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Gold Rises On Mixed Data, India Demand

October 27th, 2016 by

Gold prices gained modestly on the COMEX open this morning on a mixed bag of economic data and higher gold demand In India ahead of the five-day Diwali Festival which starts tomorrow. Spot gold was up by $6.40 from yesterday’s close, while spot silver had gained a nickel to $17.65 an ounce.

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The UK got some welcome news today, as the initial report of third-quarter GDP came in higher than expected. This is the first reading of the British economy since the June 23 vote to leave the European Union. According to the report, the British economy grew by 0.5% from the second quarter. This was slower than the second quarter’s 0.7% growth, but still above economists’ projections of 0.3%.

On a year-over-year basis, the UK saw 2.3% economic growth, leading some economists to note that the British economy was actually performing better than the US. Analysts expect that the surprisingly good data will stay the Bank of England’s hand next week, prompting the central bank to leave interest rates alone for as long as a year.

Meanwhile, the Commerce Department releases its initial estimate of third-quarter GDP in the US tomorrow. Analysts will be eager for a good number, after disappointing durable goods orders for September. Non-defense capital goods orders fell to their lowest point since early June.

After encouraging numbers from the US housing market last month, a more recent report showed that pending home sales rose in September. The string of good home sales figures could mean that positive momentum is building in the sector.

Thursday’s big data point was the drop in weekly jobless claims to 258,000. This was 3,000 lower than the previous week’s reading and the first drop in three weeks. The fewest number of Americans are currently collecting unemployment benefits since June of 2000. Moreover, the weekly jobless numbers have registered below 300,000 for a staggering 86 consecutive weeks—a feat not seen in over four decades.

bondsBonds in the US and UK continue to lose ground as traders price in higher interest rates in the near future. Yields on the 10-year Treasury note are near a five-month high this morning at 1.86%. When bond demand drops, sellers have to offer higher yields to find buyers. Market analysis of fed funds rate futures yield a 78.5% chance that the Fed will raise its benchmark interest rate targets in December.

The Dhanteras Festival is being celebrated tomorrow in India, marking the start of the five-day Diwali Festival. This is considered by Hindus to be the most auspicious time to buy gold, and higher gold demand in India is supporting prices on the global market. Diwali is also celebrated by many Jains and Buddhists.

Nymex oil prices regained the $50 level this morning after hitting a three-week low yesterday, as traders cling to statements by some Persian Gulf oil monarchies that they would agree to a 4% production cut to support oil prices.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product