What Happened to Precious Metals prior to Yellen's Speech?

Paterniano Del Favero
Giugno 28, 2017

"The main reason behind the weakness of the dollar, which has lost its upward momentum since the Fed rate hike, is USA yields stuck at low altitude", said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

Two other Fed speakers are ahead: Philadelphia Fed President Patrick Harker is due to talk in London at 11:15 a.m.

The benchmark Top-40 index was up 0.39 percent at 45,288 points and the broader All-share index rose 0.28 percent to 51,432 points.

Tokyo ended 0.1 percent lower, while Shanghai closed down 0.7 percent with dealers unimpressed by Chinese factory output data.

"Although iron ore and crude prices are stabilizing, their recovery lacks strength". "The mood has changed a little bit, and to a large extent it is driven by commodities and oil in particular".

"All in all, it is not a full "risk on" situation".

However, a steep fall in oil prices and a flattening yield curve have added to concerns over inflation, which remains below the Fed's 2 percent target.

Gold and the dollar typically move in opposite directions, which means if the dollar goes down, gold futures, which are denominated in the US currency, will rise. Friday's decline took it closer to a seven-month low of 2.103 percent plumbed on June 14.

The crude market is battling a stubborn global glut despite an effort led by OPEC to cut production in place since January.

The common currency rose to an 11-day high of $1.1220 earlier on Monday on weaker-than-expected USA data.

The New Zealand dollar briefly gained overnight, reaching as high as US73.10c after figures showed U.S. durable goods orders dropped 1.1 per cent in May, nearly twice the decline expected.

Investors are now looking ahead to Federal Reserve chair Janet Yellen's speech in London on Tuesday, where the topic is global economic issues and where investors will be listening for any hint of a third U.S. rate hike this year.

Draghi said on Monday that super low rates create jobs, foster growth and benefit borrowers, ultimately easing inequality.

Fed officials have stuck to their hawkish scripts, which is in stark contrast to the firmly dovish view expressed by Draghi against exiting super easy monetary policy too quickly.

The U.S. dollar bought 111.70 Japanese yen, higher than 111.25 yen of the previous session.

Dollar bulls will be hoping that Yellen will validate the Fed's inclination to keep raising interest rates after this month's tightening.

"The employment data is fairly correlated with what we have seen with the rand weakening", said IG South Africa senior market analyst Shaun Murison.

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