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Gold spot perked up after a 5th straight monthly fall until August. Non-yielding gold is still under pressure from a stronger U.S. dollar and rising U.S. treasury yields due to the possibility of more rate hikes from Federal Reserve.

Global Economy

• Global equity gauges mostly dipped during the last week amid signals of monetary tightening from major central banks.

• Euro zone inflation rate increased to a record high of 9.1% with a possibility to enter double-digit territory amid rising energy cost. The European Central Bank may be compelled to adapt a series of significant interest rate hikes disregarding the possibility of a recession.

• U.S. economy added 315,000 jobs in non-farm sector in the month of August, while unemployment rate rose to 3.7%.

• China imposed new round of lockdown in parts of the country to contain the Covid outbreak.

• U.S. ISM Manufacturing PMI was steady at 52.8 in August of 2022, the same as in July, pointing to low levels of factory growth not seen since June 2020.

Gold

• LBMA Spot gold and COMEX gold futures shed around 1.50 percent last week.

• Switzerland exported 186.2 tonnes of gold in July, up by 122% MoM. China was the top destination for Swiss exports in July.

• The SPDR gold backed ETFs physical holdings witnessed 4th straight monthly outflows.

Spot gold visited below $1700/ozs, marked 5th straight month’s fall

Gold prices marked a 5th consecutive monthly fall at the end of August. A strengthening US dollar on the prospects of further interest rate hikes from Federal Reserve subdued appetite for precious metal gold. Apart from that, rising U.S. Treasury yields made non-yielding bullion less attractive for investors. Spot gold slipped to near USD 1688 an ounce during last week and rebounded to above USD 1700 an ounce. Gold prices seldom dipped below the psychological level of the 1700 region after the pandemic-driven price spike, and anytime prices fell below that mark, the dips were transient.

Dollar Index hover near 110 marks, anticipates further rate hikes

The U.S. dollar strengthened further and hovered at fresh 20 year highs anticipating further hikes from Federal Reserve. Upbeat job numbers and higher inflation numbers expected to keep the central bank on its present policy path. In August, U.S. employers hired more workers than anticipated. However, moderate wage growth and an increase in the unemployment rate to 3.7% suggested the labour market was beginning to loosen, giving rise to cautious optimism that the central bank could slow the pace of rate hikes.

Switzerland exported 186.2 tonne gold in July, with the bulk heading to China

Switzerland exported 186.2 tonnes of gold in July, up by 122% from the previous month. China was the top destination for Swiss exports that month, having imported more than 80.1 tonnes. This was followed by 20.1 tonnes to Turkey and 17.6 tonnes to Thailand. On a year-to-date basis, China has remained the largest importer of Swiss gold, with total imports estimated at 255.1 tonnes

Global gold jewellery demand contracts in H1 despite strong Q2

Gold jewellery consumption in Q2 remained higher by 6% compared to corresponding quarter in the previous year, however, on H1 basis, demand remained slightly lower by 3% compared to H1 2021. Slowdown in economic growth in China due to strict COVID restrictions impacted demand for gold jewellery hugely, offsetting the gain witnessed in India, other Asia, and Middle East markets

SPDR ETFs outflows 4th month in a row

The SPDR gold backed ETFs physical holdings witnessed 3.23 percent outflows in August after showing 4.23 percent outflows in July after a 1.69 percent outflows in June, and a 2.39 percent outflows in May. The physical holdings with SPDR gold trust totalled 31.29 million ounces by the end of August.

Money Mangers reduced net longs in COMEX Gold F&O

Hedge funds and money managers reduced long positions and increased short positions in COMEX gold futures and option contracts in the week ended September 2, and the net long positions declined, US Commodity Futures Trading Commission reported

Outlook

International Gold: Strengthening US dollar on the prospects of further rate hikes from Federal Reserve subdued appetite for gold. Surging U.S. treasury yields on the other hand added pressure on the non-yielding bullion. The energy crisis in Europe and subsequent surge in inflation, fresh round of lockdown in China, fears of economic slowdown in major economies underpinned the prices. Next FOMC session is scheduled 20-21 of September.

Domestic Gold: Fall in the gold prices in domestic market were limited due to a weaker domestic currency. Without a major fall in prices in the international market, the domestic Mumbai spot prices expected to be fairly above Rs.50000/10 grams

Technical View: London Spot: Prices expected to range bound with mild rebounds in the near term. Major weakness is expected only below $1670/oz region.

MCX: Prices remain choppy with mild positive bias in the near future while the major psychological support is seen at Rs 50000/10 grams.

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