Gold's Recent Rally Fails to Change Bearish Views
FRANKFURT-GERMANY (July 23) Gold has continued to trade above 1300 in European session. The rally yesterday amid decline in the US dollar has sent mixed signals about the yellow metal's turnaround. Goldman Sachs has remained bearish over gold price, forecasting that it would decline further in the medium-term "given our U.S. economists' forecast for improving economic activity and a less accommodative monetary policy stance". Morgan Stanley also retained its "fairly pessimistic outlook" for gold as it has become increasingly likely that the Fed would begin paring QE measures.
In India, the RBI yesterday required banks and trading houses to retain 20% of every lot of gold imports at customs warehouses. It also announced that gold can only be imported when 75% of the inventory in the warehouses is used for export purposes. In a statement released by the central bank, it's mentioned that "such imports shall be linked to financing of exporters by the nominated agencies. Further, they shall make available gold in any form for domestic use only to entities engaged in jewelry business/bullion dealers supplying gold to jewelers". The measures implemented by the RBI to curb demand for gold should cause negative impacts on the price.
On oil news, China's crude oil production soared +3.3% y/y to 103.3M tons in the first 6 months of the year. Refined crude rose +6.6% to 217.5M tons while refined oil products gained +6% to 133.8M tons during the period. Apparent consumption of refined oil products added +4.0% 126.5M tons. Strong rise in domestic production has dampened import demand, the decline of which was also a result of moderation of Chinese economic growth.
On the dataflow, Canada's retail sales probably gained +0.3% m/m in May, up from +0.1% a month ago. Excluding autos, retail sales might have also gained +0.3% after a -0.3% drop in the prior month. US home price index probably rose +0.8% m/m in May, following a +0.7% gain a month ago. Eurozone will also report flash data on consumer confidence which probably slipped to -18.3 in July from -18.8 in June.
