Credit Suisse says it remains upbeat on gold prices, although the bank’s full-year average price forecast is around current levels. As of 9:12 a.m. EDT, spot gold was $8.90 softer at $1,278.50 an ounce. “We remain positive on gold prices in 2019 owing to a number of macro factors,” Credit Suisse says. “We continue to believe gold miners will operate against a backdrop of higher gold prices YoY [year-on-year] in 2019, and we (conservatively) estimate an average gold price of ~US$1,280/oz in 2019. Gold is being supported by ongoing geopolitical issues (U.S.-China trade war and Brexit, among others), concerns around slowing global economic growth and recession fears, and a more dovish U.S. Federal Reserve (no rate hikes in 2019).”
A resilient U.S. dollar is making it hard for gold to hang onto any gains, says Lukman Otunuga, research analyst at FXTM. Gold is under pressure Tuesday, falling $8.90 to $1,278.50 an ounce as of 9:12 a.m. EDT. “Broadly, global risk sentiment has been supported by China showing signs of stabilizing and hopes that the U.S.-China trade saga will conclude with a breakthrough deal,” Otunuga says. “However, with the ECB [European Central Bank] and the IMF [International Monetary Fund] warning that risks remain tilted to the downside, markets do not yet have the all-clear for charging into a risk-on side....Focusing on the medium- to longer-term outlook, gold remains protected by concerns over slowing global growth, Brexit, geopolitical risks and a dovish Federal Reserve. As long as these themes remain present, the metal still has ample upside potential.”
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Gold futures are approaching a point where sell stops could be activated, says INTL FCStone. These are pre-placed orders activated when certain chart points are hit. As of 9:09 a.m. EDT, Comex June gold was $9.70 lower to $1,281.60 an ounce. “The $1280/ounce level remains key support and we are watching that closely as lots of stops are presumably just below that mark,” INTL FCStone says.
Gold has been on the defensive since the start of Asia-Pacific trading, weighed down by a strong U.S. dollar, says MKS. “It was generally one-way traffic from the Tokyo open as bullion declined underneath $1,288, with weakness accelerating as Shanghai opened,” MKS says. “While China continued to see an elevated on-shore premium toward $18, we saw little in the way of interest throughout the session as bullion extended declines….” As of 9:12 a.m. EDT, spot gold was $8.90 softer at $1,278.50 an ounce. Analysts pointed out that outflows continue from exchange-traded funds, with holdings falling by another 120,000 ounces on Monday. “The yellow metal now sits firmly underneath the 100 DMA [100-day moving average] at USD $1,289…,” MKS says.
Dovish views from European Central Bank officials are weighing on the euro, with the U.S. dollar rising, says Brown Brothers Harriman. As of 9:13 a.m. EDT, June euro futures were 0.05% lower to $1.13575. They have been trending lower in recent months. “Press reports suggest a ‘significant minority’ at the ECB [European Central Bank] remain doubtful of the H2 recovery scenario that the bank is showing in its March projections,” BBH says. “Some went so far as to cast doubt on the accuracy of its models. Just as we saw after the March ECB meeting, so too are we now seeing dovish leaks after this month’s meeting.” The ECB is scheduled to meet again on June 6, when new staff projections are scheduled for release. “If data remain soft, we suspect this dovish minority will grow and perhaps feed into a more dovish policy stance,” BBH says.
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