[B]Daily Market Analysis – 24th July, 2015[/B]
[I]By FxGrow Research & Analysis Team[/I]
[B]Gold prices hit 5-year lows on weak China PMI, Global cues[/B]
Gold prices fell in the Asian trading session as globally investors see a slowdown in the Chinese Economy which is one of the top buyers of the precious metal.
Gold touched a record low of $1078.67 in the early trading session and consolidated at $1081.40in the European trading session today.
The China Purchasing Managers Index (PMI) showed a decline to 48.2 a 15-month-low, well below analyst expectation of 49.7 on backdrop of the recent stock market crash and weak global exports.
“In our opinion, the movements in the gold price earlier this year reflected market expectations that the events in Greece or the pullback in Chinese stocks were local – not global – risks and that the possibility of a disorderly outcome was/is still low. This does not necessarily mean that the market is correct. It simply reflects its current view” - World Gold Council.
“Investors now seem focused on the direction of the US dollar and the Fed’s monetary policy stance… The gold price already reflects a possible rate hike later this year and that the US-centered perspective is missing a more comprehensive view of the market” - World Gold Council.
“Whether it happens over before the end of the year, or later, we believe that the gold price should already incorporate, at least in good part, current market expectations of a rate hike. In our view, the gold price may be less susceptible to the first rate hike when it actually occurs and the main focus will be the pace at which the Fed signals it will continue raising rates” - World Gold Council.
“Should the conditions change and the risk of contagion or the unintended consequences of a Greek exit increase, we would expect to see a stronger reaction from the gold price. As a high quality, liquid asset, it is likely that many investors would use gold to protect wealth. Similarly, the recent Chinese stock market sell-off hasn’t resulted in a large uptick in the gold price thus far. A more substantial market correction in China, however, could spill over to other economies, increase uncertainty worldwide and make gold a more relevant hedge” - World Gold Council.
The markets are now focusing on a Federal Reserve rate hike in September this year as geopolitical tension appears eased for now.
“What a conundrum we face: commodities are shouting that the global economy is deteriorating, key emerging markets are already seeing major volatility, and yet the world’s most important central bank is close to tightening monetary policy” - Michael Every, Rabobank
Following the Weak China PMI Australian Dollar has dropped to a low of $0.7285 in the European trading session, the lowest levels since 2009.
Crude oil prices have moved lower to $48.64 on concerns of global oversupply and weak demand.
Gold prices tumbled to 5 year low and is currently trading at 1079.92, while Silver is weak at 14.49
[B][I]24th July 2015 – 10:55hrs GMT[/I][/B]
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[I][B]Note:[/B] This analysis is intended to provide general information and does not constitute the provision of INVESTMENT ADVICE. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend investors obtain investment advice specific to their situation before making any financial investment decision.[/I]