Comex gold was trading moderately higher near $1,942 per ounce on September 4 after a 0.4 percent decline the previous day. Gold slipped in the last two sessions after failing to hold above $ 2,000.
The US dollar index has recovered from the recent two-year low as mixed economic data, Fed’s dovish stance and lower bond yields were offset by ECB’s concern about the euro’s strength, Brexit uncertainty and hopes of aggressive monetary and fiscal policies under the new regime in Japan.
In the last few days, gold has remained volatile in a directionless trade that has pushed investors to the sidelines.
Gold holdings with SPDR ETF remained unchanged at 1,250.042 tonnes on September 3 after two days of minor outflows. The steep discount in Indian and Chinese markets also reflects weaker consumer demand. However, gold benefitted from a sharp sell-off in equity market, which was a reminder that the rally in equity market is not in sync with the pace of economic recovery.
US DJIA index slumped 2.8 percent in its biggest selloff since June. While market players say the selloff was a long due, we need to see if it continues. Also, supporting the price is rising virus cases and US-China tensions.
Gold may remain choppy as US equity markets are showing some vulnerability to correction while the dollar index is attempting recovery. We, however, expect buying interest to emerge at lower level as Fed’s dovish stance and mixed US economic data may limit upside in the dollar.
Comex silver was trading moderately higher near $ 27 per ounce after a 1.9 percent decline the previous day. Silver fell amid losses in gold and industrial metals. Gains in the dollar and selloff in share markets weighed on commodities.
ETF outflows also showed profit-taking. Silver holdings with iShares ETF fell by 101.3 tonnes to 17680.16 tonnes. The spot gold silver ratio bounced back after dropping briefly below 70 levels, pressurising silver more. The steep discount in Indian markets also reflected weaker consumer demand.
However, supporting the price is improving outlook for demand with pick up in industrial activity across the globe.
Silver may witness choppy trade along with gold amid lack of a clear direction, however, we expect gold to remain supported by global uncertainty and this may keep a floor to silver as well.
Base metals on LME traded mix after most ended lower on September 3. Prices have come under pressure amid profit-booking after recent run-up along with weakness across global equity indices.
Asian indices opened lower, tracking sharp retreat in the US indices overnight. US indices that had hit record high came under pressure amid profit-taking as investors were doubtful of lofty valuations in face of mixed economic data.
While initial jobless claims fell last week; ISM Non-Mfg. PMI for August dipped to 56.9 from previous month’s 58.1.
Prices may further come under pressure tracking simmering US-China tensions and surging coronavirus cases, which threaten to derail the nascent economic recovery.
The downside in metals pack may, however, be capped amid demand optimism, especially from top consumer China, along with progress on vaccine front.
The recent spate of upbeat data from China and improvement in factory data from major economies continue to fan demand outlook for base metals. Capping the downside is choppiness in the dollar Index ahead of US non-farm payrolls data due later on September 4.
The dollar index was trading changed near 92.75 levels after previous day’s modest decline but is off the April 2018 low of 91.746 hit earlier in the week.
The index has bounced off the lows amid short covering but the upside remains capped amid mixed data from US and growing bets that Fed may keep its interest rates lower for longer time.
Forecasts indicate that US jobs growth slowed in August and this has been factored in. Only if the reading is below market expectations, we may see a correction in US dollar and a rebound in commodities.
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