Gold futures are once again above the $1,500 psychological mark this morning as investors sought a safe haven in the yellow metal to protect against economic uncertainty, the U.S.-China trade standoff and the continued unrest in Hong Kong.
Goldman Sachs cut its fourth-quarter U.S. growth forecast by 20 basis points to 1.8% on Sunday, citing the trade war. In a note to clients, Chief Economist Jan Hatzius said Goldman expects a new round of tariffs to go through in September and doesn’t think a trade deal will happen before the 2020 presidential election. “Fears that the trade war will trigger a recession are growing,” the report said.
December futures rose 3.5% last week and touched the highest level for a most-active contract on Comex since 2013. Gold has climbed this year amid trade tensions, fears of slowing economic growth and signs of easing monetary policy. Hedge funds and money managers raised their bullish stance in Comex gold in the week ended Aug. 6, the U.S. Commodity Futures Trading Commission (CFTC) reported Friday. The December contract is currently at $1,513.70, up 5.20.
Many Asian markets were closed Monday for the Islamic holiday.
James Hyerczyk at FX Empire wrote that he’ll be keeping a close eye on China’s yuan, as any prolonged move below 7 per dollar could pressure global bond yields and trigger another surge in gold prices. Chinese policy makers allowed a slip below that threshold last week.
Gold bears are likely to test the $1,480s as markets come to terms with ongoing geopolitical strife, Ross J. Burland at FX Street forecast. The yellow metal may also give up ground if there are signs that U.S. and Chinese trade officials are going to meet in September, he said. Meanwhile, bulls are likely to try to test a range of $1,528 to the $1,530s.
Expectations are growing that the Fed will follow its July 31 rate cut with a second one in September. The CME FedWatch Tool still has the odds of a Sept. 18 rate cut at 100%, with the probability of a 25-basis-point reduction at 83.5% and the likelihood of a 50-basis-point cut at 16.5%.
Meanwhile, banks and trade groups in India submitted a blueprint to the government to set up a physical gold exchange, The Financial Times reported. India is the world’s second-largest consumer market for the yellow metal.
Silver futures outpaced gold last week on Comex. September futures rose 4.1% last week to settle at $16.93 an ounce. The September contract is down a tad this morning, currently at 16.915, down 0.016. Spot platinum gained 1.9% last week, and spot palladium increased 1.1%. All were little changed early Monday.
Economic data expected this week include the U.S. consumer price index for July on Tuesday; Chinese retail sales and industrial production data and the jobless rate Wednesday; and U.S. jobless claims, industrial production and retail.
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