YEREVAN, August 5. /ARKA/. Last week gold trading was marked by considerable volatility because of a string of important events which could change the mood of investors. The U.S. economic data was inconsistent. The initial assessment of the U.S. GDP level in the second quarter exceeded the expectations of investors, while the news from the labor market was mixed: the unemployment rate fell to 7.4%, but the data on the number of new jobs in the non-agricultural sector disappointed market participants.
Regular meetings of the Federal Reserve and the European Central Bank (ECB) brought no surprises. The American regulator did not revise the interest rates, while purchases of securities n the U.S. still continues in previous levels because of high unemployment level despite the improving situation in the labor market. The ECB also preserved its monetary policy, after Mario Draghi made it clear that the super soft monetary policy will continue for a long time. As a result, after significant fluctuations the price of gold fell by 1.48% to 1310.97 U.S. dollars per troy ounce. The gold dynamics this week could be affected by economic data from the U.S. and the eurozone.
A string of important news is expected this week from China, which can also affect the price of gold, as China is one of the largest consumers of this metal. We would like to remind that Chinese economy has been experiencing a slowdown, so gold market may pay attention to its macro data.
The U.S. news is expected to be moderately positive, while European news is likely to disappoint investors, and Chinese statistics can paint a mixed picture, so the gold price is likely to feel some pressure and stay at $1,272.0 per troy ounce. However, if economic data from the United States once again demonstrate instability of economic improvements, and European and Chinese news inspire optimism of investors, the price of gold may rise to 1,347.0 dollars per ounce.
Prices of copper last week began to decline after Chinese auditing service’s statement on the audit of public debt increased concerns about the pace of economic growth. The increasing copper stock at Shanghai Futures Exchange by 2007 tons to 163,571 tons also hindered the growth of copper price.
But from the middle of the week investor sentiment changed. The Fed’s decision to continue the quantitative easing and positive U.S. economic data upped the price by 2.34% to 3.1645 U.S. dollars per pound. This week the price of copper may rise moderately but steady growth remains still limited because of the large number of open short positions. The market optimism may be backed also by news form Germany where industrial production and factory orders probably rose.
At the same time, a package of Chinese news to be published on Friday, may increase the volatility of the market. The expected increase in industrial production and retail sales in China in July, and the increase in imports are likely to have a positive impact on the stock of the red metal, since China accounts for more than 40% of copper world consumption.
However, the recently published business activity index data on China’s manufacturing sector by HSBC for July, which was decreasing for four months in a row, cast doubt on the positive news from China. A possible increase in the consumer price index in July may have a negative impact on the stock of copper, as the acceleration of inflation constrains monetary authorities in China, not allowing them to apply additional economic stimuli. Thus, if the Chinese indicators are negative, and European news is worse than expected, the cost of copper may decline to USD 3.06-3.27 per pound.
By Mikael Verdyan, FOREX CLUB analyst
The opinion of the author may not necessarily represent that of the news agency
