By Jigar Trivedi
Comex gold is seen below the $1,920 an ounce mark, near one-month lows on Friday and tracking lower Treasury prices as markets remained skeptical over the Fed’s course of action following the latest economic releases. Fed officials signaled that there is still more work to do to bring inflation down, stoking fears that the current terminal rate will be maintained for longer than previously expected, thus increasing the opportunity cost of holding non-interest-bearing precious metals.
US jobless claims rise to 1-month high
The number of Americans filing for unemployment benefits jumped by 21,000 from the prior week to 248,000 on the week ending August 5th, the highest in one month, sharply above expectations of 230,000. Despite remaining at a historically low level, the figure suggested that the US labor market is starting to soften from stubbornly tight levels since the start of the year, loosely aligning with recent bets that the Federal Reserve may refrain from tightening monetary policy further this year.
Dollar heads for 4th straight weekly gains
The US dollar was steady on Friday, with the index hovering around 102.5, as traders digested US headline inflation reading for July that showed a moderate increase, but is still way above the Federal Reserve’s 2% target. The index was on course to gain for the fourth straight week, supported by overall strong US economic data and renewed worries about the health of the country’s banking sector and stalling economic recovery across the mainland. Meanwhile, geopolitical concerns reemerged after Washington banned certain US technology investments in China.
Outlook
It is a holiday shortened week for India as India will celebrate Independence day on Tuesday (15th August) and Parsi New Year (16th August) hence Banking holiday. On 18th August US will release building permits, housing starts and industrial production for July. The same day the US Fed will release minutes of the last meeting. On Thursday, 19th August, US will release weekly jobless claims and Philly Fed manufacturing Index for August. Hence the dollar index is expected to stay volatile. MCX Gold October has a storng support near Rs. 58,500 per 10 gram and the outlook is positive for near term target of Rs. 59,650 per 10 gram.
(Jigar Trivedi, Senior Research Analyst – Currencies & Commodities at Reliance Securities Limited. Views expressed are the author’s own.)