Will the Central Banker Speeches at Jackson Hole Help Gold?

The U.S. Comex gold futures have fallen for four consecutive days by 2.37% to end at 1,274.50 on Thursday, dropping below the 200-day moving average. The Dollar Index has climbed 0.89% this week to 82.154 on Thursday. While the U.S. ten-year government bond yield rose about 7bp this week to 2.407%, the yield is still 15bp below that at the end of July. The market is focusing on the V-shaped recovery in the S&P 500 Index, which recovered over four percent from the recent low to reach a record high of 1992.37 on Thursday. The Euro Stoxx 50 Index is heading towards a three percent rise this week after rising 0.89% last week. The crude oil futures have declined 3.65% so far this week.

Central Banks in Focus

China’s August HSBC manufacturing PMI was much lower than expected at 50.3 compared to the consensus of 51.5. The culprit could be the tighter money market rates at the end of Q2 although the interest rates and the property market conditions have eased already in August. The Eurozone flash Composite PMI declined from 53.8 in July to 52.8 in August, consistent with a weak quarterly GDP growth of 0.3% according to ING. The Bank of England minutes show that the committee voted 7 to 2 for no rate increase. With the recent low inflation data and little wage pressure, rates may stay unchanged for longer. The market focus will be on Janet Yellen’s speech on Friday morning at Jackson Hole on the labour market. In the latest FOMC minutes, more participants would prefer rates to rise sooner than expected to adapt to the incoming data. The interest rate futures now show a 51% chance that the rates will rise to 50bp by July 2015. If rates rise faster than expected, the holding costs for gold could rise sooner, leading to more speculators selling gold. Traders are looking for more dovish comments from the Fed governor to buy back gold.

Plenty of Data and Events to Watch

Apart from watching the central bankers’ speeches at the Jackson Hole Symposium this weekend, we will also monitor the August Germany IFO business climate and the U.S. July new home sales on 25 August, the June U.S. Case-Shiller housing prices and the August U.S. Consumer Confidence Index on 26 August, the U.S. Q2 GDP and the consumer spending second release and the July Japanese inflation data and the industrial production data on 28 August as well as the Eurozone July unemployment rate and the U.S. July personal spending rate and the Core PCE price index on 29 August.