Gold Takes A Tumble
October 9, 2015
Investors Trading Academy
European equities traded fairly mixed (around zero) today due to the lack of significant market moving information. US equities opened weak and slightly in the red, no significant trading movements are expected.
The ECB minutes show limited surprises, with most of the details being discussed during the ECB press conference last month. The ECB stated that the bond buying program is going along nicely, however, they do need more time to decide whether to beef up their quantitative easing program. ECB chief economist Peter Praet says the economic environment is characterized by seeping pessimism about long term growth. He says that these negative expectations on LT-growth are weighing on the euro-area recovery. The euro is trading at 1.1278 against a weakening US dollar. The greenback dipped 20 points after the release of FOMC minutes on Wednesday. Later today, US Federal reserve’s Kocherlakota and Williams are speaking.
The rally in European equities indeed did run into resistance, but didn’t lose ground basically drifted sideways near the flat-line. This put a floor for further USD losses. The indecisive trading pattern of the previous sessions continued. EUR/USD still traded in the 1.13 area around noon. USD/JPY changed hands in the 119.80 area. The dollar received again a better bid going into the start of the US trading session. EUR/USD returned to the mid 1.12 area. Soft comments from ECB’s Praet might have accelerated the move, even as he didn’t bring any new insights on ECB policy. The US jobless claims printed at a very low 263 000 and no special factors were mentioned.
The Bank of England decided to leave its benchmark interest rate and asset purchasing target unchanged. As expected, the policy rate remains at 0.5% for the 79th month in a row after the monetary policy committee voted 8-1 against a rate hike. A soggy inflation and the emerging countries (especially China) are worrying the BoE. The pound climbed to trade at 1.5287 easing after the BoE decision. The EURGBP is trading at 0.7375 gaining steadily.
The Greece unemployment rate has stabilized in July at 25%, after the June number was downwardly revised from 25.2% to 25%. This was better than expected, with consensus foreseeing an increase to 25.4%.
Gold futures were slipping in early Thursday trade as China’s week-long holiday concluded and as investors braced for the release of minutes from the Federal Reserve’s mid-September policy-setting meeting.
Gold dipped $9.50, or 0.8%, lower at $1,139.20 an ounce, and the precious metal looked likely to snap a three-session streak of gains that had brought it to its highest settlement since Sept. 24. Gold had been enjoying a modest rally as investors shifted expectations of an interest-rate hike—the first for the U.S. in nearly a decade. Although traders have said that the likelihood of a rate rise has been factored into the current price of gold, the Fed’s minutes could offer more detail about the pace and timing of the U.S. central bank’s plans, which could influence metals.
According to a Thursday research note by Commerzbank, precious metals were headed lower as traders consolidated some of the previous session’s gains. “Following the steep price rises of recent days, precious metals are seeing profit-taking this morning which is weighing significantly on prices,” the note said.