Harshal BarotGold prices continue to be stuck in a broad range as a host of factors including demand, geo-politics and economic data are keeping sentiment mixed. While, geo-politics and dismal economic data are keeping prices supported, the demand side has disappointed as indicated by the Q2 numbers released by the WGC.
Gold demand fell 16 percent in Q2 compared to a year earlier as demand from India and China eased from near record levels last year.
Meanwhile, even as US data remains mostly optimistic, EU data has turned dismal which has raised concerns over a fresh slowdown. Looking ahead, the situation in Ukraine and Iraq may keep prices underpinned but any cooling of geo-political concerns will trigger a fresh round of selling.
Also, closely watched will be the Fed minutes and the Jackson Hole annual gathering of central bankers for cues on direction of global monetary policies. On the price front, USD 1280- USD 1330 remains a range and only a breach on either side will give direction to gold.
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Oil had a roller coaster ride last week as fears of a supply glut led to a fifth consecutive weekly decline. Both the EIA and IEA reports released last week indicated a very comfortable supply picture while trimming their demand forecasts for this year.
Also, US production hit the highest levels since 1987 in July which pressured WTI prices during the week. Further adding to pressure, economic data from the eurozone was dismal while Chinese data also raised concerns about demand growth. However, fresh concerns over Ukraine helped crude oil recover by the end of last week and WTI prices have managed to regain the critical USD 97 level.
Meanwhile, natural gas prices resumed the downtrend last week as the inventory deficit to last year's levels continues to narrow. For crude oil, even as the overall bias remains weak below USD 97, strong pullbacks could be seen due to headline risks. On the downside, USD 94 is a critical support area.
Metals corrected last week, with copper logging its biggest weekly loss in one month, ahead of a fresh reading on China's property market that has dragged on its economy and raised questions over its metals demand.
Poor set of economic data from the eurozone and the US continued to add further pressure. Copper has fallen nearly 5 percent since touching a near-five-month peak on July 8 and posted a 1.9 percent fall for this week, its steepest drop in four weeks.
US manufacturing output rose broadly in July and automobile production recorded its largest increase in five years, boosting the economy at the start of the Q3.
In the week ahead, investors will be anticipating an annual meeting of top central bank officials and economists in Jackson Hole, Wyoming from August 21 to 23. The spotlight will be on Fed Chair Janet Yellen, who will speak on Friday in her first appearance.
Minutes of the Fed's July policy meeting will be published on Wednesday for further clues about the timing of future interest rate hikes. Amidst so many events and data points, likely pressure on the metals camp is expected into the week.(The writer is analyst of Precious Metals & Energy at Motilal Oswal)
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