On this first day of a new week, in the middle of the month, markets are expected to be fairly quiet; base metals are trading down by nearly 0.5 percent at LME electronic platform. The Asian equities are also trading mixed with the Chinese markets mostly edging down the negative territory.
Due to “Marine Day” the Japanese bourses are off for a holiday limiting cues from the sunshine nation. Riskier assets including base metals edged down after surging to one week high in the prior session as the top consumer China’s Premier on Sunday indicated severe downside risks still persists. However, efforts to stabilize the economy are working and the government will step up efforts in the second half of the year to increase policy effectiveness and foresight, raising hopes of more aggressive investment spending by Beijing.
Speculators are now dreaming of monetary easing from both hemispheres, traders are spreading rumors that the PBoC will begin a round of monetary stimulus to try to jumpstart the Chinese economy, while there are hopes and dreams that the US Fed will follow the same policy. Can you just imagine, the two largest Central Banks in the world injecting stimulus virtually simultaneously?
Further, the International Monetary fund is likely to reduce the growth forecast of the World as the economy slows and may continue to weaken riskier assets including base metals.
From the economic data front, the Euro-zone CPI may likely increase after increased easing by the ECB while the Eurozone trade balance may also remain at tenterhook after weak export imports figures.
From the US, the Empire manufacturing may improve slightly with increased advanced retail sales however; piling business inventories may continue to disappoint the show for metals pack. It’s been the 10th week gold is being consolidating in a range of $1550-1620. Alternative days of gains and losses are making hardly any change in prices on weekly basis. After Friday’s gain, today again prices have taken a back seat at early Globex ahead of the IMF report of global economic growth.
Moving ahead, expect weakness in gold to be continued as a likely rise in Euro zone CPI and reducing trade balance may further weaken the Euro. Reports from the US may also forecast a slight improvement in retail sales and empire manufacturing. All these would indicate a stronger dollar and so gold may come under pressure.
Moreover, investors will be eyeing Bernanke’s testimony tomorrow where he is expected to reiterate the same, i.e.; a least-considerate easing at this point. Market expectation is therefore likely to stay weak with the IMF expectedly revising its global growth to a weaker note. Overall, market sentiment to bank on the testimony and a likely weakness in Euro may pressurize the metal for the day. However, technical supports may work out fine which may not let the metal to fall to a greater extent.