Gold Clings To USD1115 As Focus Shifts To Fed

In euro terms, gold is holding its own at above €1,000 per troy ounce. The rand is expected to come under more pressure from inflation and retail figures for July due on Wednesday. In addition, auto sales have remained healthy, as has the housing sector.

Investors withdrew $2.3 billion from gold exchange-traded products in July as the dollar strengthened, BlackRock data showed. Last December, they projected 2.8 percent growth for this year. If the Fed failed to step in, the concern is that the inflation rate would continue to spiral upward until it seriously disrupted the ability of businesses and households to plan for the future and make normal business decisions.

When looking at the charts for gold, the commodity has been in a strong downtrend over the last couple of months and have been forming lower lows and lower highs which is indicative of the fact that bears are in total control at the current moment. Nor are currency movements helping. The global Monetary Fund (IMF) welcomed the move, but some US politicians disliked it and branded China a currency manipulator.

“A potential currency war among large Asia exporters would not be something the Fed would want to be raising rates going into”, said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange.

The dollar started the week on a firmer footing on Monday as traders looked to the prospects of a U.S. rate hike next month while the yen was little moved after data showed Japan’s economy shrank in the April-June quarter.

The positive from this is that a 6 percent rise isn’t enough by itself to crimp demand for the yellow metal, especially since Chinese prices are still about 13 percent below the high point so far in 2015 reached in early February. “I think the rate hike has already been discounted fully whether it happens in September or December”. The Bloomberg Dollar Spot Index, which tracks the currency versus 10 major peers, rose 0.2% to 1,210.39. The share price is now down -35.37% for the past three months.

And while Europe and the United States seem to have steadied their economies, the outlook for the global economy at large is only fair to middling.

He continued, “In June, they cut their forecast again to 1.9 (percent)”.

Stocks aren’t cheap: The U.S. equity market is trading at a richer valuation than most others.

Volatile markets were soothed as the yuan steadied after China’s central bank said there was no reason for the currency to fall further given the country’s strong economic fundamentals.

That’s because the Fed only sets rates on overnight loans that Federal Reserve member banks receive from the Fed itself or from one another, says Jay Sommariva, vice president and senior fixed income portfolio manager at Fort Pitt Capital Group in Pittsburgh, Penn.