COMEX gold is trading flat near $1,936/oz after a 0.2 percent decline on Friday. Gold corrected sharply after failing to sustain above the $2,000/oz level but has managed to hold above $1,920/oz level so far.
Gold has turned rangebound amid mixed cues and this trend may continue unless there are fresh triggers, possibly from the ECB’s monetary policy meeting or the US inflation data.
Weighing on gold’s price is gains in the US dollar index, slack ETF activity and weaker consumer demand. The US dollar index continues to trade firm after last week’s gain as mixed economic data, rising virus cases and ECB’s concerns about the euro’s strength.
British Pound has come under pressure amid a fresh rise in virus cases and increasing uncertainty about post Brexit terms negotiations. Gold holdings with SPDR ETF were unchanged for a second day Friday at 1250.042 tonnes.
Consumer demand is weak as is evident from a discount in the Indian and Chinese market. However, supporting gold price is early signs of correction in the US equity market, mixed economic data from major economies, rising virus cases and increased US-China tensions.
US equity markets fell for the second day on Friday as market players assessed the rally in light of challenges for the US economy in the form of rising virus cases, uneven recovery and delay in additional stimulus.
After mixed US non-farm payrolls reading on Friday, German industrial production and euro-zone investor confidence data painted a mixed picture. Global virus cases continue to rise with India reaching the second position in the tally and fresh cases being reported in parts of Europe.
Tensions between US-China rose further as President Donald Trump said he intends to curb the US economic relationship with China. Also, supporting gold is US Federal Reserves’ dovish stance and mixed economic data which has kept bond yields low.
Gold may witness choppy trade as market players assess the relentless rally in the US equity market and a sharp fall in the US dollar. However, we expect buying interest to emerge at lower levels as increasing challenges to the global economy may improve its safe-haven appeal.
NYMEX crude trades 2.49 percent lower near $38.77/bbl after a 3.9 percent decline on Friday. After weeks of consolidation, crude oil has come under pressure amid signs of correction in the US equity market and gains in the US dollar index.
US equity market fell for the second consecutive day on Friday as market players assessed the sharp rally in last few weeks against rising virus cases, mixed economic data and lack of progress over stimulus measures. Also weighing on market sentiment is rising virus cases and increasing tensions between the US and China.
The US dollar index continues to trade firm after last week’s gain as mixed economic data, rising virus cases and ECB’s concerns about the euro’s strength has pressurised the euro. Crude weakened also as Saudi Arabia cut the October official selling price for Arab Light crude it sells to Asia by the most since May indicating weaker demand, as reported by Reuters.
A marginal rise in US crude oil rig count also showed that producers are not keen on cutting more output. Meanwhile, most of the production shut in the Gulf of Mexico due to storm activity has been resumed. However, supporting price is the sixth weekly decline in US crude oil stocks which shows a tightening market.
Also supporting price is robust Chinese imports. China’s crude imports stood at 47.48 million tonnes in August up 12.6 percent from a year ago but less than record level set in June. Crude oil has come well off recent highs and may witness choppy trade as US equities and US dollar struggle for direction however we may see buying interest emerging at lower levels as expectations of another decline in US crude oil stocks may lend support to prices.
Focus today will be on US EIA’s monthly outlook, economic data from major economies and development relating to US-China, virus outbreak and vaccine and US stimulus talks.
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