Gold Stuck In Tight Trading Range
The greenback rallied on Friday as more Federal Reserve members spoke in favor of a rate increase in the near term. Goldended the week at 1331.65 and is expected to bounce back towards the 1350 level but no higher. FOMC meeting beginning on September 20th.
Rate hike expectations began to increase again and are back up to similar levels as last week. This is important because lately gold prices tend to move inversely with rate hike expectations. If there is an expectation for increased rates, then traders will seek out other assets which produce a yield. If rates are expected to remain low, then gold appears more attractive since it doesn’t deliver a yield.Upside risks to prices would include Donald Trump winning the White House in November. On the downside, stronger US economic data spurring faster rate hikes could pose a threat. It remains to be seen whether gold’s comparatively lackluster showing will prompt more rethinks.
Monday, 12 September Monthly OPEC Report.Observers are turning bearish with worries continuing over sluggish global demand growth and increased supply. The situation has led analysts at the New York-based Morgan Stanley to admit that conviction levels for the market being rebalanced by mid-2017 are now falling.
The bank said in a note that additional unexpected supply from producers such as Iraq, Libya, Nigeria and the U.S. could derail hopes for the market rebalancing. Meanwhile the Organization of the Petroleum Exporting Countries and Russia are maintaining the production-freeze talk ahead of a meeting on the subject in Algeria on Sept. 28.But any deal would have to overcome major obstacles, including Iran’s refusal to consider a production cap until it hits pre-sanction levels.
Copper ended the week at 2.089 and remains a strong sell leading into next week as the US dollar will weigh on the metal. Copper inventories remain high and weak Chinese data has had an effect.China’s refined copper output was 645,000 tonnes in August, down 2.86% from July, and up 0.62% year-on-year.LME copper should range between USD 4,615-4,655/mt on Monday and SHFE 1611 copper will move at RMB 36,400~36,700/mt.There will be only three trading days this week due to China’s Mid-Autumn Festival on September 15-17 and investors may exit market for safety. The upcoming holiday boosts expectation for pre-holiday stocking building and this will also make longs keep cautious.US Fed will start its September rate meeting from September 21.
China Aluminum International Trading Co. (Chalco Trading) cut aluminum prices it offered in major markets today after previous hike, it said on its WeChat.LME aluminum fell below the 5-day moving average and will trade in a tight range of USD 1,565-1,585/mt today with eyes on the OPEC’s monthly oil report.
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