Today in early trading base metals are trading down by 0.1 to 0.4 percent apart from Copper at LME electronic platform. The Asian markets have also opened on a mixed note after reduced economic growth expectation by the International Monetary Fund. The IMF cut both Global and China’s economic forecast for 2012 as well as 2013 pressurizing riskier assets including base metals. Further, the FDI inflow to China also declined 6.9 percent to $12 billion containing equities. Markets would eye the testimony of the Fed for today’s session and albeit may turn volatile in the evening.
Prolonged delay for Q3 and no major boost from the US central banks are likely to keep riskier assets including base metals at tenterhook in the evening. From the economic data front, UK CPI is likely to remain at a blend while the ZEW survey figures from Germany and Euro-zone are likely to decline and may continue to weaken Euro along with base metals. However, the US releases of inflation, industrial production and capacity utilization is expected to improve after increased manufacturing and may support gains. Further, the NABH house market index and TIC flows may also increase and support gains in metals pack in the evening session. Overall, base metals may perform on a diverse note with Copper and Aluminum gaining slightly while other metals might continue to remain under pressure in today’s session.
The big event for today is, Bernanke’s testimony on the back of lower global growth is likely to support gains; however, markets may turn volatile and remaining cautious might be a wise move as Bernanke has a way of playing the markets. Remember the Bernanke Gold Strategy.
A weak beginning and a continuation of consolidation phase led gold to generate hardly any return on intraday basis yesterday. The resiliency in gold’s move was observed for quite a long time as the global financial health and news cast continued to linger creating uncertainties among investors. Market are expected Bernanke to reiterate the same what was actually portrayed in the last meet and minutes. Reports today may forecast weakening economic scenario in Euro zone and therefore Euro may slid a bit. From the US, industrial production number may improve a bit after the Empire state manufacturing recouped nicely in July so far. However, a drastic fall in advance retail sales couple with rise in manufacturing may indicate the capacity has been utilized optimally. On the other hand, CPI may follow the rising PPI while net long term TIC flows may improve, indicating more dollar demand. All these are pointing to a stronger dollar. Technically although the chart signifies a confirmed buy, potential may be slight weak for a comprehensive gain. Divergence in Euro would have propelled the metal for this gain and may support for some more time till Bernanke starts the semi-annual testimony. Remember to watch for the Bernanke Bounce.
Gold is currently trading at 1593.95 and will most likely remain trapped under the 1600 price, where it is facing congestion between 1575 and 1595 as investors prepare before the Fed Chairman testifies.
- Federal Reserve Chairman Ben Bernanke Testifies Before Congress
- Forex: EUR/USD test session lows on Bernanke testimony
- Market Weighs ECB, Bernanke Testimony: “Don’t Fight the Fed” Says Baker
- Fed’s Bernanke repeats Wednesday’s testimony before the US Senate
- Dollar: Were Traders Surprised by No QE3 Mention from Bernanke?