Gold Prices Retreat But Could "Receive Catalyst" from Central Bankers' Meeting in Jackson Hole, Silver Down to Seven-Week Low

GOLD PRICES hit a two-week low on Monday morning in London as the US Dollar traded higher as investors await the much anticipated speech from the Fed Chair Janet Yellen happening this Friday, writes Steffen Grosshauser at BullionVault.

Gold tested recent support levels as the metal quickly touched a low of $1331 per ounce before rising to $1336.

“The slow summer trade is yet to see a break of USD $1330 – $1360,” noted Swiss refiner MKS PAMP in their latest market update. “However we may receive a catalyst in the form of Federal Reserve Chair Janet Yellen’s Jackson Hole speech this Friday.”

Janet Yellen is due to speak at the Jackson Hole Economic Symposium in Wyoming where central bankers from around the world meet every year. This could produce some signal about the outlook of the U.S. economy, after Fed officials have hinted in the last few days of an increased probability of a further interest rate hike as early as this September.

The Fed vice-chairman Stanley Fischer said on Sunday that the U.S. economy was close to hitting the central bank’s targets for full employment and 2% inflation. 

“It will be interesting if [Yellen] takes on the slightly more hawkish rhetoric of some of her colleagues of late, as that could potentially shake markets up a little,” said an analyst at ANZ Commodity Research on Monday.  

“We think that a September move might be too early for the Fed to act, but by the same token, a December move could be late,” countered INTL FCStone analyst Edward Meir. However, the majority of market participants do not expect an increase before March next year, according to the CME’s FedWatch tool.

“The U.S. economic indicators are looking healthy and the probability of a U.S. rate hike will go up further in the coming months, rallying the dollar and putting pressure on gold,” said Barnabas Gan, an analyst at Asian bank OCBC.

The U.S. Dollar index, which tracks the greenback against a basket of other major currencies, slightly rebounded after it fell to a near two-month low of 94.07 last week.

Furthermore, “the weekend remarks out of the Bank of Japan provided support to the Dollar this morning, most pronounced in a sharp move lower in silver,” wrote MKS PAMP in a note, referring to the BOJ Governor Haruhiko Kuroda’s remark that Japan’s central bank would not rule out deepening a cut to negative rates.

Silver pulled back further from the $20 mark and dropped to a seven-week low by trading between the range of $18.76 and $19.10 per ounce so far on Monday. Platinum and palladium fell 0.6% and 0.7% respectively, while base metals were down an average of 0.5%.

Meanwhile in India, gold sales have been sluggish despite the start of the festive season. Markets were reported to be “dull” due to the soared prices this year. Gold imports in 2016 were also expected to fall to the lowest level in seven years. The combined demand for jewellery and investment fell significantly to 247 tonnes in the first half of 2016, a 42% year-on-year decrease, according to the market-development organization, the World Gold Council.

In contrast, the Russian Central Bank announced last week an addition of further 6 tonnes to their gold reserves in July. Since January, Russia added over 90 tonnes, which brings their holdings to more than 1,500 tonnes – the sixth biggest reserves in the world by country. Last year, Russia’s Central Bank added a record of 208 tonnes of gold to their holdings, while the country financially suffered from international sanctions and plummeting oil prices.

Back in Europe, the leaders of the Eurozone’s largest economies Germany, France and Italy were about to meet on Monday near Naples to discuss how to “relaunch Europe” after the Brexit.


This publication is for education purposes only and should not be considered either general of personal advice. It does not consider any particular person’s investment objectives, financial situation or needs. Accordingly, no recommendation (expressed or implied) or other information contained in this report should be acted upon without the appropriateness of that information having regard to those factors. You should assess whether or not the information contained herein is appropriate to your individual financial circumstances and goals before making an investment decision, or seek the help the of a licensed financial adviser. Performance is historical, performance may vary, past performance is not necessarily indicative of future performance. This report was produced in conjunction with ABC Bullion NSW.

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