Stocks in the USA have gained over the past month, while the dollar’s lost ground, as Fed officials weighed whether to increase borrowing costs amid conflicting signals given by a strengthening jobs market and weak growth.
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Borthwick said expectations that USA rates would remain low supported emerging market currencies such as the Mexican peso and Russian ruble since lower-for-longer US monetary policy would keep afloat emerging market countries who have borrowed in dollars. The next level of resistance is gold’s one-month resistance point of $1,378 per ounce.
Given the backdrop of a weak Q2’16 US GDP report, softening expectations for Q3’16 US GDP (the Atlanta Fed’s GDPNow growth forecast is down to +3.5% from +3.8% over the past two weeks), and the contentious US presidential election cycle, it seems highly unlikely that the Fed will be raising rates in September. Trading ranged at $1,344.40-1,347.95 so far.
Energy companies (+0.2%) topped today’s leaderboard as US crude oil added another 1.8% to $46.58/bbl even after Iran cast doubt on the likelihood of an agreement to limit production next month; telecoms (-2%) and utilities (-1.2%) were the biggest laggards.
South Korea’s won and the Malaysian ringgit dropped after Federal Reserve officials signalled they may increase interest rates this year, supporting the dollar.
Markets lifted the odds of a September move to a still modest 24 percent after the two Fed speakers warned that a September rate hike is not off the radar, National Australia Bank (NAB) said on Tuesday.
“Key to gold’s near-term price performance will be Wednesday’s FOMC minutes and comments from various FOMC members….”
The dollar treaded water early on Tuesday, caught in a narrow range ahead of a series of US data releases later in the session, while sterling was on the defensive after downbeat United Kingdom data nudged it toward a 31-year low. Building permits over the same period stood at 1.15 million, a slight miss of the 1.16 million expected. US rates are considered to be on a higher path than much of the rest of the developed world, but a go-slow Fed has helped pad gold’s 27% year-to-date gain.
Industrial production and capacity utilisation were both better-than-expected at 0.7 percent and 75.9 percent.
In equities, the Shanghai Composite fell 0.25 percent to 3,102.22.
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In other precious metals, silver increased $0.052 to $19.83/19.875.
