Gold kicks off the week flat leading into the European session

After closing 0.39% higher last week gold kicks of the week flat. Overnight the yellow metal gapped lower to trade at $1767.20 but has since recovered to start the European session at $1786.31/oz. Silver is 0.20% higher at $26.50/oz and had no such problems at the open. In the rest of the commodities complex, copper has moved 1.59% higher and spot WTI hangs high at the lofty level of $75.22/bbl.

Risk sentiment in the Asia Pac area was mixed overnight as the Nikkei 225 closed -0.64% in the red but the ASX (0.09%) kept its head above water. The Shanghai Composite is currently 0.16% higher. Futures in Europe are pointing to a negative open.

In the FX markets, all of the major was relatively subdued. The dollar index trades 0.03% higher and this biggest mover was USD/CHF which rose 0.20%. In the crypto space, BTC/USD fell -2.72% to trade at $34,323.

Looking at the news from the weekend and overnight, a ransomware attack affected 200 companies in the U.S. and President Biden said if he found out Russia was responsible America would retaliate.

Risk appetite in China was affected by the latest crackdown on the tech sector. Ride-hailing app Didi was removed from "app stores" due to safety concerns.

China Caixin/Markit PMI for June Services 50.3 (vs. expected 55.7) Composite 50.6 (vs. prior 53.8). New Zealand – ANZ Commodity Price index for June: 0.8% m/m (prior +1.3%).

Chinese President Xi is said to have a call with German Chancellor Merkel and French President Macron

Bank of Japan Governor Kuroda once again reiterated the BoJ won't hesitate to ease further if necessary.

Saudi Arabia's energy minister says to UAE he wants "compromise and rationality" on OPEC oil deal. The UAE rejected a proposal to extend the deal and increase production and it seeks a review of baseline production levels.

ECB's Schnabel says an overshoot of inflation is necessary and proportionate.

China's largest steel-making city Tangshan has begun implementing a 30% output cut. The reduction is said to be in place for the rest of the year.

Chile's Codelco copper mine production rose 5.8% to 152.55 tonnes in May. BHP's Escondida mine production (May) fell 9.2% to 84,800 tonnes. Lastly, Chile's Collahuasi copper mine production fell 3.7% to 57,900 in May.

ECB's Knot flags phase-out of coronavirus support beginning March 2022. Knot then added he is wary of the potential for accelerating inflation.

Looking ahead to the rest of the session highlights include composite and services PM's from the major nations and comments from ECB's Lagarde, Enria, de Guindos and Buba's Buch. Remember the U.S. could be quiet as the nation is off for Independence Day.
 

By Rajan Dhall

For Kitco News

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After the worst June since 2013, is gold price ready to rebound?

After dropping more than 7% in June, gold is trying to rebound. Can the precious metal see $1,800 an ounce breached next week as higher inflation continues to worry industry experts? Here's a look at Kitco's top three stories of the week:
 

!. Gold saw its worst June since 2013
 

2. Is recession next? El-Erian is concerned the 'Fed is falling behind' on inflation story

 

3. Higher inflation for the next 5 years: 'be overweight stocks, gold, and commodities,' says WisdomTree's research head
 

By Anna Golubova

For Kitco News
 

Contact agolubova@kitco.com

www.kitco.com
 

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Gold price has a chance to break out next week, here's why – analysts

Gold could see a significant rally above the $1,800 an ounce level next week after the release of the Federal Reserve's June monetary policy meeting minutes, analysts told Kitco News.

One of the biggest events to watch next week will be the Federal Reserve's monetary policy meeting minutes. The meeting, which took place in mid-June, triggered a significant selloff in gold.

"Markets are expecting a hawkish tilt, and anything that tells us there is no hawkish tilt is a little bit less than people were pricing in. You can get a big rally in gold," TD Securities head of global strategy Bart Melek told Kitco News.

Market participants will be closely monitoring whether the hawkish comments made by some of the Fed members during the last few weeks match up with the notes from the meeting minutes.

"FOMC meeting minutes are interesting in the event if they contradict anything that we've heard from the Fed so far, especially from some of the more hawkish Fed members," said Gainesville Coins precious metals expert Everett Millman.

Gold is ending the week on a strong note as prices are once again trying to breach the $1,800 an ounce level following a mixed U.S. employment report.

"We got 850,000 new jobs added to the economy in June, but the unemployment rate went up to 5.9%. The participation rate was also still very weak, which means there is no particular impetus for the Fed to tighten monetary policy anytime soon. And that is good for gold," Melek said. "We are also seeing wage growth slowing, and that implies that inflation is likely transitory and there is no big reason for the Fed to start raising rates."

It is still not clear whether there is enough momentum to propel gold much higher next week, but Melek does see prices returning to $1,900 an ounce in the next six months.

Another driver to watch is the movement in the oil price, added Millman, noting that any additional price hike will end up working in favor of gold.

"I'm interested in what happens at the OPEC+ meeting. Uncertainty around oil could have big implications for inflation, and that is still one of the main drivers for gold," he said. "If they come to an agreement to limit output, that should push oil prices higher."

Higher oil prices feed into higher inflation, and that is positive for gold, Millman elaborated. "It's interesting in the case of Russia too, which is such a big OPEC+ player. Russia is reliant on energy markets for its economy, and it hasn't been buying gold lately. If oil rises, the country could see extra funds and possibly start purchasing gold again," he said.

Some analysts noted that it'd been a frustrating time for the gold bulls.

"It's been one step forward and two steps back," said Walsh Trading co-director Sean Lusk. "Gold couldn't hold $1,800 and went down to mid-April lows of around $1,760s. Now we are popping back up on unemployment data. Everything screams inflation, but the problem has been the rally in the U.S. dollar."

Lusk is optimistic for July because of gold's seasonality coming back. "We are coming back into traditional gold buying pattern in mid-July. The wedding season takes hold. There is a buying bias. Cyclical trade is entering back into the market," he said.

A breakout above $1,820 next week would open the door for another rally in gold, said RJO Futures senior commodities broker Daniel Pavilonis. "If we close above it, gold could go much higher and even make new highs."
 

Data to watch

It will be a fairly light data week due to the U.S. celebrating Independence Day. Aside from the Fed's meeting minutes on Wednesday, markets will be paying close attention to the ISM non-manufacturing PMI on Tuesday and jobless claims on Thursday.

"The ISM services index is probably the premier number and should show the sector is growing very strongly with increased business opportunities thanks to the reopening," said ING chief international economist James Knightley.

 

By Anna Golubova

For Kitco News

 

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