Commodity Market: Gold edges higher on Monday, but gains seen limited as investor risk appetite heightens

Spot Gold started the new week on a stronger footing in Europe as the latest macro data from Japan and the United States added to prospects of a sluggish economic recovery. Still, a slight improvement in investor risk appetite due to signs of easing US-China tensions could limit upside for the yellow metal.

An official government report showed on Friday that US retail sales had increased at a slower-than-anticipated monthly rate in July, by 1.2%, compared with a consensus estimate of a 1.9% growth.

In other macro data, Japan’s economy was reported to have contracted at a record quarterly rate of 7.8% in Q2, while in annual terms, the country’s GDP shrank at a rate of 27.8% during the second quarter.

Meanwhile, reports in the media emerged that China was intending to bolster purchases of US oil. The news came just a day before Beijing and Washington were scheduled to resume trade negotiations. However, the review of the “Phase One” trade deal between the two economic superpowers has been delayed, which provided certain relief to global markets, since the agreement has been left intact.

As of 9:25 GMT on Monday Spot Gold was edging up 0.37% to trade at $1,952.00 per troy ounce, while moving within a daily range of $1,929.65-$1,957.26. The precious metal advanced 10.95% in July, while marking its fourth consecutive month of gains and also the best monthly performance since January 2012.

The commodity retreated 4.45% last week, which has been its worst performance since the business week ended on March 13th. Still, the metal’s year-to-date gain is over 28.5%.

Meanwhile, Gold futures for delivery in December were gaining 0.63% on the day to trade at $1,962.00 per troy ounce, while Silver futures for delivery in September were up 2.98% to trade at $26.867 per troy ounce.

The US Dollar Index, which reflects the relative strength of the greenback against a basket of six other major currencies, was inching down 0.08% on Monday to 93.02, after earlier slipping as low as 92.89, or its weakest level since August 7th (92.76). Weaker US Dollar tends to make Gold cheaper for holders of other currencies.

Today Gold traders will be paying attention to the monthly manufacturing data for the New York area at 12:30 GMT. The New York Empire State Manufacturing Index probably dropped to 15.0 in August, according to market expectations, from a level of 17.2 in the prior month.

Market players are also expecting the Minutes from the Federal Reserve’s latest policy meeting, due out on Wednesday. Speculation has emerged that an average inflation target may be adopted by the Fed in an attempt to drive inflation above 2% for some time and to compensate for the period during which it has remained below that level.

Meanwhile, near-term investor interest rate expectations were without change. According to CME’s FedWatch Tool, as of August 17th, investors saw a 100.0% chance of the Federal Reserve keeping borrowing costs at the current 0%-0.25% level at its policy meeting on September 15th-16th, or unchanged compared to August 14th.

Daily Pivot Levels (traditional method of calculation)

Central Pivot – $1,946.49
R1 – $1,960.66
R2 – $1,976.60
R3 – $1,990.77
R4 – $2,004.94

S1 – $1,930.55
S2 – $1,916.38
S3 – $1,900.43
S4 – $1,884.49

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