Date
24 July 2017
Gold prices are expected to trend upward in the medium term. The yellow metal is likely to hit US$1,361 to US$1,370 an ounce as long as it stays above US$1,330. Photo: Bloomberg
Gold prices are expected to trend upward in the medium term. The yellow metal is likely to hit US$1,361 to US$1,370 an ounce as long as it stays above US$1,330. Photo: Bloomberg

Poor US data boosts gold and silver

Disappointing second-quarter GDP data in the US sent mixed signals to the market.

Investors are closely watching the upcoming July non-farm payroll data.

Meanwhile, the Federal Open Market Committee did not give a clear timetable for the next rate hike in the minutes of its last meeting.

Fed chief Janet Yellen will speak at the central bank’s annual conference in Jackson Hole on Aug. 26 and investors will be keen to glean any clues.

On Monday, New York Fed President William Dudley said the Fed should carefully consider any interest rate increase due to lingering risks to the US economy.

In fact, the Fed might hold off any action until December because of the US presidential election in November.

However, if non-farm payroll data due out Friday turns out to be robust, that might reverse expectations.

The Fed might consider a rate hike in September or November.

Golden key

London gold prices edged up early this week after weak economic data in the US.

Gold prices rose to US$1,360 per ounce on Tuesday, the highest since July 12.

Gold prices are expected to trend upward in the medium term.

The yellow metal is likely to hit US$1,361 to US$1,370 an ounce as long as it stays above US$1,330.

In the meantime, London silver has stayed above the 25-day moving average of US$19.90.

Silver may rise further to US$20.60 or even US$21.30 as long as it does not fall below the support level of US$19.90.

If not, it might tumble to US$19.60 or even US$19.20.

Japan stimulus

Japanese Prime Minister Shinzo Abe’s cabinet approved 13.5 trillion yen (US$133.7 billion) in fiscal measures on Tuesday to stimulate economic growth.

The US dollar dropped to a three-week low of 101.45 against the yen after the stimulus package came up of short of market expectations.

The greenback has hovered below the 100-day moving average of 107.5 against the yen since late July.

That could be a critical level for the medium term. The immediate resistance level is at the 25-day moving average of 103.80 and 102.80.

UK rate hike

The Bank of England might inject billions of pounds into the market apart from a rate hike on Thursday.

The central bank is expected to cut interest rates on Thursday for the first time since 2009 in a bid to prevent a recession after Brexit.

Britain’s manufacturing sector contracted at the fastest pace in more than three years in July, according to a survey released on Monday, which means the Brexit vote is hurting the nation’s economy.

Most economists expect a rate cut of 25 basis points to 0.25 percent at least and half of them believe the central bank will resume its bond-purchasing program, according to a Reuters poll.

The pound slipped off the peak on Monday and might edge up to 1.331 or 1.35 against the dollar.

It has support at 1.26 on the downside.

New Australia low

The Reserve Bank of Australia cut its official interest rate to a fresh low of just 1.5 per cent on Tuesday.

It was the second rate cut this year. The aussie bounced back quickly after falling to 0.7486 against the US dollar.

Consumer price index growth slowed to a 17-year low and consumer prices rose just 1.5 percent, well below the target range of 2 to 3 percent.

The odds for another rate cut before December is roughly 68 percent.

This article appeared in the Hong Kong Economic Journal on August 3.

Translation by Julie Zhu

[Chinese version 中文版]

– Contact us at [email protected]

JZ/DY/RA

Sales director, Emperor Capital Group Limited; HKEJ columnist

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