Spot gold is expected to trade with a positive bias in the short run on reduced rate hike possibility.
Gold price prediction today: Gold prices are likely to trade with a positive bias in the near-term and buying on dips is the recommended strategy, says Praveen Singh, Head Currencies and Commodities, Mirae Asset ShareKhan.
Gold Performance:
- Spot gold extended its weekly winning streak to the second straight week in the week ending August 14. It closed 0.70% higher for the week at $4376.
- The shiny metal has started this week on a positive footing. At the time of writing this article on August 17, the metal was trading at $4421, up nearly 1% for the day.
Geopolitics and oil:
- The US-Iran 60-day ceasefire MoU is set to expire on August 17; however, the ceasefire MoU has lost its relevance due to repeated cycles of strikes and talks. Senior Islamic Revolutionary Guard Corps (IRGC) commander Brigadier General Yadollah Javani said Iran’s defensive posture will shift to an offensive one under a new “maximum deterrence” policy. Iran does not want to extend the MoU.
- Iran said that talks with Oman on the Strait of Hormuz are continuing.
- Traffic through the Strait of Hormuz has come to a grinding halt.
- The US President Trump, citing his dissatisfaction with lack of support on Iran and good relationship with North Korea, has ordered the Pentagon to scale back joint military exercises with South Korea. The annual Ulchi Freedom Shield drills are scheduled to be conducted from August 17 to 27.
- On Monday, Trump threatened to bomb Oman if it gets in the way of US-Iran talks.
- To increase economic pressure on Iran to bring it back to the negotiation table, the US is preparing to impose more economic sanctions on Iran which would be in addition to 2200 sanctions already in place since 2018 and include continued blockade of Iran’s ports.
- Brent crude oil closed with a weekly gain of 6% at $88.60 in the week ending August 14. Brent futures at $88.21 were marginally higher at the time of writing.
Data roundup:
- US Empire manufacturing and NAHB housing data released Monday were better-than-expected.
- Japan’s Q2 economic growth slowed down from 0.5% to a 0.3% (forecast 0.5%) reading. Likewise, year-on-year growth, at 1.1% cooled off from 1.8% and fell short of expectations of 2%.
- China’s retail sales and industrial production data released on August 17 disappointed. China’s economy seems to be struggling at the beginning of the H2. July retail sales rose 0.6% y-o-y, well below the forecast of 1.5% (prior 1%). Industrial production cooled off from 5.3% y-o-y in June to 4.5% in July, Vs the estimate of 5%, while fixed asset investments YTD declined 6.7% Vs the forecast of -6.2% and prior -5.7%. New home prices declined 0.18%, 37th straight monthly decline. July data indicate that China may not be able to achieve a GDP growth rate of 4.3% in H2, required for meeting the government’s target of 4.5% growth.
- US data released last week were on soft side: Advance US retail sales retail sales declined 0.6% (forecast 0.1%, prior 0.2%) in July; ex auto and gas sales were down 0.3% m-o-m (forecast 0.2%, prior 0.3%); retail sales control group fell 0.4% m-o-m Vs the estimate of 0.3%. University of Michigan sentiment slumped from 55.20 in July to 51 (forecast 55) in August (prel. reading). Although one-year inflation expectations at 4.3% were hotter-than-expected data of 4.2%, ten-year inflation expectations remain anchored and steady at 3.3%. July US CPI data extended its disinflationary trend as headline CPI edged lower from 3.5% in June to 3.4% in July, matching the estimate as even July PPI cooled down from June.
US Dollar Index and yields:
- The US Dollar Index was on defensive on Monday as following soft US data (nonfarm payroll, retail sales, CPI, PPI), traders have pared their rate hike bets. At the time of writing this article, the Index was hovering around 99.50, down ~0.20% for the day.
- Two-year yields were steady at 4.17%, while ten-year yields at 4.71% were up 2 bps.
- The US Dollar Index was up 0.15% for the week ending August 14 and is currently down nearly 2.3% from the cycle high of 101.80. Two-year yields have retreated sharply from its 19-month high of 4.37% hit on July 23. Twos were up 3 bps for the week. Ten-year yields have retreated slightly from the eighteen-month high of 4.75% reached on July 31. Tens were up 1% last week.
CFTC positioning:
- In the week ending August 11, money managers have increased their bullish gold bets by 9,470 net-long positions to 141,868, the most bullish position in more than 10 months. Long-only positions rose 9,671 lots to 151,491, the highest in almost seven months, while short-only positions rose 201 lots to 9,623.
ETF and COMEX inventory:
- Total known global
gold ETF holdings fell after rising for seven straight days. Holdings, currently at 97.34 Moz, are up 1.18 Moz from the cycle low reached in July but are still down 1.61 Moz YTD as investors have liquidated some of their ETF holdings on Fed rate hike concerns. - Registered COMEX gold inventory stands at 14.47 Moz, up nearly 2% from the cycle low of 14.19 Moz seen on August 7.
Reuters survey on Fed rate hike:
- Over 90% of 104 economists polled by Reuters see the Federal Reserve keeping benchmark interest rates unchanged at 3.5%-3.75% in September and for the rest of this year. Nearly 80% of them see no change in interest rates through the end of the next year.
Fed rate hike probability:
- Probability of the US Federal Reserve hiking rates by the year-end has dwindled from 80% seen a month ago to 68%.
Upcoming data:
- Major US data to be released this week include June TIC flows (August 18), weekly ADP employment change (August 18), July import price Index (August 18), July housing starts (August 18), July industrial production (August 18), August Philadelphia Business outlook index (August 18), July Leading Index (August 20) and S&P PMIs (August 21).
- Traders will also monitor the Eurozone’s July CPI (August 19), PMIs (August 21) and the UK’s July monthly labour report (August 18), July CPI (August 19) and PMIs (August 21).
Gold Price Outlook :
- Spot gold is expected to trade with a positive bias in the short run on reduced rate hike possibility, soft US data and rangebound crude oil prices. However, some consolidation is possible, which will be healthy for the metal. In the near-term, the shiny metal may test resistance at $4500.
- It is advisable to buy into the dips rather than chasing the rally.
- Support is seen at 4385/4290-4300/4200-$4220.
(Disclaimer: Recommendations and views on the stock market, or any other asset classes or personal finance management tips given by experts and analysts are their own. These opinions do not represent the views of The Times of India.)
