Gold Soars on Airstrikes in Syria

December Comex Gold futures rallied from an eight-month low on aggressive counter-trend buying and profit-taking, following a prolonged move down in price and time. With hedge and commodity funds massively short, the market was ripe for a short squeeze. The news behind today’s almost $20 rally was the start of U.S.-led airstrikes in Syria.

The military action triggered a sell-off in the equity markets which led some investors to move their profits into gold. The surprise geopolitical event also gave fund investors an excuse to begin booking profits. It is too early to tell if this move will hold since the majority of the fundamentals are still overwhelmingly bearish. However, due the pilling up of the negative fundamentals, contrary traders may have gotten it right this time at least over the short-run.

November Crude Oil futures traded higher on Tuesday after wavering most of the session. Bearish China Purchasing Managers’ Index data came in above consensus at 50.5 rather than 50.0, but this number was low enough to fuel concerns about future demand. This news helped attract some selling pressure.

However, the news of airstrikes in Syria by a U.S.-led coalition helped underpin the market and was able to generate some light short-covering. The turmoil in the Middle East is likely to provide some support, but don’t expect a huge rally unless there are supply disruptions. Also helping to boost prices was a rumor that OPEC is considering a cut in production next year to deal with the oversupply.

The EUR/USD was able to post a small gain on Tuesday despite bearish economic data. This is usually a sign that a market is running out of sellers, making it ripe for a short-covering rally. Any signs of “seller exhaustion” usually brings up thoughts of a short-squeeze. If this occurs then look for a more meaningful rally throughout the week.

New data from Markit showed overall weakness in the Euro Zone. Today, it was reported that the Services PMI posted a reading of 52.8. This was a three-month low. In Germany, factory growth showed its worst reading in 15 months. Manufacturing and services were also down in France.

The GBP/USD also rose on Tuesday as investors took profits after the recent sell-off on the thought the Fed would continue to post-pone a rate hike because of the uneven recovery taking place in the U.S. Most of the reaction was to a report showing U.S. home prices rose less than forecast in July. This was the second consecutive weaker-than-forecast housing report. Yesterday, the U.S. reported existing home sales as weaker-than-estimated.

Metals Pack Fundamental Analysis September 24, 2014 Forecast – Silver & Copper

Silver recovered 63 points on the coat tails of gold which also traded in the green today. Silver climbed to 17.837 as the US dollar took a rest. Copper gained 6 points on a better than expected HSBC PMI release in China. The report remains weak but came in better than forecast. Bloomberg reported that copper rose for the first time in five days and nickel climbed after better-than-expected factory data from China, the biggest user of industrial metals.

Copper climbed as much as 0.9 percent in London. The preliminary Purchasing Managers’ Index for Chinese manufacturing rose to 50.5 from a final reading of 50.2 in August, according to data today from HSBC Holdings Plc and Markit Economics. That exceeds the median estimate of 50 in a Bloomberg survey of economists. Levels above 50 indicate expansion.

“It’s all about China,” Chae Un Soo, a metals trader at Korea Exchange Bank Futures Co., said by phone today from Seoul. “Today, we got better-than-expected results from the manufacturing PMI, which has helped the prices up for metals,” improving short-term sentiment, he said.

Copper rebounded from their three-month lows on Tuesday after a private survey showed China’s manufacturing sector expanded at a slightly faster pace than expected, but lack of physical buying suggested the industrial metal and its peers were not out of the woods yet

Gold Fundamental Analysis September 24, 2014 Forecast

Gold gained a bit today as traders took advantage of low prices to buy the commodity sending it up to 1224.20 after the release of PMI data in China and throughout the eurozone. Regardless of this mild bounce, there’s no reason to own gold in dollar terms at this point, according to commodities trader Dennis Gartman of the Gartman letter. “Owning gold has been just a treacherous, boring, nasty trade that just keeps losing money for anybody who buys it,” he told CNBC in an interview. “There will be a time when inflationary pressures will once again exhibit themselves, but that time is not now.”

A mostly quiet day for economic numbers is on tap for Tuesday, but the FHFA house price index for July and the Richmond Fed survey of manufacturing activity for September will both be released. Precious metals were stuck near its lowest in almost nine months, hurt by outflows from the top bullion backed exchange-traded fund (ETF) as investors adjust positions due to concern about higher US interest rates and strength in the dollar.

Investors pulled out of SPDR Gold Trust, the top gold-backed ETF, for a second day in a row, with the fund’s holdings falling to 774.65 tonnes on Monday — its lowest since December 2008. The fund is a good representation of investor sentiment due to the size of its holdings.

NZD/USD Fundamental Analysis September 24, 2014 Forecast

The NZD/USD eased by 6 points to trade at 0.8115 paying little attention to the jump in Chinese manufacturing data this morning as low diary prices and the upcoming data releases and comments from Graham Wheeler of the central bank are expected.  Markets have become increasingly jittery over the performance of China’s economy after a disappointing showing in recent months. Industrial production growth in August slowed to its lowest level since the 2008 global financial crisis, while its economically vital property market slid for a fourth straight month. The PMI sub-indexes also uncovered worrying signs about the job market. A measure of employment shed more than a point, dropping to 46.9 – its lowest since February 2009 when a collapse in exports threw tens of millions of Chinese out of work.

On March 13, when the RBNZ increased interest rates from 2.5 per cent to 2.75 per cent, it was the first change in over two years. At the time the New Zealand dollar was trading above US86c, around 2 per cent below its all-time high. The bank then subsequently raised the official cash rate three more times to 3.5 per cent, pausing in July when the exchange rate was above US88s. For a small island nation that relies so heavily on its exports, one could call this a rather risky strategy. It was however a necessary step in order to curb inflationary pressures stemming from a booming housing market which, combined with the introduction of new macro prudential measures, are showing some signs of working. Last week it reached a low near US80c, some 10 per cent below its peak in July.  Was this just sheer luck, or great timing? I believe it was great foresight by Governor Wheeler and the board of the RBNZ to make that call when they did.

USD/CAD Fundamental Analysis September 24, 2014 Forecast

The USD/CAD is trading at 1.1004 easing down 38 points as the US dollar gives up some of its momentum after lackluster housing data. The sharp dollar rally in the recent weeks was mainly aided by the market view that the US Fed will turn to a hiking cycle next year for sure. The central bank on 17 September said it sees higher interest rates by the end of 2015 than it was projected earlier. Some analysts, however, don’t believe in the case for continued dollar rally and fall of metals- they say the US will not be able to hike rates as easy as it would think because the impact of an earlier-than-required hike will be difficult repair.

Meanwhile, the Canadian Dollar has softened in recent weeks and is likely to remain bearish ahead of the speech expected from Bank of Canada Deputy Governor Carolyn Wilkins. However, Canadian inflation figures beat forecasts last week and raised speculation that interest rate hikes could occur in the Canadian economy for the first time in four years.  Canada’s Core Consumer Price Index unexpectedly jumped to 2.1% in August, higher that the 1.8% forecast.