On Thursday in early electronic trading, gold futures fell slightly, denting the previous session’s hefty gains. A major concern for market participants is the upcoming data on U.S. retail sales and jobless claims, which is likely to fuel market speculation about the future of the Federal Reserve’s stimulus efforts. However, this speculations are not new and the majority of market participants expect the Fed’s actions to take place sometime in the fourth quarter of 2013.
Gold prices internationally are expected to move up as weak equity markets and a halt in outflows from exchange traded funds can support gold. Asian stock markets fell sharply, prompting additional concerns about the global economy.
In addition, demand from major buyer China, which returned from a three-day holiday on Thursday, also is expected to support gold prices.China, which had shut for the Dragon Boat festival, has been a big factor in holding up gold prices.
Demand in India, the biggest buyer of the precious metal, has cooled and investors have dumped holdings in exchange-traded funds. Nevertheless, gold price in India is also expected to move up, but would constrains to the upside potential due to a strong Rupee.
Gold for August deliver fell $6.20, 0.5%, to $1,385.90 an ounce. Gold prices on Wednesday climbed $15, or 1.1%, in floor trading on the New York Mercantile Exchange.
Due later Thursday in the U.S. are a report on retail sales in May and a weekly report on claims for unemployment benefits. Retail sales are expected to rise 0.5%. Meanwhile, weekly jobless claims have settled in around a range of 350,000 or slightly less.
Signs that the U.S. economy remains on the growth track could further bolster the view that the Fed in coming months will slow the pace of its bond purchases. Gold prices are down nearly 17% this year, hurt by expectations that the asset-buying program will wind down.
Gold prices in recent years have leapt as the Fed and other major central banks embarked on aggressive monetary-easing programs.
Weighing on sentiment, the World Bank cut its global growth forecast for 2013 to 2.2% from a prior view of 2.4% expansion.
Morgan Stanley, meanwhile, cut its China GDP forecasts to 7.6% in 2013, from 8.2%, and 7.6% in 2014, from 7.9%. The stated in a note reasons are aggregate demand weakness and the new government’s less pro-growth policy stance.
Meanwhile Thursday, other metals prices found no upside support from a decline in the U.S. dollar. A weaker dollar is usually supportive of dollar-denominated commodities as it makes them less expensive for buyers with using currencies. However, in resent weeks, the correlation seem to be broken. The dollar plunged against the Japanese yen, hitting as low as ¥93.76 overnight, before moving back above ¥94.
July silver slipped 5 cents to $21.75 an ounce in early electronic trading.
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