Vang SJC

Last Friday (July 31st), the gold price suddenly rebounced, while dollar slid on satisfactory data from the US. However, in July, the precious metal has recorded “disastrous” decline in more than two years, on the speculation of Fed’s rate hike.

Gold closed at $1,095.03/ounce, up 0.6% compared with the opening price ($1,088.15/ounce).

Currently, gold is trading at $1,093.43/ounce at 3:04 pm GMT+7.

Today (August 3rd), gold prices are likely to fall, under the influence of several factors:

  • Last week, China released PMI manufacturing index to be 50.0 lower than the expected in July (50.2). Today, the Caixin / Markit PMI index slipped to 47.8 in July, the lowest since July 2013. Gloomy growth prospects may affect gold demand in the 2nd largest economy of the world.
  • Mainland stock markets continues to plunge further, making a large amount of investment into dead capital, affecting cash flow into other assets.
  • Last weekend, the University of Michigan announced US consumer sentiment index fell to 93.1 in July from 96.1 in June, but still much better than 13.8 of last year. Households are more optimistic and have more buying power, boosting the US economy. Promising dollar may pull the gold price down.
  • Negative sentiment is spreading, while the outlook of Fed’s rate hike has still put pressure on gold prices in recent months. According to the latest report about COT published by the CFTC last Friday, the amount of “bet” on the uptrend for gold remained at a record low since July 2013, marking the 5 consecutive weeks of decline. By the end of July 28th, net position from large speculators and hedge funds reached +24.465 contracts, down 3.814 compared with the previous week. It can be seen that speculators are still trying to “flee” from the precious metal.

However, the gold price is also likely to increase due:

  • Gold demand may rise on “cheap” gold.¬†Gold imports from India recorded an impressive growth of 61% to 155 tonnes in the first two months of fiscal year 2015-2016 (April and May) on easing barriers from the Indian central bank. Demand for gold in India is likely to continue rising on accumulation for the wedding season and holiday season latter this year. Gold prices receive support.
  • As last week’s data, the US wage growth was only 0.2% in QII/2015, lower than expectation of 0.6%. This is one of the important indicators, easing the possibility of the Fed’s rate hike in September. This is good news for gold prices to rise.

The last impressive rebounce of gold may lure investors to come back to the precious market.

Tonight, the US will publish the personal income, personal spending, and PMI as well as Fed Governor Jerome Powell’s speech. Good data may help the dollar to escalate, thereby adversely affect gold prices, and vice versa.

Forecast: gold price likely run wildly on US data, in the dominant down trend. Prices may pop up to $1,100/ounce, then go down towards $1.085/ounce.

Ban Mai