the rally and it may be that as equities are setting fresh highs, more investors are expecting a correction so may be putting more into havens. Silver has been following gold, platinum prices have struggled to follow gold and palladium is still consolidating after the strong run in May/June. For now we expect the dollar to be the main driver in gold prices.

This week began with a positive note for gold as it Monday held around its highest price in nearly seven weeks as tensions on the Korean peninsula boosted safe-haven demand for the metal and as the U.S. dollar hovered close to multi-month lows.

News that North Korea has conducted yet another missile test spurred a late-week push higher in gold prices which stretched into near-term resistance just ahead of the European close.

The United States flew two supersonic B-1B bombers over the Korean peninsula in a show of force on Sunday and the U.S. ambassador to the United Nations said China, Japan and South Korea needed to do more after Pyongyang's latest missile tests.

Though a weaker dollar is the main driver for gold prices, currently deepening political turmoil in Washington and North Korea's progress on ballistic missiles will all ensure the uncertainty premium continues to support gold's price.

Looking ahead to next week, markets will be closely eyeing central bank interest rate decisions from the Reserve Bank of Australia (RBA) & the Bank of England (BOE) with the highly anticipated U.S. Non-Farm Payroll report slated for Friday. While the broader outlook for bullion remains constructive, prices are eyeing near-term resistance heading into the close of the month and could limit the topside near-term.