Gold prices firm at the start of the week ahead of key risks event clash

July 29, 2019

London (July 29)  Gold prices have rallied and are trading 0.35% higher at $1423 at the time of writing having climbed from a low of 1418 at the start of the week following a futures close of  $1,419.30 an ounce and printing a weekly loss of 0.5%. Gold notched a gain of +0.28% on Friday on a spot basis, despite a solid performance in the greenback and far better than expected Gross Domestic Produce, (GDP), data. The DXY index ended 0.12% higher, printing a solid week of gains on the charts as markets dialled down the Fed’ expectations for the following week.

The data on Friday showed that U.S. GDP expanded at a 2.1% annualised pace in Q2, topping estimates (1.8%). The consumer and government spending propelled the economy in Q2 which is an area that the Federal Reserve will likely be concentrated on - Household consumption grew 4.3%, their best showing since late 2017 while government spending grew 5%, its fastest pace since mid-2009. Consequently, the U.S. 2-year treasury yields initially rose from 1.85% to 1.88% following the data and 10-year yields moved between 2.06% and 2.10% while markets price in 28bp of easing at the Federal Reserve this week.

FOMC and Sino/US trade talks clash

Meanwhile, the Federal Open Market Committee (FOMC) is expected to ease rates this week and it is expected that the central bank to cut its target rates by 25bps with a possibility to an end of quantitative tightening.  Also, on the radar, we have the Sino/US trade talks clashing with the FOMC and anything other than progress will be seen as a positive for gold.

"Negotiators for the U.S. and China will face off in Shanghai this coming week in yet another attempt to piece together a trade accord, amid considerably lowered expectations for the kind of sweeping deal that appeared within reach this spring. Modest wins might be obtainable, however.

People close to the talks say a major breakthrough is unlikely on points that led to negotiations breaking down in early May. That includes the U.S. insistence that China commit to legal changes to protect intellectual property and abandon state..."


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