Markets were volatile as the week ended and this volatility was reflected in the movements of gold prices.
Gold prices fell on Friday, after shuffling between gains and losses as investors weighed concern about Europe’s banking woes against heightened expectations of a Fed rate increase in December.
The yellow metal had fallen to as low as $1,311.95 on Friday – the lowest since September 21 – following news that Deutsche Bank was near a settlement with US regulators.
Amidst rise of uncertainty over the health of a financial industry, traders have shifted focus to gold to provide what it best does- safe haven.
Traders are seeking for the yellow metal as uncertainty prevails after the news reports by Bloomberg that 10 hedge funds that do business with Deutsche Bank have pared their exposure. Its shares fell to a record low, and European and Asian equities retreated. There’s heightened haven buying as anxiety grows over the German lender, Australia & New Zealand Banking Group Ltd. said in a note.
Investors had been nervous about the uncertainty surrounding Deutsche Bank after some of its clients, among them several big hedge funds, were reported to have withdrawn securities or cash from the German lender amid concerns about its stability and their exposure.
But, on Friday, safe haven demand for gold dwindled after stocks in major markets largely recovered from a sell-off on easing concerns about Deutsche Bank. This lead to a fall in gold prices. Spot gold was down 0.3 percent at $1,316.32 per ounce during Friday trading hours.
As the session wore on, the focus turned to increasing expectations that the U.S. Federal Reserve will raise rates by the end of the year. Fed-funds futures, used to bet on central-bank policy, showed investors assigned a 61.6 % likelihood to a rate increase in December, up from 52% the previous day, according to CME data on Friday.
Expectations for higher rates tend to weigh on gold, which yields nothing and struggles to compete with Treasury’s and other investments when borrowing costs rise.
Hence there were sluggish sentiments in the market as it might have to edge lower before finding firm support.
A collapse in Deutsche Bank’s already beaten stock had sent Europe into a fresh tailspin early on Friday and left world equity markets slipping towards their worst week in three months. Safe-haven demand had sustained bullion until the market turned its attention to U.S. economic data and important numbers coming from China.
The Commerce Department said on Friday that U.S. consumer Spending fell in August for the first time in seven months while Inflation showed signs of accelerating, mixed signals that could keep the Fed cautious about raising interest rates.
Let’s have a look on the key economic indicators-
- In US data released Friday, the core PCE price index was as expected at 0.2 percent but personal spending and personal income undershot at 0.0 percent and 0.2 percent.
- The Chicago PMI was better than expected at 54.2. Revised UoM consumer sentiment and revised UoM inflation expectations at 91.2 and 2.4 percent respectively were also better than forecasts.
- A string of manufacturing PMI numbers are due from Eurozone countries as well as the US later today. The ISM manufacturing PMI, construction spending, ISM manufacturing prices and total vehicle sales from the US will also be of note.
- In US data released on Thursday, second quarter final GDP growth came in at 1.4 percent quarter-on-quarter, slightly better than expectations of 1.3 percent. Weekly unemployment claims for last week was also better than expected at 254,000, against a forecast of 260,000.
- Pending home sales for August, however, fell 2.4 percent month-on-month – a 0.1 percent decline was called for.
- China’s official manufacturing PMI for September was at 50.4 (close to expectations of 50.5),
- China’s manufacturing sector remains in expansion mode alongside stable production and demand growths, the NBS said.
- But the foundation of the manufacturing sector’s stable growth is not solid as firms continue to face operating difficulties while industries eliminate excess capacities, the Bureau cautioned.
- The country’s official non-manufacturing PMI, which represents the services sector was at 53.7 in September, was up from August’s figure of 53.5.
- The official PMIs added to the continued Chinese growth story and risk on mood in markets, National Australia Bank said on Monday.
- For the time being The precious metals are looking quite diverse with gold prices struggling to rise and when they do they struggle to hold on to any gains
- For the time being The precious metals are looking quite diverse with gold prices struggling to rise and when they do they struggle to hold on to any gains.