Gold maintains late week uptick, global equities tank

Otmane El Rhazi from The Bullion Desk.

Gold prices rose for the second consecutive session as the Chinese and global equity markets sustained heavy losses.

Gold for August delivery on the Comex division of the New York Mercantile Exchange rose $3.30 or 0.3 percent to $1,088.80 per ounce. Trade has ranged from $1,087.70 to $1,104.40.

Overnight in Asia the Shanghai Composite index fell 8.5 percent despite heavy intervention by central government, which at one time suspended trading for 90 percent of the stocks. The drop was the single biggest one day decline since February 2007.

Additionally, Germany’s DAX and France’s CAC-40 were each down two percent, while the dollar was 0.8 percent weaker at $1.1072 against the euro.

“The high degree of pessimism shown by speculative financial investors will probably preclude any significant recovery of gold and silver prices in the short term,” Commerzbank said. “We regard the current weakness of precious metal prices as exaggerated and expect to see higher prices by year’s end.”

In potential poor news for the precious metal’s complex, the Federal Open Market Committee (FOMC) is due to meet tomorrow and Wednesday that will conclude with a press conference.

Expectations of a monetary normalisation have grown as Federal Reserve chairwoman Janet Yellen has become quite hawkish in fresh speeches.

A rate hike – especially one in September – would be quite bearish for precious metals as the Fed has removed forward guidance, becoming entirely data dependent.

The net long fund position in Comex gold fell sharply by 19,545 contracts or 40 percent to 28,279 from 47,824 contracts in the week ending July 21, according to the latest Commodities Futures Trading Commission statistics. Over the same period, gold prices sold off by 4.59 percent.

In global data, the German IFO business climate bettered expectations at 108.0, while eurozone M3 money supply at five percent was as expected

While in the US, June Core durable goods orders month-over-month rose 0.8 percent, above the 0.4 percent forecast. With durable goods orders month-over-month in June boosted 3.4 percent, besting the 3.2 consensus.

As for other precious metals, Comex silver for September delivery rose 7.2 cents to $14.560 per ounce. Trade has ranged from $14.510 to $14.740.

Platinum for October settlement declined $2.0 to $978.70, while the most actively traded palladium contract was at $623.90, up $1.30.

(Editing by Tom Jennemann)

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