In the holiday-shortened week, MCX gold weakened by 0.6% & Comex gold fell by 1.06%. The mere anticipation of a mini-deal between the U.S. & China pulled the price down and obviously, it could lead to a temporary tariff truce. President Donald Trump said the first day of high-level negotiations between the U.S. and China last Thursday went “very well” and that he plans to meet with Vice Premier Liu He next day. The U.S. will halt a scheduled increase in tariffs on China as part of a “phase one” trade accord. Beijing will double farm goods purchases to as much as $50 billion and take steps on IP, financial services and the yuan.
According to CME’s FedWatch Tool, there is a 75% chance of rate cut at this month-end meet, i.e., 30th October. ETF investors have boosted holdings in bullion-backed ETFs for 18 sessions in a row, the longest run of inflows since 2009. Trade tensions and a slowdown in global economic growth have boosted haven demand for the metal, even as a stronger dollar and signs of a U.S.-China thaw have weighed on its price and spurred a pullback from bullish bets among hedge funds. European negotiators warned that Boris Johnson’s Brexit plan isn’t good enough to be the basis of a deal. The British PM told his Cabinet there’s a way forward for an agreement and talks resume Monday as both sides rush to reach a potential compromise.
Jean-Claude Juncker said Brussels should approve an extension past the Oct. 31 deadline if London asks for another delay. SPDR Gold ETF did not attract any fresh buyer, 921 tonnes as on Friday against 924 tonnes a week ago. However, globally, the ETF holding continued to rally as Washington has added 28 Chinese companies, government offices and security bureaus to a United States blacklist over their alleged role in facilitating human rights abuses in China’s Xinjiang region.
Gold may experience a bearish tone in the week since there seems no demand from India ahead of Deepawali. India imported only 26 tonnes of gold in September against 81.71 tonnes a year ago. However globally, the factors may support prices hence we don’t see a sharp fall. From an economic data point of view, Euro-zone industrial production on Monday, U.S. empire state manufacturing index on Tuesday, U.S. retail sales & business inventories on Wednesday, U.S. housing starts, building permits, Philly Fed manufacturing index, industrial production on Thursday will drive the dollar vis-a-vis gold. Investment demand may continue to rise as phase one of the U.S.
China deal has not brought smiles on the street. Donald Trump ordered a withdrawal of American troops from northern Syria amid rising criticism of Turkey’s attack and his abandonment of support for Kurdish allies. The president said the Treasury is “ready to go” with sanctions on Ankara, and Germany and France announced they’ll stop selling arms to Turkey in protest. Hence the downside is limited but, undertone will be bearish. MCX gold may stay in a range from Rs. 37,300 to 38,100 in the week.
Author: Rushab Maru – Research Analyst – Currency & Commodity, 17th October 2019