1-Current condition in the market and the primary causes which are supporting the safe-haven buying
2-Analysis the market through the top-down macroeconomic process(data-driven approach)
3-Top Hedge funds report on the precious metal sector
4-Technical levels to watch out for, Advises, and recommendation from Goldsilveranalyst.
As we are publishing this report, Gold is trading at 1531.40 USD per ounce, and the white metal is trading at 17.400 USD per ounce. Precious metals complex prices had already surprised the market, especially Gold when it broke the long term key psychological resistance last week. At the moment, it seems investors are treating every dip in the P.M.s as a long term buying opportunity.
Gold has reliable support coming in from three directions — U.S.-China trade war, global monetary easing, and technical price levels. Usually Gold and silver along with other safe heaven assets perform well when investors risk appetite drops, and at the moment, we are witnessing the same. Heightened geopolitical risks, especially U.S-China trade war, notions of Quantitative easing coming from the major central banks of the world and technical price levels are major catalyst working for gold bulls.
The previous rate 25 basis rate cut and the future rate cut expectations are also the primary catalysts driving gold and silver prices higher. By looking at the upward momentum in prices it seems markets are pricing with a 100% certainty of September interest rate cut,85% certainty of December interest rate cut and 65 % certainty of march rate cut however Right now there is a 21% probability that the Fed cuts 50 basis points in September,we believe the pricing of the market on expectations could be a potential concern for gold prices.
Although we have outlined many factors behind the spectacular rally in gold and silver prices but despite all of them we believe two reasons are the utmost important, the first one is U.S. CHINA trade tensions and the second one is trump twitter account and his tweets, let's put these not-funny joke aside but seriously Take these two out of the equation and nobody would be talking about the Fed easing.
Markets will be focused on the trade war this week as some crucial deadlines are on the horizon.one of the deadlines is due on August 20 when an extension given to U.S. suppliers to keep dealing with Huawei runs out. Traders will also be paying close attention to any new tweets from U.S. President Donald Trump and China's responses or retaliation. Many analysts believe that the trade dispute is unlikely to be resolved any time soon, which means that the risk-off sentiment will persist in the marketplace.
This week is a data-driven week with the several U.S., and China macroeconomic data are set to release. Today US CPI data will be released, and on Thursday retail sales data will be published. Chinese economic data, including industrial production and retail sales, will be critical in order to see how China is doing in light of the trade tensions.
It will also be vital to pay attention to the U.S. flash PMIs, NY State manufacturing, and Philly Fed manufacturing data, scheduled for release next week.
Analysis of the market through the top-down macroeconomic process(data-driven approach)
Our Economic Research Report(Updated monthly)-(important)
Top Hedge funds report on the precious metal sector.
Gold is a "juggernaut" and is proving to a be a good hedge against negative real bond yields, with the yellow metal's prices holding above $1,500 the medium-term, this according to Chris Weston, head of research of Pepperstone Group.
"You have got 10-year real yields looking like they might turn negative at any stage. 5-year real yields are heading that way. We have got a situation where the pool of negative debt is well over $15 trillion at the moment, and Gold has been working as a hedge against that ballooning pool of negative debt," Weston said. "The fact that gold has no yield is yield in itself, in this sort of paradox situation."
On key levels to target, Weston said that Gold is likely to test 2011 lows of $1,522 an ounce.
"We have been saying that the 2011 lows of around $1,522 would probably be a realistic target. We are not a million miles away from that at the moment," he said.
Weston noted that $1,587 to $1,600 an ounce could be a realistic longer-term target.
Shorter-term, Weston said Gold has likely hit a already.
"We do not see too much of a move lower. There is much love in Gold at the moment," he said.
Risks for Gold may come in the form of a selloff in bond yields, Weston added.
Gold prices have surged and are seeing its best weekly gains in more than three years. Market uncertainty intensified at the start of the week after the Chinese government let the yuan rise above seven against the U.S. dollar for the first time in more than a decade, igniting fears that the U.S. –China trade war has evolved into a currency war.
Gold and silver still have momentum behind them, says T.D. Securities. "Momentum signals are firmly pointing to the upside across the complex," strategists at T.D. Securities write. The U.S.-China trade war and expectations of further rate cuts are likely to continue to support the precious metals sector. "As the pressure on China's economy weighs on the RMB, which was allowed to weaken below the 7.0 mark, the President is likely to continue urging the Fed to lower rates which in turn could provide some positive tailwinds for gold and silver ," TDS says. "Global assets will have to grow accustomed to the reality that trade uncertainty is likely here to stay, which ultimately has consequences for asset prices and the growth outlook.
Goldman Sachs Group upgraded its gold forecast for the first time this year, upping its and 6-month projections to $1,575 and $1,600 an ounce in light of escalating trade war tensions.
Gold prices were solidly above $1,500 an ounce on Monday — a level that was hit last week for the first time since 2013.
After rising nearly 4% last week, Gold's rally is far from over, according to analysts at Goldman, who see more upside in the yellow metal.
"Gold prices have increased further as a weaker CNY sparked substantial U.S. and global growth fears. With growth worries likely to persist, Gold could rise further, driven by an increased allocation from portfolio managers, who continue to under-own Gold . We raise our 3, 6, 12 month gold price forecasts from $1,450, $1,475, $1,475/toz to $1,575, $1,600 and $1,600/toz, respectively,” Goldman analysts said in a note.
The U.S.-China trade war has entered stage two this summer as U.S. President Donald Trump announced a 10% tariff on the remaining $300 billion worth of Chinese imports starting September 1, the note said.
"With the U.S. and China taking a harder line on trade, our economists no longer expect a trade deal before the 2020 president election—a fundamental change in view," the analysts including Sabine Schels wrote on Wednesday.
A currency war with depreciating CNY plays a crucial role in trade war tensions and Goldman's outlook for precious metals.
"Previously, China opted for stability and defended its currency in order to facilitate the ongoing trade negotiations in the background. Now, F.X. appears to be playing an increasingly central role in the trade tensions," the analysts said. "We estimate that a 10% depreciation of CNY vs. USD would spell as much as 13% downside to the S&P GSCI industrial metals sub-index."
Weaker CNY , in this case, means higher gold prices due to increased global growth fears, added Goldman.
"The depreciation of the CNY led to an increase in 'fear,' lower long term U.S. rates, and thus a higher gold price. Thus, a substantial depreciation of the CNY could lead to more 'fear' regarding the U.S. and global growth akin to early 2016 and should be Gold ," the analysts stated.
Gold's demand is also on a strong uptrend, with Goldman upping its 2019 forecast from 300 tonnes to 600 tonnes.
"Now, with the DM CAI persistently low, the trade war is escalating, global equities selling off and spiking, it looks like our risk scenario is playing out. Indeed, gold ETFs have recently built momentum almost as strong as in 2016, and we believe that can be maintained in the short term," the analysts said.
Technical levels to watch out for, Advises and recommendation from Goldsilveranalyst
Although we understand all the factors mentioned which are supporting the price of Gold are still there including continuous fall in yields, geopolitical risks, fears of the industrial economy and notions of Quantitative easing coming from the major central banks of the world but despite the momentum which we are witnessing,we have doubts about the sustainability of Gold's surge. Prices moved up substantially, and even though gold prices can reach $1585, we believe investors should lock in some profit at these levels.
Gold has had a great run over the last year, up 17%. It has been a perfect storm of sorts for Gold , especially on the interest-rate front. With long-term interest rates declining globally, Gold has been an attractive alternative to debt,"
Gold is an excellent alternative to any risk, including economic instability and geopolitical tensions. However, at these levels, Gold is just too expensive. The two metals we recommend considering right now are platinum and silver . Both are historically quite cheap versus Gold , and in our opinion, may offer more upside potential should gold keep grinding higher,".
"The price of platinum has mostly traded above the price of Gold , but that is not the case today. For those looking for an alternative to Gold , we recommend consideration of platinum and silver ,"
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