Limited support for gold even if Fed delays rate rise – Barclays

Otmane El Rhazi from The Bullion Desk.

Barclays expects the first rise in interest rates from the Federal Reserve in March next year but sees this giving only limited support to gold, it said.

The market is now pricing in a low probability of a US rate rise in September,  the bank said in a note on Monday.

The latest trade data as well as gold leasing and stock data, however, suggest there was some stabilisation of demand in China and India, especially following price falls in July,

China’s July gold imports were up 22 percent month-on-month and 79 percent year-on-year. Shanghai Gold Exchange warranted stock has also moved back to a more typical level after a big build-up in the third quarter, while the gold lending rate – albeit still at a low level – has also stabilised following the recent decline, it said.

India’s imports showed a more marked increase, up 57 percent month-on-month and 88 percent year-on-year in July, with local physical premium remaining stable. Indian monsoon rains are now 12 percent below normal levels due to the El Nino season but Indian consumers seem to have responded to lower gold prices in July, Barclays said.

The spot gold price had slipped close to its lowest in around one week on Friday following the release of a mixed US labour report. The report – which was initially expected to provide more clues to whether the FOMC will lift rates in September – split market opinions.

US non-farm payroll employment increased by 173,000 in August, below the 215,000 forecast, but the unemployment rate fell to 5.1 percent from 5.2 percent in the prior month.

Even though the headline number undershot expectations, there were other positives in the report. The June total was revised to 245,000 from 231,000 and the change for July was revised to 245,000 from 215,000. With these revisions, employment gains in June and July combined were 44,000 more than previously reported.

The spot gold price was last at $1,122.40/1,122.70 per ounce on Monday, up 70 cents on Friday’s close.

 

(Editing by Mark Shaw)

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