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Commodity Research Report Ways2Capital 17 july 2017

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Gold prices rose to two-week highs on Friday as weak U.S. inflation data added to doubts over whether the Federal Reserve would raise interest rates for a third time this year. Gold futures for August delivery ended up 0.95% at $1,228.88 on the Comex division of the New York Mercantile Exchange after rising as high as $1,232.7 earlier, the most since July 3. The precious metal ended the week with gains of 1.32%. U.S. consumer price inflation slowed to 1.6% in June from 1.9% in May, the Labor Department said on Friday. Consumer spending was also weaker than expected, with retail sales falling 0.2% in June, compared to expectations of a 0.1% rise. The Fed hiked rates at its June meeting and stuck to its forecast for one more rate hike this year but the sluggish inflation outlook has raised questions over whether officials will be able to stick to their planned tightening path. In testimony before Congress on Wednesday, Fed Chair Janet Yellen said the economy is on a strong enough footing for the Fed to raise rates, but she also reiterated that inflation is below target and noted that it is a particular “uncertainty” that could affect monetary policy. Expectations that rates will stay low tend to boost gold, which struggles to compete with yield-bearing investments when borrowing costs rise. The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.69% to 94.9 late Friday, its lowest trough since October 5. The weaker greenback boosted gold, making the dollar-priced commodity cheaper for holders of other currencies.

Elsewhere in metals trading, silver futures rose 1.71% to $15.96 a troy ounce and notched up a weekly gain of 2.38%. In the week ahead, investors will be turning their attention to the outcome of Thursday’s European Central Bank meeting for fresh clues on when the central bank will shift away from its ultra-easy policy. Monday’s data on Chinese second quarter growth will also be closely watched along with inflation data out of the UK.

Gold prices jumped 1.4 percent to the highest level in nearly two weeks on Friday after data pointed to weak U.S. inflation, reaffirming doubts that the U.S. central bank would again hike interest rates this year. U.S. consumer prices were unchanged in June and retail sales fell for a second straight month. Bond yields dipped and the dollar index .DXY slid to their lowest level since September 2016 after the weaker-than-expected figures. Spot gold XAU= gained 0.96 pct at $1,228.61 per ounce by 3:01 p.m. EDT (1901 GMT) after hitting $1,232.76. It was poised for a weekly gain of 1.3 percent, the biggest since mid-May. The U.S. data bolstered expectations that the U.S. Federal Reserve would likely to move slowly to continue raising interest rates in the absence of inflation signs. Some had been expecting another rate hike in 2017. Fed Chair Janet Yellen’s comments to the U.S. Congress this week “were more dovish than originally anticipated,” said David Meger, director of metals trading for High Ridge Futures in Chicago. Friday’s “data reaffirms the delay,” he said. “We’re seeing precious (prices) buoyed on the back of that.” The most-active U.S. gold futures GCcv1 for August delivery futures settled up $ 10.20, or 0.84 percent, at $ 1,227.50 per ounce. The contract finished the week up 1.5 percent, its first gain in six weeks. The weaker greenback boosted gold, making the dollar-priced commodity cheaper for investors holding other currencies. Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen, said the chart picture had been damaged last week when gold broke below its May lows, but bullion was now fighting back. “The key level is $1,230 on gold. In order to turn neutral again we need to move back above that level,” he said. Meanwhile, holdings at the SPDR Gold Trust GLD , the world’s largest gold-backed exchange-traded fund fell 0.43 percent to 828.84 tonnes on Thursday from 832.39 tonnes on Wednesday.

Gold demand fell in India this week, with dealers offering a discount for the first time in one month despite a correction in local prices as consumers advanced purchases in June before the rollout of a new nationwide sales tax. Elsewhere in Asia, a spurt in buying was short-lived as global prices recovered from near four-month lows hit on Monday. Bullion dealers in India offered a discount of up to $1.20 an ounce this week over official domestic prices MAUc1 , compared with a premium of $ 2.00 last week. The domestic price includes a 10 percent import tax. Consumers bought more gold in the last week of June to avoid paying a higher 3 percent rate under the Goods and Services Tax that came into effect from July 1. demand is very weak. That’s why even jewellers are trimming purchases,”. Gold prices MAUc1 in India are trading at near their lowest level in six months. India’s gold imports in June more than tripled from a year earlier to 75 tonnes, but it could fall below 35 tonnes in July, consultancy GFMS said. market is oversupplied despite lower imports in the first week of July. There is ample stockpile from last month’s imports,” said a Mumbai-based dealer with a private bank. In top consumer China, premiums were at $10.00 per ounce, compared with the $9.00-$10.00 range last week, while in Hong Kong, the premiums were at 70 cents to $1.00 against 50 cents-$1.00 in the previous week. “There was quite a bit of physical buying when prices dropped, but with prices going back up slightly around the $1,220 level, demand has stabilised,” said a Singapore-based dealer. The international spot gold benchmark XAU= was little changed around the $1,218 per ounce level on Friday and was on track to register its first weekly gain in three, having recovered from Monday’s $1,204.45, the lowest since mid-March.

Gold prices edged higher in European trade on Thursday, nearing a one-week high following Federal Reserve Chair Janet Yellen’s congressional testimony to gradually raise interest rates. Comex gold futures were at $1,222.49 a troy ounce by 3:18AM ET, up $3.40, or around 0.3%. Prices tallied a third-straight gain Wednesday after Yellen sounded cautious on inflation and noted the Fed would not need to raise rates “all that much further” to reach current low estimates of the neutral funds rate. She also said that the U.S. economy is healthy enough for the Fed to begin winding down its massive $4.5 trillion balance sheet at some point this year. The speech was seen as mainly dovish by market participants. The dollar index traded down almost 0.3% at 95.31 in early trade, not far from the nine-month low of 95.22 plumbed in late June. Yields of the benchmark 10-year U.S. Treasury fell to 2.32%, well off highs near 2.39% touched last week. Investors now looked ahead to more comments from the Fed chair, will testify for a second day on the institution’s monetary policy in front of the House Financial Services Committee at 10:00AM ET . Besides Yellen, Thursday’s calendar also features PPI inflation data and weekly jobless claims, both due at 8:30AM ET. Monthly CPI data is due Friday. The Fed hiked rates at its June meeting and stuck to its forecast for one more rate hike this year, but the subdued inflation outlook has since raised doubts over whether the U.S. central bank will be able to stick to its planned tightening path. Futures traders are pricing in around a 40% chance of a hike by the end of the year, according to Investing.com’s Fed Rate Monitor Tool.The precious metal is sensitive to moves in U.S. rates, which lift the opportunity cost of holding non-yielding assets such as bullion.

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