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Gold firms on growth risks, but bound for weekly dip

 

·         Gold bounced above $1,800 on Friday, buoyed by bets that central banks may keep interest rates relatively low to stave off lingering growth risks.

 

·         But an overall uptick in the dollar, while investors tried to gauge the timing of the U.S. Federal Reserve’s taper timeline, kept bullion on course for a weekly decline.

 

·         Spot gold rose 0.3% to $1,800.40 per ounce by 0732 GMT. Down 1.4% so far, it was headed for its first weekly fall in five. U.S. gold futures rose 0.1% to $1,802.10.

 

·         Facilitating gold’s advance, the dollar was a tad softer on the day, making bullion more appealing for those holding other currencies, but the greenback was still bound for a weekly rise.

 

·         Gold continues to remain a buy on dips because central banks are in no hurry to raise interest rates, said Stephen Innes, managing partner at SPI Asset Management.

 

·         “Growth is still a really big concern for central banks.”

 

·         Gold investors closely followed cues from the Fed, since non-yielding bullion tends to gain when interest rates are low, while some consider bullion a hedge against higher inflation fuelled by massive stimulus.

 

·         And the signals were mixed, with a recent Fed report showing the U.S. economy “downshifted slightly” in August. But a number of Fed officials said this week the August slowdown in job growth would not throw off plans to reduce asset purchases this year.

 

·         Despite elevated macro risks, the Fed is unlikely to take 2021 taper off the table and gold should head lower in the fourth quarter, around $1,700, Citi Research said in a note.

 

·         Gold Price Forecast: XAU/USD battles to conquer $1,800, not a good sign for bulls

 

Market participants now look forward to the release of the US Producer Price Index for some impetus later during the early North American session. This, along with the US bond yields, could influence the USD price dynamics. Apart from this, the broader market risk sentiment might also produce some trading opportunities around the XAU/USD on the last day of the week.

 

Short-term technical outlook

From a technical perspective, the commodity's inability to climb further beyond the $1,800 mark warrants some caution for bullish traders. This makes it prudent to wait for some follow-through strength back above the very important 200-day SMA, around the $1,810 region, before positioning for any further appreciating move. The XAU/USD might then accelerate the momentum and aim to challenge a strong barrier near the $1,832-34 supply zone. A convincing breakthrough the mentioned hurdle has the potential to lift the commodity further towards the $1,853 intermediate resistance en-route the $1.868-70 region.

 

On the flip side, the $1,784-82 region now seems to have emerged as immediate support ahead of the $1,775-74 horizontal zone. A convincing break below will be seen as a fresh trigger for bearish traders and set the stage for a deeper retracement to the $1,750 level. The downward trajectory could further get extended towards the $1,729-28 region before the metal eventually drops to the $1,700 round figure.

 

·         Silver rose 0.54 % to $24.20 per ounce but was down 2% this week.

 

·         Platinum gained 0.4% to $981.19. It was headed for its biggest weekly decline since early August, falling 4.2%.

 

·         Palladium climbed 0.5% to $2,189.33 but was down over 9% for the week. (Reporting by Eileen Soreng in Bengaluru; Editing by Uttaresh.V, Devika Syamnath and Mark Heinrich)

 

·         Central banks don’t want to take punch bowl away too quickly, former Fed governor says

Randy Kroszner, deputy dean at the University of Chicago Booth School of Business and former Federal Reserve governor, weighs in on central banks’ monetary policy dilemma.

 

·         Covid waves will hit the global supply chain for two years, Reagan economist warns

The semiconductor shortage is affecting consumers’ ability to buy cars, smartphones and virtually all electronics — and there may be little relief in sight.

 

·         UK economy grew by just 0.1% in July - ONS

 

·         Spread of Delta COVID variant slows UK economy to crawl in July

 

 

·         UK PM Johnson's Conservatives see support slump to lowest since election – poll

 

·         German finance ministry raided in money laundering probe

·         China vehicle sales slid 18% in August - industry body

China’s auto sales fell 17.8% in August from the corresponding month a year earlier, industry data showed on Friday.

 

·         Japan's popular vaccine minister Kono set to enter race for next leader

 

·         Japan's exports seen surging in August, wholesale prices staying high - Reuters poll

Japan’s exports likely surged for the sixth straight month in August thanks to strong global demand for machinery goods and a flattering comparison with last year’s pandemic-induced slump, a Reuters poll showed on Friday.          

Japan’s wholesale prices were expected to stay at more than 10-year highs in August due to global commodity inflation and a weak yen, while firms’ machinery orders likely rose in July, according to analysts polled by Reuters.

Exports likely jumped 34.0% in August from a year earlier, the sixth month of double-digit gains, though they were seen slowing from July’s 37.0% increase, the poll showed.

 

·         Toyota cuts production target on parts and chips shortages

Toyota Motor Corp cut its annual production target on Friday by 300,000 vehicles as a slowdown in output at COVID-19 hit parts factories in Vietnam and Malaysia added to the pain of a global shortage of auto chips.

 

·         Vietnam to reopen resort island to foreign tourists to boost economy

Vietnam plans to reopen the beach-fringed island of Phu Quoc to foreign tourists from next month, authorities said, as the country looks at ways to revive an economy suffering from extended lockdowns due to the coronavirus pandemic.

 

·         Australia’s daily Covid-19 cases near 2,000 as delta gains ground

 

 

Reference: CNBC, Reuters, FXStreet