Fibogroup Market Analysis 2017

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The gold price is under further pressure today as investors exit the haven asset on the back of easing political tensions and expected monetary policy tightening from the US Federal reserve.

The US dollar seems to be the favorite choice at the moment as traders seek interest bearing investments and a stronger dollar makes it more expensive for holders of other currencies to buy gold.

The precious metal has now lost over $30 in the last 3 trading sessions as tensions between North Korea and the US subside, which for now seems to have brushed off the situation that a military conflict was imminent.

Gold also once again showed how sensitive it was to interest rate hikes from the Fed and after last week’s statement by the central bank that the central bank was still on target to raise rates it fell out of favour.

The correction is going to continue because the Fed seems bent on continuing their scheduled rate hikes,” said George Gero, managing director with RBC Wealth Management.

Yesterday’s durable goods order figure from the US hit the market at 1.7 percent against analysts’ expectations for a figure of 1 percent and all but guarantees that the fed will lift rates over the coming months, and with this expectation, we may see the gold price suffer further losses.

 

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The gold price is under further pressure today and is now sitting at a six week low as the US dollar begins to strengthen with is bad news for the precious metal as it makes it more expensive for holders of other currencies.

Potential interest rate rises in the US have been the biggest burden on gold but now the focus has turned to Donald trump and whether he can push some of his key reforms through after the recent fail to abolish Obama healthcare,

Gold prices have been “unable to stand the specter of higher U.S. interest rates and a stronger dollar,” noted Ed Meir, an analyst at INTL FCStone Inc. in New York.

“The political focus in Washington has now shifted from the ill-fated health-care legislation to more growth-friendly issues like tax cuts and reforms.” he added.

Although gold is down, it seems to have found a good base of support at the $1,284 mark over the last couple of days which as we can see on the chart was a previous support level.

If Trump runs into trouble again trying to push through his political agenda this may be the catalyst for gold to use this current support level to reverse

 

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The Euro looks set for a week of volatility after a referendum over the weekend by the Catalonian government in Spain where voters overwhelmingly voted to break away from Spain.

With over 40 percent voter turnout and 90 percent declaring a ‘Yes’ vote for independence, Carles Puigdemont, Catalonia’s regional leader has promised to present the results to parliament ASAP, which would then move forward with steps to grant the voters there wish of independence.

The Prime Minister of Spain and the central government from Madrid are not going to take the results lying down, and have declared the result illegal, while promising tougher action against Catalonia.

This is one of Spain’s biggest political crisis in decades and the longer it drags out, the worse for the Euro it is expected ted to be,

“There’s a high chance that Spain may be headed towards a new crisis, especially if Catalonia’s President, Carles Puigdemont, declares independence as he has promised to do in the next 48 hours” said Hussein Sayed, chief market strategist at FXTM.

“This will lead to more violence and probably an intervention from EU leaders, who will come under pressure to take action,” he added.

Spain is now one of a number of European countries where political unrest has been brewing for some time with another being Italy, and with elections just around the corner, it may be more added woes for the Euro.


“Noise around Catalan independence is likely to keep the euro on the back foot and risks fueling a deeper technical correction , especially with the spectra of the possibly more contentious Italian elections looming in early 2018.” says Viraj Patel at ING.

 

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The gold price is under further pressure today as investors exit the safe haven commodity in favour of the US dollar after yesterday’s positive round of economic data from the US


ISM manufacturing PMI numbers hit the market at 60.8, well above expectations for a figure of 58 and all but guarantees a rate hike from the US Fedral Reserve in the coming months.


Gold is now sitting at a 7-week low and has certainly fallen out of favour with traders as Geo political tensions cool down, which give little reason to hold onto non-interest bearing investments such as gold.


Unless the situation drastically changes between the US and North Korea it is hard to see gold bouncing back and further losses are expected and it seems the market is bracing for such a situation


"The factors that pushed gold toward $1,360 in early September are now reversing," said Julius Baer analyst Carsten Menke.


"The U.S. dollar and yields have rebounded from their recent lows and it looks like positioning in the gold futures market is somewhat reversing, with some long covering and new shorts." He added

 

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The Oil price has finally settled in today’s trading after a week of heavy losses on the back of profit taking and some say that the price may once again head higher.

FOLLOWING a solid month of gains, investors decided to cash in on the higher prices which has driven the oil price down almost 10 percent

“After the steep rally of recent weeks, it seems quite logical that the market runs into some resistance, triggering waves of profit-taking,” said Hans van Cleef, senior energy economist at ABN Amro Bank NV in Amsterdam.

Although the oil price has pulled back sharply over the past week, some predict that the overall direction is still bullish and now may be a good time to get back in as oil resumes its uptrend which should continue until the end of the year.

“We think it's for real, we're in the middle of a bit of a sell-off, maybe even testing the $50 level for WTI, but the sell-off is profit-taking more than anything else, and the momentum in the physical markets, joined by the momentum in the financial markets, really point to a higher price between now and the end of the year." Said Ed Morse from Citi group.

A proposed extension of production cuts by Opec members is also expected to keep the oil price well supported.

 

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The gold price is on the rebound today as investors await tomorrows all important jobs data out of the US and depending on the numbers, gold could go either way.

The market is currently pricing in a 70 percent chance that the US Federal Reserve will lift interest rates before the end of the year.

If tomorrows Non farm payrolls figure and unemployment rate hit the market above expectations the chances of a rate hike will probably rise to over 90 percent and that should see the gold price tumble again.

On the other hand, if the figures disappoint investors, gold is likely to benefit as the chances of a rate rise fall.

On the chart, we can see that gold has traded in a tight range over the last 3 trading sessions, making a run for the $1,280 mark before pulling back towards the lows of the session.

Even if the data from America tomorrow falls short of expectations, gold may find it difficult to break above this range.

 

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The gold price can’t seem to go anywhere today as traders sit on the sidelines awaiting the non-farm payrolls report and the unemployment rate from the US due out later this afternoon.

The figure for the non-farm expected by the market is 90,000 which is well down on last month’s number of 156,000.

With such a low number expected, the chances that it will come in above expectations is considerably high and if it happens the gold price is likely to get punished and head down towards the next resistance level of $1,256.

In the event the figure disappoints investors, gold is unlikely to go higher than $1,280 and then probably get pushed back down again as it did in the previous 2 trading sessions.

It seems for the time being that gold has lost its appeal and it will take something special to attract interest in it again.

Donald trump and his war of words may just be the thing that gold needs right now.

 

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The Australian dollar is once again under pressure today, sitting at its lowest level in 3 months against its US counterpart and it may be in for further losses with a possible rate cut from the RBA in the nearest future.

Last Friday Reserve Bank of Australia board member Ian Harper said he wouldn’t rule out a rate cut on the back of disastrous retail sales figures and current inflation numbers that sit well below the RBA’s target rate.

“The RBA is now stuck in limbo. It has a mandate to maintain price stability, to keep inflation under control. Normally, that means acting ahead of the curve, whacking up rates before inflationary pressures build,”said ABC Business Editor Ian Verrender

“Not this time - it will have to let inflation run, to allow incomes to catch up with debt. With no lift in rates for the foreseeable future, the dollar will remain under pressure.” He added.

Over the last month, commodity prices such as Iron ore, copper have tumbled which has taken its toll on the Australian economy and Aussie dollar, and analysts from Capital Economics predict that the carnage is not over and further falls are expected as demand from China wanes.

This is also expected to drag the Australian dollar down further

"Signs of somewhat softer economic activity in China also raised concerns in the more industrial metals markets. Indeed, we suspect that prices have further to fall, as China's economy slows in the fourth quarter in response to earlier policy tightening." They said

 

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After hitting a low of $1,260 3 days ago, the gold price has rallied nearly $30 to be trading around $1,289 today and some are predicting that the rally is about to end.

Comments by US president Donald Trump over the weekend that only action and not talk will end North Korea’s nuclear ambitions helped support the precious metal but many believe the comments were an empty threat and wont amount to anything more.

The market is also now pricing a 90 percent chance that the US Federal Reserve will lift interest rates next year which will most likely see investors exiting gold for the US dollar on the back of higher yields.

"We still reiterate our view that the precious metal will likely remain under pressure over the short-term, as we see a firmer dollar, resilient equity markets, rising interest rates and slightly quieter geopolitical conditions, all combining to keep serious rallies in check," said INTL FCStone analyst Edward Meir

Tomorrows minutes meeting from the US Federal Reserve may show whether the Fed does in fact plan to lift interest rates in December and the gold price is likely to react accordingly

 

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The oil price is set to remain stagnant over the next few years according to some analysts with the outside possibility that the price could tumble if Opec members fail to cooperate or production levels from the US continue to rise.

Oil production from the United States has risen 10 percent this year to more than 9.5 million barrels per day and they have no intention to go along with Opec and reduce supplies

“We don’t see big reasons for inventories to go down a lot from still high levels now. Hence we don’t see big reasons for prices to go up or down by much in 2018, and it’s similar for 2019,” said Jeff Brown, the president of consultancy Facts Global Energy.

Mr Brown also noted that Opec members will have to extend the current production cuts indefinitely, and a failure to do so could see the price of oil encounter substantial losses.

“OPEC doesn’t have an exit strategy. They need to continue to manage the market, or prices will drop a lot. If OPEC decides not to roll over, oil prices could easily could fall back into the $30s,” he said.

Oil could soon be traded in currencies other than the US dollar which will throw another round of uncertainty into the market, and according to Carl Weinberg, chief economist and managing director at High Frequency Economics, China and the Chinese yuan are set to be the main beneficiaries as the country buys more oil than any other.

"I believe that yuan pricing of oil is coming and as soon as the Saudis move to accept it as the Chinese will compel them to do. Then the rest of the oil market will move along with them." Mr Weinberg said