Gold prices slump as summer lethargy takes hold

Otmane El Rhazi from The Bullion Desk.

Gold prices fell for the second consecutive day as investors kept the precious metal in a tight range throughout the session.

Gold for December delivery on the Comex division of the New York Mercantile Exchange was last up $2.90 to settle at $1,112.70 per ounce. The yellow-metal spent the first half of the week trading to three week highs, before declining the past two sessions.

The timing of the first rate rise by the Federal Open Market Committee (FOMC) is becoming increasingly important to investors. The FOMC meeting is just over a month away and debate is ongoing whether the Fed should maintain near zero interest rates or raise rates by 25 basis points.

CME Group Fedwatch – a measure to gauge the market’s expectations of a change in the Fed Funds target rate – was currently at a 45 percent probability of a rate rise next month. The figure has swung from zero to above 50 percent over the last few weeks.

“Markets stalling this afternoon in typical Friday fashion following a strong week for the yellow metal flushing out many of the markets shorts,” Triland Metals said. “The Fed’s rate hike continues to be on everyone’s radar with many of us scratching our heads as whether it will happen September, December or even this year for that matter.”

The Chinese government released gold holding figures for the second time in recent weeks. Total holdings were at 1,677 tonnes at the end of July, a one percent bump from the previous month.

Additionally, the People’s Bank of China (PBoC) increased the reference rate to the dollar by 0.05 percent. The past three days saw the bank drop rates to the lowest point since 1994.

In news, the Greek parliament passed its third bailout totalling 85 billion euros. The programme calls for more austerity in the form of increased spending cuts and increases in taxes.

Meanwhile in the US, PPI month-over-month in July was at 0.2 percent, above the 0.1 percent mark, while Core PPI in July rose 0.3 percent, besting the forecast of 0.1 percent.

The capacity utilisation rate in July was at 78 percent, matching predictions, with industrial production month-over-month in July jumped 0.6 percent, above the consensus of 0.3 percent.

Preliminary University of Michigan Consumer sentiment in August was 92.9, just off the 93.5 forecast. Preliminary University of Michigan inflation expectations in August were at 2.8 percent, equaling the previous reading.

In US equities, the Dow Jones industrial average and S&P were each up 0.3 percent, while the dollar was 0.3 percent stronger at $1.1120 against the euro.

As for other precious metals, Comex silver for September delivery was last down 21.9 cents to $15.180 per ounce. Trade has ranged from $15.140 to $15.585.

Platinum for October settlement fell $1.20 to $993.80 per ounce, while the most actively traded palladium contract was at $617.60 per ounce, up $1.90.

(Editing by Tom Jennemann)

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