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July 22, 2016

Gold extends decline on appeal to risk assets, ECB hold the policy unchanged.

Gold extends decline on appeal to risk assets, ECB hold the policy unchanged.

Gold futures slid on Friday as upbeat economic data from US released in Thursday supported greenback, while ECB left the door open for stimulus in future.On Thursday prices fell to three-week low at $1,314, recapturing $15 in New-York session. Downturn resumed on Friday though second attempt to break the support is likely to be reserved for next week.

 

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Market sentiments started to heat as ECB President Mario Draghi said on Thursday that European markets have successfully coped with the volatility as a result of Brexit, showing “encouraging stability”, but reiterated that the Central Bank is ready to act, using all tools within mandate.The comments came after the ECB kept interest rate unchanged at a record low 0.0%, tallying with forecasts.

US Dollar gained support on positive employment figures posted in Thursday which boosted optimism about the U.S. economy.

The data showed that existing home sales in the United States unexpectedly rose in June by 1.1% to 5.57 million units, while a separate report showed that the number of aplications for unemployment benefit in the United States unexpectedly fell last week to 253000 (-1000). The USD index, showing how good greenback performs against the basket of other majors rose sharply by 0.23% to 97.16. Futures on US interest rate price in only 1.2% probability of rate hike on next meeting at Wednesday, July 27.

Gloomy UK Composite PMI released on Friday added pessimism to post-Brexit UK economic outlook. The headline figure at 47.7 missed median estimate of 48.5, signaling economic contraction could be faster than expected.

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