Vang SJC

Last Friday (14/8), gold turned slightly lower as the dollar shifted higher on encouraging U.S. data and as investors weighed the impact of China’s currency intervention on the finance markets.

Ending the session, gold prices closed at $1,114.52/ounce, down 0.05% compared with the opening price ($1,115.1/ounce).

Currently, at 2:51 p.m. GMT+7, the price of gold is $1,116.7/ounce.

Today (17/8), gold may fall due to the following factors:

  • Today, China’s yuan held steady against the dollar. The People’s Bank of China (PBOC) set the midpoint rate at 6.3969 yuan per dollar, firmer than the previous fix 6.3975. The move has calmed down investors over concerns about currency wars. Hence, the appeal of gold as safe-haven assets decreased.
  • U.S. industrial output advanced 0.6% in July, its strongest pace in eight months, another bullish sign for third-quarter economic growth that boosted the prospects of a Federal Reserve interest rate hike next month. This put more pressure on gold prices.
  • The euro zone economy grew by less than expected in QII/2015, dispite efforts of ECB with QE. Meanwhile, economists seem to lack confidence in the region’s recovery, according to a Bloomberg survey published on Friday.Therefore, the euro may fall, creating momentum for the dollar, thereby pulling gold down.
  • Euro zone finance ministers have agreed to lend Greece up to 86 billion euros ($96 billion) after Greek lawmakers accepted their stiff conditions. We can see that, Greece is moving forward, so gold demand as a safe-haven may fall.
  • Commodity market continued to slip, as oil prices hit a record low in the past six years. Today, the Bloomberg Commodity Index fell for a fifth straight day, slipping 0.2 percent toward its lowest level since 2002. The risk of deflation pull down the appeal of gold, as gold and inflation is often considered “best friends”.

However, gold may rise due to:

  • Gold speculator and large futures traders slightly edged their gold bullish positions higher last week for a second week, according to the latest Commitment of Traders (COT) data released by the Commodity Futures Trading Commission (CFTC) on Friday (14/8). The non-commercial futures contracts of Comex gold futures, traded by large speculators and hedge funds, totaled a net position of +32,442 contracts in the data reported through August 11th. This was a weekly change of +2,542 contracts from the previous week’s total of +29,900 net contracts that was registered on August 4th. Investors’ sentiment seems to become a little more optimistic, a positive signal for the gold prices.
  • The World Gold Council is optimistic that there will be an increase in demand for physical gold in the second half of this year, when it expects a seasonal demand increase in India and gold’s lower price to feed through into stronger consumer demand. Rising demand will push gold prices upward.
  • Japan’s economy shows signs of weaks in QII/2015 as consumers and businesses cut spending and exports slipped. Today’s data showed GDP fell 1.6% compared with the last year. Slowing growth of the world’s third largest economy could make investors come to gold, as a safe-haven.

The hottest of this week is the FOMC Meeting Minutes which will be released on Wednesday (19/8). These are important clues to help investors get the timing of the Fed’s rate hikes.

Tonight, the U.S. will release Empire State manufacturing index and NAHB Housing Market Index. Good data will support the dollar, putting pressure on gold prices and vice versa.

Forecast: Gold prices may go down toward $1,108/ounce.

Linh Nhan