Gold has been pulled the winding down of the US QE program and a probability of rates hike. Probability that the Fed may increase its Fed- Funds rate by mid 2015 will effectively reduce gold price in dollar terms.
US economic development:
This week, important data coming in from US has clearly shown signs of a gradually strengthening economy. The U.S. gross domestic product grew at a revised annualized rate of 4.2% in the second quarter of this year.
The U.S. Department of Labor said the number of individuals filing for initial jobless benefits in the week ending Aug. 22 declined by 1,000 to 298,000 from the previous week’s revised total of 299,000.
A separate report showed that U.S. pending home sales increased by 3.3% last month, beating expectations for a 0.5% rise. June’s figure was revised to a 1.3% drop from a previously estimated decline of 1.1%
As we all know, any positive data coming in from US has a negative effect in gold prices as gold is pressured by the idea that if the U.S. economy has sustained improvement then the Federal Reserve will start to raise rates, once it ends its quantitative easing program.
Further there were news that Geo-political tensions seem to have eased out and hence, we saw gold losing its safe haven status and gold prices slipped back below $1300.
The lack of any movement to change Indian import restrictions under the new government has also been a disappointment for the gold bulls.
As we see that the market has been divided into two segments: “the bulls and the bears” and as we go through this transition we can expect to see assets outperforming expectations. The market can’t help but exceed expectations since the investors’ expectations are so low at this point.
We now see what the market has been awaiting for:
|1st September:||The August China NBS manufacturing PMI index and the Euro zone final manufacturing PMI|
|2nd September:||The U.S. August ISM manufacturing index|
|3rd September:||The preliminary Q2 GDP of the Euro zone|
|4th September:||The Bank of England and the ECB interest rates decisions and announcements on 4 September|
|5th September:||U.S. August non-farm payrolls and the unemployment rate|
The market will be watching the outcomes of Thursday’s European Central Bank meeting and Friday’s U.S. August nonfarm payrolls report for gold direction. Economists are looking for ECB to take some sort of action, with a cut to interest rates likely.
|GOLD||$1273- $1307 an ounce||Rs. 27,500- Rs. 28,500 per 10 gram|
|SILVER||$19.15- $19.85 an ounce||Rs. 41,500- Rs. 43,500 per kg|