Gold Silver Report 10 August 2015

Gold continued to stagnate this week as analysts speculated and waited over U.S. economic data to look for signals as to whether the Federal Reserve would issue a rate hike sooner or later.

Price and Charts Snapshot:

On Monday gold was steadying slightly above a previous 5-1/2-year low, after some weaker U.S. economic data showed a factory activity index slipped short of expectations, and U.S. consumer spending rose at its slowest pace in four months in June. Gold was however still pressured by expectations for a near-term hike in U.S. interest rates.^[1] On Tuesday gold remained near a 5-1/2-year low,after reports of an improving U.S. labour market maintained expectations of a rate hike this year.^[2] Gold then eased on Wednesday on a stronger-than-forecast report on the U.S. services sector which pushed the greenback to a 2-month high, pushing gold down but still above the 5-1/2 year.^[3] On Thursday gold and silver both edged higher after a tumble in global equities and the U.S. dollar, but gains were limited as traders awaited on upcoming U.S. employment data as a cue to whether the Federal Reserve may raise interest hikes.^[4] On Friday, gold rose after a below expectations U.S. non-farm payrolls data indicated a chance the Federal Reserve may delay an immediate interest rate hike, but remained on course for a weekly fall.

Gold’s rout deepened last month as the yellow metal had lost nearly 7%: its steepest monthly fall in two years, as the looming rate hike boosted the U.S. dollar. A global commodities price benchmark also sank to a 12-year low on Monday, as fears about economic conditions in China deepened.^[5] Saxo Bank senior manager Ole Hansen said “In the medium term, with rising bond yields, EM (emerging markets) currencies collapsing, no safe haven demand and with the dollar potentially going higher on U.S. rate expectations, there is no gold-friendly news out there.”^[6]

The ever looming rate hike is expected to come as early as September, just next month, presenting downside risk for non-interest yielding gold.^[7] Barnabas Gan, an analyst at OCBC Bank said “If indicators show the U.S. economy is improving very strongly, it does give a cue that gold may breach the $1,000 support.”^[8] Even with sometimes lower-than-expected economic data occasionally coming out of the U.S., Vishnu Varathan of Mizuho Bank in Singapore noted that “an initial rate hike this year is not blown out of the water by any of the data that have come out so far. All it does is it reinforces that the pace of hikes as we go forward will be quite gradual and the way the Fed assesses policy will probably err on the side of caution”.^[9]