Commodities

Gold holds as dollar falls from 2-year high

2019-09-11 09:10:26 GMT (Economies.com)

Gold futures tilted higher today for the second straight session, rebounding from the lowest level since August 13th, as dollar fell for the seventh session from its highest since May 12, 2017, ahead of economic data releases by the US economy.

 

As of 04:20 GMT, gold futures (December delivery) rose by 0.11% to $1,497.60 an ounce, from the opening of $1,493.90, after opening on a falling price gap as it closed yesterday at $1,499.20, while dollar index fell by 0.01% to 98.33 points from the opening of 98.34.

 

The markets are anticipating today the release of the US PPI reading, with forecasts of it to hold at zero levels vs. 0.2% growth in July, with the core PPI growing by 0.2%, the annual reading of the same index may also grow by 1.7%.

 

The core annual PPI reading is expected to grow to 2.2% vs. 2.1% in July, and the final reading for the wholesale inventory index is expected to rise by 0.2%, the same as the initial reading for July and vs. stability at the 0% in June.

 

US Treasury Secretary Steven Mnuchin said yesterday that the upcoming US-China trade talks round in the US will focus on the value of the Chinese yuan, while adding that the Governor of the People's Bank of China might attend, which comes after the Chinese currency recently crossed the 7-yuan-dollar mark for the first time in a decade.

 

Secretary Mnuchin also stated on the weekend that the US administration is considering to make new tax cuts during the next year, with reference to the trade agreement with Japan, as it is expected to be completed soon and that the trade talks with France are still progressing, adding that President Trump prefers to continue to impose tariffs in the absence of a trade deal with China.

 

Secretary Mnuchin also said on Monday that the US administration is ready to sign a trade agreement with China if it benefits the US, but said that the impact of trade war on the US economy has not yet been noticed, while adding that there is no reason to say that the Fed Governor Jerome Powell position is not under threat.

 

President Trump recently said that his administration is considering expanding tax cuts later and that the Fed should act proactively and cut interest rates on federal funds, while the FOMC is scheduled to meet on 17-18 of September in Washington, and the committee is expected to offer a 25bp rate cut for the second consecutive meeting.

 

The escalation of the US-China trade war has recently boosted market's fears about the US and Chinese economy growth due to the US administration's trade protectionism with many countries, led by China, while the US and China will continue their trade talks by next month in Washington, which will ease the market's concerns.

 

The People's Bank of China said its reserve requirement ratio would be cut by 50 basis points starting from September 16th, and also stated that it's seeking to expand it to 100 basis points, in 2 phases of 50 basis points each, which will provide liquidity of around 900 billion yuan.

 

The markets are also anticipating the ECB decisions and monetary policy, with forecasts for the ECB to cut interest rates to a negative range on Thursday and to announce quantitative easing policies to to stimulate the european economy.

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