The market’s focus on stronger data and dollar causes gold prices to give up gains.
The U.S. Comex gold futures rose 1.93% last week but fell 2.11% this week to $1,176.60 on Tuesday. The S&P 500 Index rose 0.68% this week while the Euro Stoxx 50 Index surged 4.97% and the crude oil futures jumped 2.35%. The Dollar Index has also jumped 1.43% this week led by the 1.53% decline in the Euro/Dollar on Tuesday. The 10-year German Bund yield rose 12bp to 0.87% this week and the ten-year U.S. government bond yield jumped 15bp to 2.409%. The 10-year Italian government bond yield dropped 13bp on the contrary to 2.13%. The VIX index has collapsed from a recent high of 15.39% on 15 June to just 12.11% on Tuesday despite the uncertainties in the Greek deal.
Better news on the growth front
The May new home sales in the U.S. rose to a 546,000 annualized rate compared to the expected 523,000 and 534,000 in April. Residential investment will likely help the Q2 GDP growth. The June preliminary U.S. Markit PMI was slightly lower at 53.4 compared to 54.1 expected. However, the Eurozone flash composite PMI rose to a high of 54.1 in June while that of China at 49.6 also beat the expectation of 49.4. In the meantime, we are down to the wire for the Euro lenders and Greece to agree on a deal. They will meet on Wednesday. Greece appears to converge with the lenders’ conditions on structural reforms despite the numerous technical hurdles both sides still have to manage.
Gold price down again
As Greece is looking less likely to leave the Euro and the market’s attention goes back to the stronger U.S. economic data and the timing of the rate hike, the gold prices have given up all their gains from last week. The managed money total net combined gold positions have fallen 4.25% during the week ending 16 June as the short positions rose 7.27% after a jump of 31% the week before. In addition, the gold prices in the local markets in India and China are trading at a discount. The better news according to Barclays is the surprising progress in the Southwest monsoons in India, which will likely support the gold demand in three months’ time.