Gold price outlook: Relief rally in gold prices on the US-Iran preliminary deal is facing the risk of reversal as the central banks turn more vigilant on curbing inflation expectations.
At the time of writing, the metal was trading at $4230, down .6 per cent for the day.
Geopolitics and oil:
Contrary to the US’s version of the agreement, Iran insists that Iran and Oman will regulate the traffic flows through the Strait. Iran will not charge ships for using the Strait for 60 days, but Iran’s top negotiator said Wednesday that there would be a fee for transit after that. Iran has reaffirmed its previous commitment to never develop a nuclear weapon, though it is an old commitment.
Questions concerning Iran’s stockpile of highly enriched uranium, further enrichment efforts, or any kind of international monitoring are to be sorted out in the extended ceasefire period. Iran will be allowed to have ballistic missiles. Risk to deal lingers as Israel has not committed to stopping its War in Lebanon.
Data roundup:
US retail sales advanced 0.9 per cent M-o-M in May, which beat the estimate of 0.6 per cent and was higher than the prior reading of 0.4 per cent. Even control group sales at 0.7 per cent M-o-M topped the median forecast of 0.4 per cent. Initial jobless claims slid from 230K to 226K (forecast 225K) as continuing claims were up from 1786K to 1810K.
Central Bank watch:
Gold ETF and COMEX inventory:
Total known global gold ERF holdings fell for the eighth straight day on June 17. Holdings currently stand at 97.09 MOz, down 1.86 MOz Y-T-D. ETFs have seen a net outflow of 3.85 MOz so far since the beginning of the Iran war.
US Dollar Index and yields:
The US Dollar Index has been boosted by the Fed’s hawkish stance. The Index, at the time of writing, was hovering around 100.61, the highest in a year and up 0.55 per cent for the day. The Index is up 1.1 per cent from its June 17 low of 99.49.
Two-year US yields surged to 4.21 per cent — cycle high — on the FOMC day and June 18 before easing. At the time of writing, yields at 4.15 per cent were down 3 bps. Ten-year yields at 4.42 per cent were down 1 per cent.
Upcoming data:
Major US data on tap include S&P PMIs (June 23), PCE Price Index (June 25) and final reading of Q1 GDP (June 25). Japan’s national CPI data will be released on June 19. Europe’s PMIs will be released on June 23.
Outlook:
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Disclaimer: This article is written by Praveen Singh, head of commodities at Mirae Asset ShareKhan. Views expressed are his own. Readers’ discretion is advised.
