Monday, August 10, 2020

Gold Ends Record Winning Streak as Dollar Rebounds

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News shaping
the markets today

     

What’s happening: Gold futures closed lower on Friday, ending a five-session record spike for the bullion.

What happened: Prices for the safe-haven metal have been on an upturn due to investor uncertainties about the economic impact of the pandemic in the long term and weakness in the US dollar.

The greenback rebounded marginally on Friday, supported by the US jobs report coming in slightly better than expected, putting an end to the five-session winning streak.

Why it matters: The US dollar recorded a gain in the previous session, notching its first weekly rise in the last six weeks. The ICE dollar index, which measures the greenback’s performance versus a basket of six major rivals, gained 0.8% on Friday.

The yellow metal slipped on increased risk appetite following an upbeat jobs report from the US. The US Labor Department reported job addition of 1.76 million in July, versus estimates of 1.7 million adds. The US unemployment rate fell to 10.2% in July, from June’s reading of 11.1%.

Investors remained cautious, however, amid continued tensions between the US and China, with President Donald Trump announcing a ban on transactions with Chinese tech companies operating in the country.

Gold futures for December delivery dipped 2% to close at $2,028 an ounce on Friday, following a 1% gain on Thursday. However, the safe-haven metal still recorded gains of 2.1% last week, rising for the ninth successive week.

September silver dropped 3% to settle at $27.540 an ounce in the previous session, after gaining 5.6% on Thursday. The white metal recorded a weekly gain of 13.7%.

In other metals, September copper declined by 4.1% to settle at $2.7925 a pound on Friday, dropping 2.6% for the week. October platinum lost 4.3% to close at $970.40 an ounce, but notched a weekly gain of 5.6%.

What to watch: Investors will be closely monitoring heightening tensions between Washington and Beijing. While political uncertainty boosts the demand for safe-haven investing, the pressure on China could lower demand, as the country is a major buyer of precious metals.

The Markets Today

     

The euro will be in focus today, after the shared currency eased from two-year highs during the previous session.

Context: The euro declined versus the US dollar on Friday, after surging to its strongest level since May 2018 in the earlier session. While tensions between the world’s two largest economies exerted pressure on the euro, the US dollar was supported by the upbeat jobs report.

Details: US President Donald Trump ordered a ban on transactions with two Chinese tech companies citing national security concerns. The news triggered a move by forex traders away from riskier assets.

On a positive note, Germany and France reported better-than-expected industrial output reports for June. Industrial production in Germany jumped by a record 8.9% in June, while France’s industrial production increased 12.7% during the month.

German exports also climbed by a higher-than-expected rate, surging 14.9% versus consensus estimates of 13.3%.

The US dollar rebounded in the previous session after the NFP report showed higher-than-expected job additions and a decline in the unemployment rate.

The EUR/USD pair slipped below 1.1800 on Friday, dipping to its lowest level in three days. The pair settled lower at $1.1788 in the previous session.

What to watch: With no major economic reports due to be released today by the Eurozone, investors await major releases from the region later in the week, including the ZEW indicator of economic sentiment, industrial production, GDP growth rate, balance of trade and employment change.

Investors will also continue to focus on the covid-19 figures, with the total number of cases surpassing 19.8 million around the world..

Other Markets: US indices trading closed mixed on Friday. While the Dow Jones index and S&P 500 rose by 0.17% and 0.06%, respectively, the Nasdaq 100 declined 0.87%.

Support & Resistances
for Today

     

market snapshot

     

Futures at 0400 (GMT)

What else to watch today

     

Turkey’s treasury cash balance, Mexico's industrial production as well as the US job openings and consumer inflation expectations.