Gold Back at Key Levels as Chinese Investors Return

Bullion for immediate delivery made a rebound during Asian trade, Monday as buying interests pinched higher with Chinese investors’ return following China’s week-long national day celebration.

Spot gold closed at $1, 260.70 to $1,261.15 per ounce, a $3.20 jump from last Friday’s close. Trading played between $1,256.50 and $1,264.30 on Monday.

A modest opening was reported for spot gold despite Japan and Hong Kong being on holidays with China expected to open as a buyer after its holidays, according to MKS Group.

"Early buying was evident from both speculators and physical traders, with investors expecting the return of the Chinese - after a week-long break - to see some decent buying," said Alex Thorndike, senior precious metals dealer at the abovementioned firm.

“We expect gold to remain buoyant, looking for support around $1,250 following Friday’s encouraging move back above the level on the less than impressive US jobs data,” the broker said.

Last Friday, the released US jobs report revealed 156,000 Americans to join the labor market in September which is below the 171,000 forecast. However, the reading for the previous month was revised from 151,000 to 167,000.

A 0.2 percent for US average hourly earnings was projected, despite the headline unemployment rate increasing from 4.9 percent to 5 percent.

December hike for Fed is still highly likely since the payrolls report showed enough strength, said National Australia Bank on Monday morning.

The market currently sees a 65-percent chance of a December hike pushing through, reports by the CME Group FedWatch tool.

The US jobs data made the US dollar index respond more softly. The index closed at 96.55 on Monday, 0.05 percent higher than its previous landing, but relatively lower compared to last Friday’s 97.47—highest since July.

In equities, the Shanghai Composite jumped 0.8 percent to 3,028.70 on Monday trade.

For commodities, the Brent crude oil for immediate delivery price slumped 0.5 percent at $51.39 per barrel, and the West Texas Intermediate spot price fell 0.59 percent to $49.25.

Gold for December delivery closed at 273 yuan per gram on the Shanghai Futures Exchange while December silver was flat at 3,966 yuan per kilogram.

"Gold prices are quite appealing after the recent correction. In China, what we see today is that there is some demand to buy gold following its dip," said HuaAn Gold fund manager Richard Xu. HuaAn Gold is China's top gold exchange-traded fund (ETF).

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Deutsche Bank Sell-off Drags Lenders Lower

European stocks dip down as Deutsche Bank AG (DBK; DB) is up for a $14 billion U.S. Justice Department settlement for mortgage-backed security claims.

The FTSE 100 slipped 0.3% to 6, 712.98 while the Stoxx Europe 600 (SXXP) fell 0.2% to 339.55, except the health care group of both exchanges which posted modest gains. Shares of Royal Bank of Scotland (RBS) and Barclays (BARC; BCS) slid to 4.1% and 2.1% respectively.

Also, other bank shares were trading lower. Standard Chartered PLC (STAN) was off 2.7%; HSBC PLC (HSBC; HSBA) down 0.7%; Lloyds Banking Group PLC with a modest dip of 0.3%.

“Deutsche Bank has no intent to settle these potential civil claims anywhere near the number cited. The negotiations are only just beginning,” the German bank said in a statement.

Analysts think that the settlement amount was way above their expectations but may just be a gateway for further discussions between the two parties. Given the case, anxiety over other European banks to face similar claims still intensifies.

Investigations by the U.S. Justice Department are connected with the bank’s issuance and underwriting of residential mortgage-backed securities between 2005 and 2007.

The German bank expects to end the negotiation with a materially lower amount as with banks that faced the same claim from the Justice Department.

In January, Goldman Sachs Group Inc. (GS) settled claims for $5.1 billion while J.P. Morgan Chase & Co. (JPM) paid a $13 billion fine in 2013. In 2014, Wall Street bank Citigroup Inc. (C) was asked to pay $12 billion to settle mortgage probe, but ended up paying only $7 billion.

The Deutsche Bank settlement was said to be the largest fine put forward by U.S. authorities after financial crisis. But analysts estimate that the bank will settle the investigation at “somewhere around the third” of the suggested $14 billion fine.

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Oil Weakens Ahead of U.S. Stockpile Data, Investors Await Fresh Cues

The price of oil slid lower during European trading hours on Wednesday, hitting a two-week low as market participants seek for fresh cues on U.S. stockpiles of crude and refined products.

The U.S. Energy Information Administration is scheduled to release its weekly report on oil stockpiles at 10:30 AM ET amid anticipations for an increase of 921,000 barrels.

At 04:29 ET, Brent crude oil futures were valued at $48 per barrel; 37 cents lower from its previous close, while the U.S. WTI crude futures declined 21 cents to $46.14 per barrel.

Oil prices had increased by more than 20 percent since the start of August on expectations that the oil producers are discussing potential effective solutions on the supply glut, setting prices on course for their biggest monthly gains since April.

Analysts, however, mentioned that the focus had moved to physical market fundamentals, which remained unstable.

“The market is getting tired of those headlines,” Olivier Jakob, managing director of Petromatrix said, pertaining to the potential oil production cut.

“Fundamentally, there is not a lot to support oil because the stocks are still at very high levels,” he continued.

On Wednesday, Khalid al-Falih, the energy minister of Saudi Arabia said that the country does not have a specific target figure for its oil output and its production will be determined by the demands of its consumers.

The further increase on oil stockpiles could limit any surge in prices. According to the data released by the American Petroleum Institute on Tuesday, the U.S. crude stocks had increased by 942,000 barrel to 525.2 million barrels in the week to August 26.

Another factor that affects the further weakening of crude is the further strengthening of the U.S. currency. It is known in the financial markets that a stronger dollar makes dollar-denominated assets, such as crude, more expensive for holders of other currencies. The U.S. dollar index, which measures the dollar’s strength against other major currencies, reached 96.143 on Tuesday, its strongest since August 9.

“The pullback in commodity prices is likely to continue in the short term, with a stronger U.S. dollar and weaker fundamentals,” ANZ mentioned in a note.

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Bank of England Leaves Rate Unchanged

The Bank of England (BoE) is poised to cut rates for the first time since 2009, as Britain’s economy begun to wobble amid recession after votes on leaving the European Union.

While the BoE surprised financial experts by leaving interest rates unchanged last three weeks, the central bank said that policymakers will have their support in any further action in August as the post-referendum uncertainty dragged down the economy.

Thus, growth sees gradual movement, and an eyed industry survey on Wednesday suggests that Britain’s economy begun to shrink at the rapid pace since the last time the BoE cut interest rates.

Several analysts are now expecting the BoE to cut interest rates by at least a quarter percentage point on Thursday to a session-low of 0.25 percent, and it is widely anticipated that its multi-billion program of government bond purchases could resume.

"There is enough evidence on the negative shock to the economy that some easing is justified," Investec economist Philip Shaw said, though he viewed the scale of the slowdown as too unclear for the BoE to buy bonds on top of a rate cut.

An economist at BoE Andy Haldane said he agreed to respond to a slowing growth by using "a sledgehammer to crack a nut", but another economist Kristin Forbes mentioned supporting the rate cut has insufficient evidence.

Given that most businesses and consumer surveys suggests a down trend, it is too early for any definite official data on how results have been weighed down by June 23’s Brexit vote.  

It is likely that the Bank of Japan (BOJ) and the Reserve Bank of Australia will proceed with a rate cut once the BoE cut its Bank Rate to the lowest level in its 322-year history, which both banks have undertaken unusual stimulus last week.

Among the main central banks globally, only the U.S. Federal Reserve has been considering a tighter policy for this year.

However, analysts and former top officials at BoE are in doubts about how positive a rate cut or several quantitative easing will do, considering official interest rates and government borrowing costs are already settling at a near session lows.

European Stocks Higher Ahead Rate Cut Decision

European stocks were broadly higher during the course of Thursday’s session as market players digest financial earnings and are closely watching on the upcoming rate decision of BoE, widely expecting a rate cut to a record low.

The pan-European STOXX 600 rose about 0.42 percent with all major stock exchange turned into positive. Meanwhile, investors are making their hopes up for BoE to cut rates for the first time since 2009 to spur the Britain’s economy, which has struggled since the U.K. voted to leave the European Union.   

However, some investors are also expecting the BoE to resume its quantitative easing program, buying government bonds. Despite an easing measure, questions were raised as to how it will make any difference.  

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Bank of England Leaves Rate Unchanged

The Bank of England (BoE) is poised to cut rates for the first time since 2009, as Britain’s economy begun to wobble amid recession after votes on leaving the European Union.

While the BoE surprised financial experts by leaving interest rates unchanged last three weeks, the central bank said that policymakers will have their support in any further action in August as the post-referendum uncertainty dragged down the economy.

Thus, growth sees gradual movement, and an eyed industry survey on Wednesday suggests that Britain’s economy begun to shrink at the rapid pace since the last time the BoE cut interest rates.

Several analysts are now expecting the BoE to cut interest rates by at least a quarter percentage point on Thursday to a session-low of 0.25 percent, and it is widely anticipated that its multi-billion program of government bond purchases could resume.

"There is enough evidence on the negative shock to the economy that some easing is justified," Investec economist Philip Shaw said, though he viewed the scale of the slowdown as too unclear for the BoE to buy bonds on top of a rate cut.

An economist at BoE Andy Haldane said he agreed to respond to a slowing growth by using "a sledgehammer to crack a nut", but another economist Kristin Forbes mentioned supporting the rate cut has insufficient evidence.

Given that most businesses and consumer surveys suggests a down trend, it is too early for any definite official data on how results have been weighed down by June 23’s Brexit vote.  

It is likely that the Bank of Japan (BOJ) and the Reserve Bank of Australia will proceed with a rate cut once the BoE cut its Bank Rate to the lowest level in its 322-year history, which both banks have undertaken unusual stimulus last week.

Among the main central banks globally, only the U.S. Federal Reserve has been considering a tighter policy for this year.

However, analysts and former top officials at BoE are in doubts about how positive a rate cut or several quantitative easing will do, considering official interest rates and government borrowing costs are already settling at a near session lows.

European Stocks Higher Ahead Rate Cut Decision

European stocks were broadly higher during the course of Thursday’s session as market players digest financial earnings and are closely watching on the upcoming rate decision of BoE, widely expecting a rate cut to a record low.

The pan-European STOXX 600 rose about 0.42 percent with all major stock exchange turned into positive. Meanwhile, investors are making their hopes up for BoE to cut rates for the first time since 2009 to spur the Britain’s economy, which has struggled since the U.K. voted to leave the European Union.   

However, some investors are also expecting the BoE to resume its quantitative easing program, buying government bonds. Despite an easing measure, questions were raised as to how it will make any difference.  

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Dollar Falls Fresh 5-week Lows Against Other Major Rivals

The dollar settled at a fresh five-week lows against a basket of other major currencies amid Tuesday’s session, followed by Japan’s stimulus measures announced and as expectations on the U.S. rate hike started to ease.  

USD/JPY has seen a 0.64% decline to changed hands at 101.76, suggesting its lowest level on the record.

The strong yen came in after the cabinet of Japan’s Prime Minister Shinzo Abe released statement of a fresh stimulus package, citing part of their initiative to help lift the economy.

The package holds about ¥13.5 trillion in fiscal measures, while the direct spending is expected to reach ¥7.5 trillion, suggesting most of it will settle in the next two years.

Subsequently, the greenback continued to struggle after data posted a 1.2% U.S. growth rate in an annual basis, posting below a 2.6% estimate.

According to the Institute for Supply Management, the index of manufacturing activity has seen a 52.6 decline last month from an earlier drop of 53.2 in June. Analysts, therefore, anticipated a downbeat index to 53.0 in July.    

Given that disappointing data, expectations begun easing for an unexpected rate hike from the Federal Reserve.

Meanwhile, EUR/USD added 0.30% to a five-week high of 1.1196.

The pound also edge higher, with GBP/USD climbed 0.50% and settled at 1.3243, while USD/CHF tumbled 0.25% to 0.9661 at the close.

Market players ignored reports from research firm Markit and the Chartered Institute of Purchasing & Supply, citing their U.K. construction purchasing manager’s index dropped to 45.9 in July from the last month’s reading of 46.0.

Analysts expected the index to decline by about 43.8 in the previous month.

The Australian and New Zealand dollars strengthened, with AUD/USD up by about 0.48% at 0.7574 and with NZD/USD rallying to 0.64% to end the session at 0.7217.

The Aussie regained from earlier losses after the Reserve Bank of Australia cut its benchmark interest rate from 1.75% to a fresh record-low of 1.50% relative to expectations.

Building approvals tumbled 2.9% in June, compared to an estimated gain of 0.5%, according to the Australian Bureau of Statistics.

In other news, Australia’s trade deficit shows a broadly wider A$3.195 billion in June from revised A$2.418 billion in May. Thus, analysts anticipate the trade deficit to show below A$2.000 billion in June.  

Further, USD/CAD dipped 0.34% to end the session at 1.3070.

The U.S. dollar index, which gauges the dollar’s strength against a basket of other major rivals, fell 0.40% at 95.37 at the close, suggesting its lowest level on the record.

U.S. Data Undermines Fed’s Rate Hike

The dollar hovered almost three-week lows amid Tuesday’s session after U.S. economic data turned into negative, undermining the unexpected Federal Reserve rate hike while the Australian dollar digests the possibility of a policy easing within the day.

The dollar index against a basket of other major rivals remained steady at 95.758, dropping as low as 95.384 in the previous week after showing its lowest level in three months.

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Dollar Index Falls at 2-week Lows

The dollar tumbled to new two-week lows against a basket of other major currencies during the course of Friday’s session, after the Bank of Japan (BOJ) disappointed market anticipations earlier in the session and the Federal Reserve has failed to act on Wednesday.

Meanwhile, market players are closely watching for the release of the U.S. economic growth data.

USD/JPY slipped by about 1.59% to changed hands at a three-week low of 103.57.

During the monthly policy meeting on Friday, the BOJ reported a broadly higher purchases of exchange-traded funds (ETFs), but its base money target remained steady at 80 trillion yen, including the pace of purchases for other assets.

The central bank left the negative interest rates unchanged at -0.1%.

The decision has disappointed the market expectations for a stimulus package worth 28 trillion yen as pledged by Prime Minister Shinzo Abe last week to help lift the economy.

The policy statement was announced after the Fed left interest rates on hold at the conclusion of the two-day policy meeting, suggesting an expected move.

In its statement, the Fed said that “near-term risks to the economic outlook have diminished” and that the labor market has “strengthened”.

All Eyes on the U.S. Economic Growth Data

Further, investors are now closely watching on the upcoming U.S. economic growth data for the second quarter, scheduled on Friday for further signals on the current stated of the economy.

EUR/USD rallied 0.22% to end the session at 1.1101.

In other news, Eurostate mentioned that the consumer price index of the euro zone has seen a 0.2% increase at an annual basis in July, topping the analysts’ estimate of a 0.1% uptick and after a 0.1% increase during the last month.

Core CPI, in exclusion of food, energy, alcohol and tobacco, has seen a 0.9% rally in the previous month, year-on-year, in line with anticipations.

The pound remained steady, with GBP/USD resting at 1.3171, while USD/CHF lost about 0.40% to settle at 0.9768.

Subsequently, the Bank of England announced an increase in net lending to individuals to £5.2 billion in June from £4.5 billion in May, suggesting an upwardly revision from an earlier forecast of £4.3 billion.

Analysts are expecting the bank to post a broadly higher net lending to individuals of £4.2 billion in the previous month.

However, the pound’s gains were covered as market players’ attention retreated to BoE’s policy meeting next week amid mounting anticipations for a rate cut.  

The Australian dollar remained flat, with AUD/USD at 0.7504, while NZD/USD rallied to 0.34% to 0.7094.

USD/CAD rose 0.17% to 1.3179.

The U.S. dollar index, which gauges the dollar’s strength against a basket of major rivals, tumbled 0.37% at 96.33, suggesting its lowest level on the record.

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Indonesia Stocks Posts Lower; IDX Composite Index Down 1.57%

Indonesia stocks posted lower during the course of Friday’s session, fueled by declining shares in the sectors of Consumer Industry, Manufacturing and Infrastructure.

The IDX Composite Index has seen 1.57% loss at the close in Jakarta.

Among the best performers amid IDX Composite Index’s session were Ictsi Jasa Prima Tbk, which rallied by about 34.95% or 36 points to changed hands at 139 in late trade. Tifico Fiber Indonesia Tbk gained 24.29% or 170 points to settle at 870 and Mitra Komunikasi Nusantara Tbk PT rose 23.35% or 92 points to 486 at the close.  

Siloam International Hospital is one of the worst performers amid session, which lost about 10.32% or 1125 points to settle at 9775 in late trade. Hm Sampoerna Tbk dipped 9.70% or 390.00 points to settle at 3630.00 and Bank of India Indonesia Tbk tumbled 9.38% or 180 points to 1740 at the close.  

Declining stocks outnumbered increasing ones on the Jakarta Stock Exchange with a range between 176 to 147 and 87 remained unchanged.

Sampoerna Tbk stocks declined to all time session lows, which dipped 9.70% or 390.00 to 3630.00 in late trade. Meanwhile, Bank of India Indonesia shares dropped to 52-week lows, which declined 9.38% or 180 to 1740.

Crude oil delivery in September lost about 0.63% or 0.26 to end the session at $40.88 a barrel. In commodities trading, Brent oil delivery in October tumbled 0.81% or 0.35 to settle at $42.88 a barrel, while Gold contract in December dipped 0.07% or 0.95 to changed hands at $1340.25 a troy ounce.

USD/IDR rallied 0.19% to 13098.0, while AUD/IDR lost 0.41% to end the session at 9812.85.

The US Dollar Index declined 0.46% at 96.25.

Win Streak May End For Indonesia Shares?

In other news, Indonesia stock was broadly higher in four consecutive sessions, climbing over 100 points or 1.9 percent within the day.   

The Jakarta Composite Index remained flat at 5,300 points, suggesting market players could lock in gains on Friday.

The global estimate for the Asian markets had mixed results, led by several inconsistent reports in earnings and weaker economic data. Meanwhile, the European markets remained sluggish, while the U.S. markets were mixed but slightly changed.  

The JCI posted higher at the close of Thursday’s session, following gains from the sectors of resource and food. Elsewhere in financials, it had mixed results.

Astra Agro Lestari is among the actives, which gained 0.34 percent, while Vale Indonesia rose 4.53 percent, Bank Negara Indonesia rallied 0.47 percent, Bank Danamon slipped 1.37 percent, Indofood Sukses added 5.63 percent and Indocement climbed 1.33 percent.

Further, the Dow remained flat at 15.82 points or 0.1 percent to end the session at 18,456.35, while the NASDAQ rallied 15.17 points or 0.3 percent to 5,154.98 and the S&P 500 increased 3.48 points or 0.2 percent to end at 2,170.06.

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Saudi Stocks Retreats Across Gulf Equity

Saudi Arabian shares led recovery across Gulf equities as trading volumes declined. Among the six-nation Gulf Cooperation Council (GCC), four of which has seen slumps, with analysts saying that GCC 200 Index controlled its longest declining streak in two months. 

  

Tadawul All Share Index of Saudi Arabia lost about 0.9 percent in Riyadh, as trading volumes were cut by 38 percent, dropping below the average. DFM General Index of Dubai dipped 0.8 percent as 123 million stocks were changed hands, which posted below the six-month average, according to reports.  

“After last week’s excitement fueled by foreign inflows, with a few exceptions, things are dull today,” said Akber Khan, who manages $850 million as senior director of asset management at Al Rayan Investment in Doha. “It’s a Sunday in the midst of summer with few results in the region. Volumes are unsurprisingly poor.”

Stock measures in the countries of Dubai, Abu Dhabi, Qatar and Kuwait issued a third week of advances in five consecutive gains through Thursday’s session as prospects for stimulus in large economies fueled demand for riskier emerging-market assets.

Market players remained cautious after the Bank of Japan (BOJ) has overruled the financing government debt and the European Central Bank remained vulnerable in a monetary expansion.

GCC slump on Sunday were followed by declines in oil prices, with Brent crude dropping about 4 percent in the week to end the session at $45.69 per barrel. The GCC is considered as the third world’s proven oil reserves and equities are much relative to crude prices.   

Saudi Arabia Posts Lower

Saudi Arabia shares edge lower during the course of Monday’s session, fueled by declining shares in the sectors of Energy & Utilities, Financial Services and Insurance.

The Tadawul All Share lost about 0.11% in late trade in the country.

Among the best performers of the Tadawul All Share were Saudi United Cooperative Insurance, which rallied by about 6.83% or 1.00 points to changed hands at 15.65 in late trade. Meanwhile, Arabian Pipes Company gained 6.09% or 0.85 points to settle at 14.80 and Malath Cooperative Insurance Co has seen a 3.49% increase or 0.55 points to end at 16.30 at the close.   

Bupa Arabia for Coop. Insurance is one of the worst performers amid session, which lost about 4.62% or 6.00 points to changed hands at 123.75 in late trade. Al Hammadi Co dipped 3.21% or 1.30 points to settle at 39.20 and Emaar The Economic City fell 2.51% or 0.35 points to 13.60 at the close. 

  

Advancing stocks outnumbered dropping ones on the Saudi Arabia Stock Exchange with a range between 84 to 64 and 22 remained unchanged.

Crude oil for delivery in September lost about 1.61% or 0.71 to end at $43.48 a barrel. In commodities trading, Brent oil October delivery dipped 1.41% or 0.65 to settle at $45.44 a barrel, while Gold contract in December fell 0.61% or 8.10 to changed hands at $1323.40 a troy ounce.  

EUR/SAR fell 0.05% to 4.1155, while USD/SAR lost about 0.02% to 3.7506.

The US Dollar Index gained 0.09% at 97.50.

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Dollar Advances in Subdued Trade

The dollar settled near four-month highs against a basket of major currencies during the course of a subdued trade on Wednesday, boosted by global growth concerns that continued to affect the market sentiment and with no major U.S. data anticipated within the day.

Market players remained cautious after the forecasts for global economic growth in 2016 was revised to 3.1%, from the previous 3.2%, and anticipates to bounce back to 3.4% next year.

The IMF lowered their U.K growth estimate to 1.7% from an earlier forecast of 1.9% this year and cut 2017 growth to 1.3% from April’s forecast of 2.2% over Brexit vote.

Meanwhile, GBP/USD rose about 0.48% to end the session at 1.3175, suggesting a one-week low of 1.3064.

The pound edge higher after the unemployment rate posted declines of 4.9% in three months to May from April’s reading of 5.0%, compared to forecasts for an unchanged reading.

The claimant count has seen a 400 increase in June, compared to estimates of an added 3,500 people, followed by an improved 12,500 in the last month.

Further, the average earnings index, and bonuses rallied 2.3% in the three months to May, relative to estimates and after a 2.0% increase in the three months to April.

In the exclusion of bonuses and wages, it advanced to 2.2%, missing the 2.3% expected gains, followed by a 2.2% rally in the three months to April.

USD/JPY climbed by about 0.18% to end the session at 106.45, suggesting its highest level on the record, while USD/CHF added 0.18% to 0.9875 in late trade.

Japan’s currency remained struggling, as heightened expectations for another monetary easing by the Bank of Japan (BOJ) kicked off.  

EUR/USD remained flat at 1.1013, settling at a one-month low of 1.0981 earlier.

Apparently, the Australian and New Zealand dollars inched lower, with AUD/USD drops to 0.32% at 0.7483, while NZD/USD has seen declines of 0.33% to end the session at 0.7032.

Subsequently, USD/CAD added 0.27% to changed hands at a one-week high of 1.3057.

The U.S. dollar index, which gauges the dollar’s strength against other major currencies, rallied by about 0.08% and settled at 97.14, hitting below a four-month high of 97.37 readings overnight.

Dollar Finds Support from Strong US Data

The greenback gave back their gains against Japan’s currency during the course of Wednesday’s session, but it hits a nearly four-month peak against a basket of major currencies fueled by a strong U.S. data and mounting anticipations over the Bank of Japan’s added easing move. 

"If the BOJ doesn't take any action, the dollar/yen can fall back to 100 again," said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.

"But now the focus has also shifted to the possibility of a U.S. interest hike," he said, which will likely underpin the dollar even in the event the BOJ decides not to ease this month.

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