Vang SJC

Yesterday (19/8), gold prices extended gains to a one-month high on Wednesday, after minutes from last month’s U.S. Federal Reserve meeting hinted to a decreased likelihood for interest rates to be raised in September, pushing the dollar lower.

Ending the session, gold prices closed at $1,133.65/ounce, up 1.4% compared with the opening price ($1,117.63/ounce).

Currently, at 3:04 p.m. GMT+7, the price of gold is at $1,137.95/ounce.

  • Early in the morning today, the FOMC meeting minutes showed policymakers continued to fret that lagging inflation and a weak global economy posed too big a risk to commit to a “liftoff,” though an improving job market edged the Fed closer to an interest rate hike. Few hours earlier, the U.S. announced that CPI rose only 0.1% in July, lower than June (0.3%). Weak inflation and the less “hawkisk” meeting minutes pull down investors’ expectations of a rate hike in September, supporting gold prices. Thus, today, gold may continue to rise.

In addition, there are several factors that can make gold rise such as:

  • Investors worry about another devaluation of the yuan. Meanwhile, the International Monetary Fund pushed back until Sept. 30, 2016, the date that China’s yuan could be included in its basket of reserve currencies, making the currency less attractive. The fear of the weak yuan and market volatility may push up gold demand.
  • Today, China’s stocks dropped, as traders weighed the level of state support for equities amid concern a slowing economy and weaker yuan will spur capital outflows. Now, many investors turn to safer assets like gold.
  • Yesterday, gold prices make impressive gains as prospects of rate hikes faded. Now investors may feel more optimistic and come back to the gold market.

However, gold prices may decrease due to:

  • Commodity market continued to slip, as oil prices plunged to the lowest in the past six years and the slow growth of China, the world largest consumer. The risk of deflation pull down the appeal of gold, as gold and inflation is often considered “best friends”.
  • Commodity markets continued bleak prospect weak growth of China, the world’s largest consumer. The risk of deflation tarnish the appeal of gold, as gold and inflation is generally considered “good friends”.
  • After pass the most difficult hurdle in the German parliament on biding vote, European Stability Mechanism (ESM) has approved 86 billion euro bailout for Greece yesterday. The first disbursements of 13 billion euros will be conducted today (August 20th), just in time for Greece to repay 3.2 billion euros to the European Central Bank (ECB). Greece is doing well, making gold’s appeal as a safe-haven faded.
  • After rising sharply yesterday, many investors could close buy orders to take profits and avoid risks, pull gold prices down.

Tonight the US will announce the Unemployment claims, Existing home sales and Philly Fed manufacturing index. The good data will support the dollar, putting pressure on gold price and vice versa.

Forecast: Gold may go up toward $1,145/ounce. However, if the U.S. has good news, gold may go down to $1,130/ounce.

Linh Nhan