FiboGroup Market Analysis 2018

[fibogroup.com]

Gold is now trading higher for a 2nd straight day following on from Yesterday’s interest rate decision from the Federal Reserve and some say the following monetary statement that was delivered may help the precious metal in the foreseeable future.

As expected the Fed kept rates on hold but in the following speech noted that further rate hikes would be needed to accommodate monetary policy on the back of rising inflation with is now flirting with the lower band of the Fed’s target range of between 2 and 3 percent.

In contrast to previous statements, the central bank didn’t seem overly concerned the inflation may quickly enter their target range which led some to speculate they may let inflation push higher than first thought which is likely to benefit gold which thrives in an environment of rising inflation.

“The Fed’s decision is showing us that the Fed is willing to let its inflation overshoot its 2% target and accommodate growth,” said Peter Spina, president and chief executive officer of GoldSeek.com.

“This should be favorable to growing inflation forecasts and make the appeal of gold grow.” He added.

Next week US President Donald Trump is to decided whether to restore sanctions against Iran for failure to live up to their end of the deal on dismantling the nuclear weapons program which the President sees as a deal that should have never been signed.

Should this happen, gold is likely to benefit as the government of Iran are unlikely to take the news lightly and their response will probably cause political tension and open up gold as a safe haven again.

“Volatility is starting to pick up. These issues will become a much more important driver of gold price, which is what we’ll be focusing on in the short term,” said Daniel Hynes, a senior commodity strategist from ANZ

“Rising global tensions would be quite supportive for safe-haven buying." he added.

 

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The Australian dollar is once again below 75c against its US counterpart after a disappointing round of data confirms suspicions that the Australian economy is in mediocre shape.

Retail sales figures released earlier today from the Australian Bureau of Statistics hit the market at 0.0 percent against analysts’ expectations for a figure of 0.2 percent, and shows consumers are starting to feel the squeeze of higher living costs which is not being offset by a pick-up in wage growth.

"Conditions remain tough for bricks and mortar retailers, with weak wage and income growth, rising prices for essentials such as electricity, and increased competition all putting downward pressure on sales," said Sarah Hunter, head of Macroeconomics Australia for BIS Oxford.

With weak retail sales now adding to the woes of lower inflation as well as disappointing wage growth, the chances of the RBA hiking rates over the next 2 years is growing slimmer by the day.

From a technical point of view the Aussie dollar is at a critical point and the support level found last week needs to hold or we may be looking at further losses according to Greg McKenna from Axitrader.

“In the very short term, yesterday’s low around 0.7490 needs to hold but the bigger level is 0.7472,” he said.

“That’s the recent low of the AUD/USD and is just below the 0.7475/80 zone, which marks the 50% re-tracement level of the Australian dollar’s broader rally from 2016 to 2018, a rally which saw the Aussie climb from the low 68 cent region to just above 81 US cents earlier this year.” He added.

 

[fibogroup.com]

The price of oil is steady in today’s trading session hovering around $70 a barrel having risen significantly over the last week on the back of US President Donald Trump’s decision to reintroduce sanctions on Iran.

How this will affect the oil price as the year unfolds remains to be seen but some are already speculating that it will be limited as not all countries are on board and other players in the market will be ready to step in and fill the hole left in the market due to the sanctions.

“The two things that would shift the market in a bearish direction is if the Saudis or Kuwaitis say we are going to offset lost Iranian supply, or if major buyers in Europe say they will ignore the decision and continue buying” Iranian crude, said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.

Another reason the oil price may not move much higher as the sanctions on Iran will not be enough to offset the surge in production from US shale drillers. The US added 10 rigs to their overall count last week which marks the highest level in over 3 years and all this action may not be factored into current prices.

“The rig count moves tend to lag oil & gas price inflections by 3-4 months, suggesting that the current demand run-rate does not fully reflect the recent crude price rally” said analysts from Morgan Stanley

“This implies that we could see another 70+ rigs added market-wide by year end.” They added.

 

[bigdolly]

Thanks but what we can expect from OPEC actions for substituting Iran projected drop in exports?

 

[fibogroup.com]

The British pound has failed to capitalize today against its US counterpart after the latest employment numbers from the UK hit the market, which may show that investors are more concerned with external data rather than local news

The unemployment rate released earlier today came in at 4.3 percent which is unchanged from last month and remains at a 43 year low while the average earnings figure rose by 2.9 percent which was in line with economists’ expectations.

Some say the earnings figure was strong enough to garner the interest of the Bank of England who may now decide that an interest rate hike later in the year may now be warranted.

"Labour market figures provide us with optimism that sustained rises in real pay are in prospect and will place more pressure on the MPC to hike interest rates soon. Indeed, employment rose by a whopping 197,000 in the three months to March, well above the consensus expectations of a 130,000 rise and the biggest quarterly rise since the end of 2015," says Ruth Gregory, UK Economist with Capital Economics.

The good news may have been offset by retail sales figure from the US which were released after the employment figures coming in at 0.3 percent which was unchanged from last month and is positive enough to keep the US Federal Reserve on track a to continue raising interest rates this year.

Immediately after the British pound tumbled below the $1.35 mark and down towards the 4 month low that we saw last week.

 

[fibogroup.com]

The oil price has remained close to a 3.5 year high in today’s trading session as the market digests the fallout from the economic sanctions reintroduced against Iran by US President Donald Trump.

Although most other countries, as well as the European Union decided to stick with the nuclear deal struck with Iran it seems as if some companies are worried to get on the wrong side of the US government and are prepared to also cut ties.

The French oil giant Total SA said earlier in the week it would pull out of an agreement to help develop Iran’s South Pars field, if it wasn’t provided an exemption by the U.S government and with such big Non US companies pulling out, the sanctions may have a far bigger effect the earlier predicted.

This “confirmed that European companies with business and banking activities in the U.S. cannot afford to go up against the U.S. Iran sanctions unless they get assurances against possible secondary sanctions for their U.S. activities,” said Bjarne Schieldrop, chief commodities analyst at SEB Markets.

Another factor expected to keep the oil prices well supported into the nearest future are the elections this weekend in Venezuela wher3e incumbent leader Nicolas Maduro is expected to get reelected as any potential opposition members have fled abroad or are in jail.

Because of rampant corruption during Manduro’s rule, the oil supplies from Venezuela have been seriously disrupted which is crippling there oil exports, and many believe that the US is on the verge of also placing sanctions on them as well which will really devastate their oil supplies.

Marcelo Carvalho, head of emerging market research, Latam at investment bank BNP Paribas compares the reduction in oil from Venezuela to the Opec Production cuts introduced to boost the oil price,

“The type of numbers we’re talking about there are comparable to the OPEC [cuts] for the overall group, so one country alone is doing what the whole group promised to cut back,” he said

“The drop in Venezuela’s oil production has been an important element of the rise in global prices for oil, there’s no doubt about it,” he added.

Some are now predicting that the price of oil may once again reach $100 sooner rather than later.

 

[fibogroup.com]

The British pound has racked up a new low for the year after an interview yesterday by SNP leader Nicole Sturgeon who noted that the push for another independence vote in Scotland would begin in the coming weeks.

Mrs Sturgeon has been emboldened by the events surrounding the Brexit negotiations and she believes that once all of that facts become known, the Scottish people will back her with a yes vote in a 2nd referendum.

“Once we get some clarity, which hopefully we will in the autumn of this year, about the Brexit outcome and the future relationship between the UK and the EU then I will consider again this question of the timing of an independence referendum,” she noted.

“Over the next couple of weeks we will, I suppose, restart a debate about why independence for Scotland is an opportunity and what those opportunities are” she added.

Some Backbenchers in the government believe that a Snap election could come as early as Autumn if the situation doesn’t change quickly.

“The numbers are against us and if we face repeated defeats when the withdrawal bill returns to the Commons, the only alternative will be to kick over the table and trigger a vote of no confidence in the Prime Minister, which will likely lead to another general election”. They said

The key for the British pound this week will be the release of CPI numbers on Wednesday followed by retail sales figures on Thursday.

The British economy barely grew in the first 3 months of the year, which some have attributed to bad weather, so this week’s news will show if the weakness was just temporary or the economy really is in a slump.

 

[fibogroup.com]

The British pound has rebounded today after yesterday’s losses on the back of a local round of positive data which some say may be enough for an interest rate hike from the bank of England later in the year.

Yesterday’s inflation figures which hit the market below expectations show continuing downtrend and led to a tumble in the pound yesterday and may have provided temporary relief for the BOE who are caught in a tug of war on the question of an interest rate hike.

That scenario may have been crushed today with the release of retail sales figures which hit the market at 1.6 percent, which was well above expectations for a figure of 0.7 percent and shows the economy may be in better shape than some thought.

The retail sales figures come on the back of recent wage growth numbers which were also positive and both are these indicators are believed to be the real driving force behind a rate rise.

The BOE may be prepared to overlook declining inflation numbers when they vote to hike rates.

"Looking ahead, with employment still rising at a robust pace, real wages on the up again, and consumer confidence high by past standards, we are upbeat about the outlook for consumer spending,” said Andrew Wishart, UK Economist with Capital Economics.

“Overall, this should help the economy to regain some pace in Q2 and further supports our view that the MPC will press ahead and hike interest rates in August." He added.

A speech by BOE boss Governor Mark Carney is likely to clarify the central banks position on the data released over the past couple of days, which will drive the direction of the pound as we head into the weekend.

 

[fibogroup.com]

The gold price has received a significant boost over the past few trading sessions on the back of economic and Geo political developments which may be the trigger for the precious metal to reverse its recent downtrend.

On Wednesday we witnessed the latest board meeting from the US Federal reserve where they reiterated that the market should expect a rate hike next month but the overall tone of the speech was dovish which threw into question the number of Rate hikes the fed might deliver after this one.

As a result, the Gold price rocketed up through the $1.300 mark.

“While another rate hike at the Fed’s next meeting in mid-June seems certain, the Fed minutes sounded more cautious about what would happen next,” said Carsten Fritsch, commodities analyst at Commerzbank,

Yesterday’s move by US President Donald Trump to cancel his planned summit with North Korean President Kim Jung-Un came as a complete surprise to the market and throws into doubt the sincerity of the later to give up the country’s nuclear weapons, which left investors snapping up gold as a safe haven.

The planned meeting between the 2 leaders has been one of the main reasons gold has tumbled in recent months, as it was thought that Trump could pull of a miracle by forcing North Korea to give up their nuclear weapons which would have brought peace and stability to the region, something not seen for many decades.

Last year Bridgewater Associates founder Ray Dalio predicted a scenario like this, and it remains to be seen whether the cancellation of the summit is just a game or the start of something more serious which will be a huge plus for gold.

"Two confrontational, nationalistic, and militaristic leaders playing chicken with each other, while the world is watching to see which one will be caught bluffing, or if there will be a hellacious war," Mr Dalio said.

"We can also say that if things go badly, it would seem that gold more than other safe haven assets like the dollar, yen, and treasuries would benefit." He added.

 

[fibogroup.com]

The gold price is steady today in the Asian trading session after Friday’s losses on the back of better than expected data from the US that all but seals the deal for rate hike from the US Federal Reserve this month.

The unemployment rate in the US dropped to an 18-year low of 3.8 percent while the Nonfarm payrolls figured surged by 223,000 jobs which saw gold sharply sold off, but buyers were quickly back into the market which stemmed the precious metal from further losses.

“Great job numbers, lower unemployment rate, increased labor participation rate and ISM [were] all putting more pressure on gold,” but the decline tapered off by late morning Friday, said Jeff Wright, executive vice president at GoldMining Inc.

Until this month’s rate hike, gold may fail to make any significant gains, but once this is out of the way the recent pressure put on the precious metal by US monetary policy may fade and help boost the price again.

Once the rate hike is out of the way, the market will be focusing on the next and potentially last move before the Fed stops for a while. We also think that the rate picture may have run its course as well, at least for now,” said INTL FCStone analyst Edward Meir

“As time moves on, there’ll be less and less reasons to get into the U.S. dollar, which is a very powerful fuel for the gold complex. “ he added.

Another factor that may support the gold price is its familiar appeal as a safe haven as the political turmoil taking place in Italy comes to a head, with some saying the market may be underestimating the size and complexity of the problem.

"There is an anti-establishment vote taking place. Taxpayers [in Italy] are fed up with socialist government bureaucrats and there's a pushback against them, just like the British did against the unelected E.U. ministers dictating what polices are for the Brits," said Frank Holmes, CEO of U.S. Global Investors.

"There is a rebellion taking place, and that is good for gold," he added.