Gold continues to fall under the onslaught of the US dollar
Last week precious metals continued to decline under the impact of the strengthening of the US dollar, but palladium prices have again shown an increase in correlation with the stock market.
The President of the United States continues to exert pressure on the head of the US Federal reserve to reduce the pace of raising interest rates and weaken the U.S. dollar exchange rate to support trade war. At the same time D. trump put forward the idea about linking taxes on income from investments to inflation. Discussion of this approach reflects the acceleration of inflation in the United States, as well as a General increase in inflation expectations.
Most likely, the fed will soften the policy of raising interest rates and after the September increase will take a break of 3-6 months. At the same time, the supporters of restriction of inflation in the United States put pressure on the regulator, requiring the acceleration of the pace of rate hikes until wages will not cease to grow. John. Powell, in his speech at Jackson hole hinted that the valuation model of inflation, the labour market and the overall state of the economy may not show all completeness of the data, which increases the risks.
Last week in Argentina happened the currency crisis that occurred under the influence of capital flight, amid the budget deficit and the current account. High level of dollar-denominated debt of the country in light of rising interest rates, the fed leads the government to the next default, and also threatens to plunge the entire world into crisis. A similar situation in Turkey has stabilized a bit, but next in line are South Africa, Chile, Indonesia and several other countries with a double deficit.
The ECB last week also filed signs of wanting to tighten monetary policy, saying that it is necessary to closely monitor the risks associated with ultra-loose monetary policies when expanding economy. The first rate hike from the ECB is expected to market in October or December 2019.
Last week investors continued to exit gold and palladium ETF funds, stocks in silver and platinum ETF-funds has grown.
According to the CFTC report, gold and silver have seen a decline in short positions. The COTR report, the increase in long positions was observed in all metals, except silver.
The price of precious metals on the Shanghai stock exchange SGE last week decreased trading volumes have grown. The yuan to the US dollar last week weakened.
The demand for physical gold in Asia is starting to grow in anticipation of the high season of consumption, although increased prices have slowed buyers. Award for delivery of gold in China last week, remained at $6/7 per ounce, dealers restock before the October “Golden week”. Award for the supply of gold in Singapore was $0,8/1,3 per ounce in Hong Kong, premiums remained at the level of $0,9/1,3 oz. Award for the supply of gold in Tokyo has dropped to $0.25 per ounce.
Gold demand in India has intensified, with the exception of Kerala. The dealers restock, but expect the strengthening of the rupee and a possible reduction in local prices. Premium in India declines to $1 per ounce.
Gold prices last week recovered to the level of $1220 under the influence of the closing of the short positions, and then decreased again to the level of $1199.
Trade was quiet in relation to traditional lull in late summer – early autumn. On Monday, the United States was the official day off. Today the auction has been intensified under the influence of a strengthening United States dollar. Silver prices last week tested the level of $14.95, and then decreased to the level of $14,25. The ratio of gold to silver is 82,78 points.
The ratio of platinum to silver is 54,37 points. Silver shows excessive weakness relative to other precious metals. Prices for platinum last week has grown to a level of $808, after which the market decreased again to the level of $773. The spread between gold and platinum is $417/oz. The spread between platinum and palladium has widened to a new high of $ 195/oz. The palladium market in the past week have grown to $970, after which prices corrected down to a level of $948.
Analyst of commodity markets,