The price of gold lost ground under the onslaught of a rising dollar
In the past period, the precious metals markets showed a significant reduction under the influence of a strengthening U.S. dollar and falling investment interest in the metals in anticipation of rising interest rates the fed. An increase in macroeconomic instability and political tensions supported prices. The palladium market has shown a significant increase in correlation with renewed growth in the stock market.
During the July meeting, the fed left the interest rate unchanged, but called the American economy is strong and hinted at a possible rate hike in September.
The regulator said the strong labour market and achieving the inflation target. By the end of the year, the fed expects the rate at 2.4 per cent against the current level of 1.75-2%. After the publication of the final statement, the yield on 10-year Treasury bonds surged to 3%. The market estimates the probability of the next rate hike in September at 90%, and in December at 70%.
However, in the Protocol of the July FOMC meeting, the US indicated that the regulator may raise rates in September if the U.S. economy continues to grow rapidly. However, the relations in the world economy and politics can lead to a revision of the plans of the regulator.
Support to the precious metals markets also supported the claims of D. trump to the U.S. fed about the pace of rising interest rates and a strengthening U.S. dollar, which led to a slight weakening of the American currency.
The result of the conference in Jackson hole (USA), held from 23 to 25 August, the fed Chairman sounded a neutral position of the regulator, not giving hints to the market on the pace of interest rate increases. Market participants interpreted his words as a probable rate hike before the end of 2018 in September and December, and in June 2019, but hope for policy easing, the fed strengthened slightly.
At the July meeting, the Bank of England raised its interest rate to 0.75%, but reported no speeding up the process of raising rates on the background of a British exit from the EU and the developing political crisis.
Following the publication of the minutes of the last ECB meeting, it became known that the protectionism and the threat of global trade war are the main risks to the Eurozone economy. The controller confirmed the completion of the stimulus program by the end of 2018 and hold interest rates at current levels until the end of summer 2019 a Strong discrepancy between the bond yields of the EU, Japan and the USA can also lead to the adjustment of the position of Central Banks.
The European Parliament has agreed to relax regulatory requirements for trading in gold of the banks at the initiative of the LBMA, partially withdrawing precious metals from the article, relating them to commodities and increased requirements for buffer capital. LBMA says gold is liquid and does not require creation of “safety cushion”, which effectively recovers gold as a financial asset. For the entry into force from 2020 amendments must be approved by the European Commission.
In recent years, increasing the risk of rising yields of American bonds due to lower interest purchases among foreign market participants, primarily foreign Central Banks. In July, purchases of foreign participants remained at the lowest since 2009 and in June was recorded sales of foreign investors. This process leads to increase the cost of servicing government debt and the budget deficit, covered by the issuance of new tranches.
In addition, the situation in Turkey can lead to imbalance in many markets, and will have a negative impact on the financial system of Europe. The downgrade by Moody’s 20 Turkish banks exacerbates the situation. The current strengthening of the U.S. dollar, combined with the problems in the financial system and trade, could trigger a debt crisis around the world in the near future.
Against this background, Finance Minister Anton Siluanov said that Russia may withdraw from the system of payments in dollars, while only for oil, but in General there is a need for the transfer of payments in other currency across the spectrum of trade operations.
In the past period, investors continued to exit gold and silver ETF funds, the reserves of platinum and platinum ETF-funds has grown. According to the report COTR and the CFTC last week continued outflow of investors from precious metals markets. In the gold market for the first time since 2001, resumed the preponderance of short positions.
According to WGC, in July 2018 is the outflow of funds from gold-backed ETF funds, stocks which fell by 1.6% on a monthly basis to 2393,6 so the Largest outflow of funds was observed from Asian (-6,2%) and North American (of-2.1%) funds. Stocks in the SPDR Gold Shares for the month decreased 2.3% (18.8 MT), inventory Source Physical Gold P-ETC has decreased by 12.5% (14,8 t), stocks in iShares Gold Trust decreased by 6.4 T.
The price of precious metals on the Shanghai stock exchange SGE in the past period decreased trading volumes remained moderate. Particularly strong decline was observed in the value of silver and platinum. The Renminbi to US dollar slightly strengthened.
The fall in world gold prices contributed to the growth of demand in Asia. Award for delivery of gold in China last week increased to $6/8 per ounce. Net gold imports to China from Hong Kong in July 2018 declined by 45% by June 2018 to
Analyst of commodity markets,