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Gold: the quiet before the storm - not enough eyes to monitor number of risks this and next week

  • Gold was drifting along between $1,191/oz and $1,198/oz.
  •  We have PPI and CPI releases and higher than expected CPI will only underpin the case for higher rates from the Fed.

Spot gold was drifting along between $1,191/oz and $1,198/oz in European and U.S. markets while the DXY slid from 95.56 to 95.03. There has been little go on but eyes are looking ahead to an impending rate hike from theFed this month, US inflation data at the end of the week. At the same time, trade tensions are simmering away on the backburner - leaving the outlook for gold somewhat vulnerable on the prospect for a  stronger greenback. 

The greenback can take its cues from the data this week.  We have PPI and CPI releases and higher than expected CPI will only underpin the case for higher rates from the Fed - Other important U.S. data in the week ahead include the JOLTS jobs, real weekly earnings, retail sales and industrial production. Markets will also be looking for updates with respect to the U.S. imposing tariffs on an additional $200 billion of imports from China. When markets start to price in the additional $267 billion that President Trump threatened on Friday, just hours before China reported another record trade surplus with the U.S, one might expect additional gains in the greenback.

Federal Reserve risks

With respect tot he Federal Reserve, analysts at Nomura explained that at this point, it would be a significant surprise if the FOMC did not raise interest rates at the upcoming September meeting:

"The economy has remained strong while recent FOMC minutes and participant comments all point to another step in removing the accommodative policy . . ."We continue to expect two more rate hikes in 2018, one in December after the expected hike in September, and two hikes in 2019, in March and September, as the FOMC continues to navigate between the shoals outlined by Powell."

Gold levels

A break of $1,200, ahead of $1,207 (last week high) comes before $1,215. To the downside, $1,190 and $1,182 (Aug 23 low).


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