The Dollar Continues to Adversely Affect Gold
Since gold is denominated in dollars, a rising US dollar will cost more for investors, pushing them further away from the precious metal, which subsequently falls in price.
The benchmark US Gulf Coast 3:2:1 crack spread fell by ~12% in the week ending July 27. It hit $20.108 per barrel. It was $22.846 per barrel the previous week.
On Monday, July 27, US on-highway diesel prices averaged $2.723 per gallon. This is a fall of 2.12% from $2.782 per gallon recorded the previous Monday.
US regular gasoline prices averaged $2.745 per gallon on July 27. Prices fell by 2% from the previous Monday. Compared to a year ago, prices fell 22.43%.
The demand for silver mainly depends on the demand for jewelry and silverware, its industrial application, as well as overall industrial and economic growth.
A few of the macro indicators that affect gold and precious metals prices are the interest rate, inflation rate, trade balance, and the US dollar.
The outlook for gold demand in India is expected to remain weak due to weaker monsoons and a lack of festivities. This puts pressure of the gold demand.
Retail sales account for about one-third of all consumer spending. They fell by 0.30% in June. The market was expecting 0.20%–0.30% month-over-month growth.
The US released better-than-expected housing data for June. US existing home sales rose 3.20% in June to 5.49 million units—the fastest pace since February 2007.
A budget deficit occurs when spending exceeds earnings. The US budget balance came in at $51.8 billion in surplus in June 2015. It was $82.4 billion in May.
The CPI for all urban consumers rose by 0.30% in June—compared to a 0.40% rise in May. June’s rise is consistent with market expectations.
Since weekly data could have statistical noise, analysts usually prefer the four-week average of jobless claims. The four-week average rose by 3,250 to 282,500.
Dollar-denominated assets, including gold, are influenced by the dollar’s strength. A strong US dollar is negative for gold and vice versa.
Since July 10, gold ETF holdings have fallen by 21.5 tons. As of July 21, known gold holdings were 1,563.8 tons. This is the lowest level since March 2009.
India imported gold worth $1.97 billion in June—a fall of 37% YoY (year-over-year). That’s quite low compared to a rise of 10.50% YoY in May.
The SGE (Shanghai Gold Exchange) points toward the underlying gold demand in the country. All of China’s mined and imported gold is sold through the SGE.
China announced its gold holdings on July 17. The holdings rose by 57% from 1,054 tons in April 2009 to 1,658 tons in June 2015—lower than expected.
Greece did reach a bailout agreement with its creditors. The loan package is worth ~86 billion euros. It’s spread out over three years.
At one point on Monday, July 20, gold prices had fallen to $1,086 per ounce before settling at $1,104 per ounce—the lowest level since March 2010.
The benchmark US Gulf Coast 3:2:1 crack spread increased by 8% in the week ended July 20, hitting $22.846 per barrel on Monday.
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