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Gold regains shine as US dollar edges lower

Tuesday, August 29, 2023

Today’s headlines

What’s happening: Gold prices rose on Monday, closing with gains for the first time in the last three sessions.

What happened: The yellow metal had declined sharply on Friday on growing speculations of the US Federal Reserve announcing another rate hike.

Gold rebounded on Monday, with the US dollar starting the week on a downturn.

Why it matters: Earlier this month, the US reported an acceleration in its consumer price index (CPI) to 3.2% in July, from 3% in June. This had already sparked some speculations of the US Federal Reserve resuming its monetary tightening policy. These speculations were further fanned by Fed Chairman Jerome Powell signalling the possibility of interest rate hikes during the Jackson Hole Economic Symposium, which sent gold prices sharply lower on Friday.

The Fed has increased interest rates by 5.25 basis points since March 2022. Higher interest rates hurt the demand for gold, which is a non-yielding asset.

Despite Friday’s losses, gold managed to end the week with a 1% gain, notching its first weekly surge in four weeks, as concerns over a slowdown in the global economy and China’s property sector woes supported safe-haven investments.

The US dollar traded almost flat on Monday, lending support to gold prices. The US dollar index, which measures the greenback’s performance versus a basket of major peers, traded slightly lower to 104.06 on Monday.

December gold gained $6.90, or 0.4%, to close at $1,946.80 an ounce, after surging as high as $1,954.20 earlier in the session on Monday.

In other metals trading, silver futures for September delivery climbed 2 cents to $24.25 per ounce, while December copper added 0.2% to close at $3.79 per pound. October platinum gained 2.5% to $972.20 per ounce and December palladium surged 2.4% to $1,261.90.

What to watch: Traders will watch the release of the US nonfarm-payrolls (NFP) report, due to be released on Friday. The US economy, which added 187,000 jobs in July, is expected to create 180,000 jobs in August. The unemployment rate in the country is projected to remain unchanged at 3.5% in August.

The markets today

European stocks will be in focus today, ahead of a basket of economic reports

Context: European shares started the final week of August with gains on Monday.

Details: Investors continued to monitor commentary from the annual retreat in Jackson Hole, Wyoming, and look forward to major upcoming economic reports later this week.

Sectors related to China, including automakers and industrials rose sharply after the Asian nation announced plans to cut the 0.1% duty on stock trades.

On the economic data front, M3 money supply in the Eurozone slipped 0.4% year-over-year to €15.6 trillion in July, after 0.6% growth in the previous month. The figure was slightly higher than market estimates of a flat reading. Bank lending to households climbed by 1.3% from a year ago, to €6.86 trillion in July, representing the weakest growth since November 2015.

The STOXX Europe 600 Index gained 0.89% to settle at 455.41, amid a sharp rebound in tech stocks. Bank stocks also added over 1% on Monday.

Germany’s DAX 40 gained 1.03% to 15,792.61, while France’s CAC 40 climbed 1.32% to settle at 7,324.71. Spain’s IBEX 35 added 1.62% and Italy’s FTSE MIB jumped 1.19%.

Markets in the UK remained closed for a public holiday.

What to watch: Investors await the release of economic reports on Germany’s GfK consumer climate indicator, France’s consumer confidence indicator and Spain’s retail sales today. Germany’s GfK consumer climate indicator, which increased to -24.4 heading into August, is expected to improve to -23 heading into September.

Analysts expect France’s consumer confidence indicator for August to remain unchanged from the previous month’s 85. Retail sales in Spain, which rose 0.3% in June, is projected to grow by 0.2% in July.

Other Markets: US trading indices closed higher on Monday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 0.62%, 0.63% and 0.74%, respectively.

The news shaping the markets

Russia’s President Vladimir Putin will not attend the G20 summit in India next month and instead send his foreign minister to the country. The news sent the safe-haven US dollar index lower this morning.


Vietnam’s annual inflation rate rose to 2.96% in August, from 2.06% in the prior month, exerting pressure on the VND/USD forex pair.


Japan’s unemployment rate climbed to 2.7% in July, from 2.5% a month ago. However, the JPY/USD pair rose in forex trading this morning.


Mexico’s trade deficit narrowed to $0.88 billion in July, from $6.247 billion in the year-ago month, lending support to the MXN/USD forex pair.


Brazil’s value of outstanding loans declined by 0.2% to BRL 5.4 trillion in July, which sent the BRL/USD pair slightly lower in forex trading this morning.

What else to watch today

Turkey’s economic confidence index, balance of trade, Mexico’s GDP growth rate and economic activity, as well as US Redbook index, S&P CoreLogic Case-Shiller 20-city home price index, FHFA house price index, number of job openings, CB consumer confidence, Dallas Fed services revenue index, Dallas Fed general business activity and API crude oil stock change.


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