The last couple of years and—in particular—the last couple of months were very difficult for gold traders—i.e. they were boring. Despite several huge daily price swings, the precious metals market has not been going anywhere, moving in and around the $1,100 - $1,300 price range.
On Monday, official data showed that Chinese demand for crude oil declined in July, which together with a stronger greenback and concerns over a rise in OPEC output weighed on investors’ sentiment and pushed the price of the black gold lower. As a result, light crude lost 2.52% and closed the day below $48. How low could the commodity go in the coming days?
The pound, already out of favor ever since the Bank of England's last policy meeting a couple of weeks ago, fell further yesterday in response to softer-than-expected UK inflation figures. The BoE's willingness to keep monetary policy extremely accommodative was beginning to make sense again, especially as the issue of Brexit still hangs over the markets. Today, however, the ONS reported some solid jobs and wages data, which led to a relief rally in sterling.
The latest "saber rattling" surrounding nuclear tensions between the U.S. and North Korea continues to dominate the headlines, and some level of concern about the situation is certainly justified. While we still expect cooler heads to prevail, there's certainly an elevated risk that a miscalculation or miscommunication on either side could lead to disaster.
The U.S. consumer price index measure of inflation rose 0.1% month-over-month in July but failed to match expectations of a 0.2% rise as we had envisaged in our Australian dollar/U.S. dollar (AUD/USD) currency pair report earlier.
Arguably the most important data for this week will be released later on today: the U.S. Consumer Price Index. Both headline and core CPI are expected to have risen 0.2% month-over-month in July. On a year-over-year basis, CPI is seen rising to 1.8% from 1.6% in June, while core CPI is expected to have remained unchanged at 1.7% last month. If the Producer Price Index (PPI) measure of inflation is anything to go by then CPI may also miss expectations. If so, the U.S. dollar could resume its downtrend, which could underpin buck-denominated precious metals further in these times of heightened geopolitical uncertainty.