Yesterday (3/8), gold prices slipped as the dollar rallied and investors cautiously awaited the next important data from the U.S. for clues about the timing of rate hikes.
Ending the session, gold prices closed at $1,086.35/ounce, down 0.8% compared with the open price ($1,095.46/ounce).
Currently, at 2:49 p.m. GMT+7, the price of gold is $1,091.19/ounce.
Today (4/8), gold prices are likely to fall, under the influence of several factors:
- Today, China’s stock market rebounds, thanks to the government’s intervention with the latest measure that restricts short selling of stocks. Investors who borrow shares must now wait one day to pay back the loans. However, the continuous efforts of the Government seems to indicate that the stock market is becoming worsen. The inflows into this market may turn into “dead” cash, affecting cash flows into other assets.
- Yesterday, the U.S. announced the ISM manufacturing index fell from 53.5 in June to 52.7 in July. Consumer spending rose 0.2% in June, personal income also rose 0.4%. U.S. factory activity slipped in July and consumer spending advanced at its slowest pace in four months in June, indicating the economy lost some momentum recently. However, the sluggish economic data did not change economists’ expectations that the Federal Reserve will hike interest rates this year. In fact, after the data was released, the dollar still went up and gold prices continued to go down. The gold market is still under pressure from the prospects of Fed’ rate hikes in recent months.
- Currently, investors are cautiously awaiting the U.S. nonfarm payrolls later this weekend. These are important indicators to help find out the timing of Fed’s action. At this time, buying gold is quite risky.
- Gold reserves in SPDR Gold Trust fell 38.74 tonnes to end July at 672.7 tonnes, its lowest level since March 2008, a sign that investors are running away from the precious metal.
However, the gold price is also likely to increase due:
- Greece is unlikely to ask for an increase in emergency funding from the European Central Bank (ECB) for weeks, because its liquidity buffer has risen thanks to cash inflows and central bank help. Last week, Greece did not ask for an increase, a sign the banks were stabilising. Greek stock market was reopened on Monday (3/8) after being closed for five weeks. Positive changes in Greece may support the euro, pulling down the dollar, push gold prices up.
- Gold demand may rise on “cheap” gold.
Tonight, the U.S. will publish factory order and and IBD/TIPP Economic Optimism. if the data is good, it may help the dollar to rise, thereby adversely affect gold prices.
Forecast: Gold may rise toward $1,095/ounce, then go down toward $1,080/ounce.