Gold Silver Report 3 August 2015
Precious metals continued to struggle after last week’s heavy losses. Positive U.S. economic data strengthened the dollar and expectations of a rate hike as early as september, leaving gold ending the week geared for its biggest monthly decline in more than two years.
Price and Charts Snapshot:
|COMEX Gold (Dec 15 delivery)
|COMEX Silver (Sep 15 delivery)
|US Dollar Spot
On Monday, gold found some respite last weeks heavy losses, remaining just under USD$1,100 per ounce, thanks to a weaker dollar. The greenback fell against a basket of currencies after a drop in U.S. stocks and bonds, however expectations a U.S. interest rate hike kept gold close to 5-1/2 year lows. On Tuesday, Gold remained near its low point with no meaningful movement as traders waited on expectations for a U.S. interest rate increase. On Wednesday, the yellow metal rose slightly but still remained near last week’s low, after a U.S. Federal Reserve meeting raised uncertainty about the timing of the rate hike. Fed officials said they felt the economy had overcome a first-quarter slowdown and was “expanding moderately”, however analysts were waiting on further statements to gain a clearer indication. This came on Thursday when a first-quarter GDP report was revised from an expected 0.2% contraction to show a 0.6% rise, confirming the American economy had improved in the second quarter, and supporting expectations of a hike. The U.S. dollar rose and gold fell by 1%, tumbling back towards the 5-1/2-year low.
On Friday Gold reversed some of its earlier losses as the dollar fell after a U.S. government index on employment costs rose less than forecast. However, prices remained on course for their biggest monthly decline in more than two years on expectations the Federal Reserve will soon raise interest rates.
Bullion has continued to struggle after losing more than 3% last week, after sharp selloffs across New York and Shanghai markets, sinking prices to their lowest since 2010.
The anticipated U.S. rate hike also kept a tight grip on sentiment. Mizuho Bank expected the Fed unlikely to deviate from its recent policy statement or in Fed Chair Janet Yellen’s congressional testimony this month. The bank said “The most likely outcome is that Fed rhetoric will emphasise that the U.S. economy is on track for a rate hike(s) this year.”
With the stronger dollar and U.S. economic growth, expectations remain bearish. According to Jeffrey Currie of Goldman Sachs, gold prices are at risk of falling as low as USD$1,050 per ounce, reinforcing the bearish outlook for bullion after last week’s rout. Phillip Streible of RJO Futures in Chicago said that with the likelihood of a rate hike by the end of the year, “there’s no need for any kind of safety whatsoever.”