Author: SondraHunter

Intensifying global economic uncertainty weighed on the market last week. There was once a boost on Friday as the US employment report in July exceeded expectations but the momentum was week. Asian markets should open with great caution on Monday as the S&P downgraded US’ rating to AA+ (from AAA) after the US market closed on Friday.

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Weekly Fundamentals – Investors Turn Risk Averse as Economic Outlook Worsens, US Debts Get Downgraded

Oil prices rebounded after US’ employment increased more than expected in July. The front-month contract for WTI crude oil price recovered to around 86 in NY session after plummeting to 82.87, a level not seen since November 2010, in European session. The equivalent Brent crude contract also reversed losses after initially declining to a 5-week low of 104.3. Wall Street fluctuated between gains and losses after the report, signaling investors’ lingering concerns over US’ economic outlook despite better-than-expected payrolls.

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Oil Rebounds as US Payrolls Climb More Than Expected

As we mentioned before, demand for gold will remain strong even after the US debt ceiling deal is done. After a brief pullback on Monday, the benchmark Comex gold contract resumed its rally yesterday, surging to a new record high of 1664.5 before settling at 1644.5, up +1.41%. The compromised agreement on raising the debt limit and reducing government expenses is passed in both the House and the Senate but market confidence has not improved.

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Gold Seen New High amid Disappointing Data, Debt Concerns in Italy

Financial markets rallied today as the White House and the Republicans agreed on a deal to raise the debt limit on Sunday night. The plan has to await approval by the Congress. While it remains a long road for the US devise a feasible long-term plan to reduce deficits to an acceptable level, the deal helps avoid a default and alleviates market worries in the near-term. Stocks advanced with the MSCI Asia Pacific Index rising more than +1%.

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US Reaches Historic Deal

Commodity price movements continue to be directed by macroeconomic concerns in the near-term. Gold jumped to a new record high of 1637.5 on Friday as US growth missed expectations. The yellow metal’s rally to new highs in 3 out of the past 5 days signaled market worries over uncertainties. The debt ceiling debate in the US has dominated the news headline for the whole week. The latest development is that House speaker Boehner’s revise plan was passed in the House but was defeated in the Senate. Meanwhile, the majority Senate leader Reid modified his proposal, incorporating Minority Leader Mitch McConnell’s ‘2-step’ process (the loan will be provided in 2 installments of 1.2 trillion, one immediate and another when the nation is near the debt limit again) to raise the debt ceiling. Economists generally do not expect the new plan to be the resolution for the debt problems.

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Weekly Fundamentals – Gold has Further to Go…