Gold Price Forecast: Limited Recovery on Dollar Correction
By Tim Clayton
Trends in the dollar and risk appetite will inevitably again play a crucial role in determining gold moves during the week ahead. Although dollar strength tends to undermine gold, the equation will be more complex, especially if any U.S. currency gains are driven by fear and risk aversion rather than confidence in U.S. fundamentals.
Minutes from July’s Federal Reserve policy meeting are due for release on Wednesday, and the overall discussion within the committee will be watched closely. The rhetoric on inflation and trade disputes as well as fiscal policy will be important for underlying sentiment.
Federal Reserve Chair Powell’s speech at the Jackson Hole Symposium will also be watched closely on Friday for further hints on likely U.S. policy developments. Markets have priced in an over 90% chance that the Fed Funds rate will be increased again at the September meeting, with a 60% chance of another rate hike in December. There will be a sharp impact on the dollar if these expectations shift, with any dovish rhetoric liable to push the U.S. currency sharply lower and support gold. Wider comments from other Federal Reserve officials will be monitored closely to assess whether there is increased pressure for a pause in rate hikes.
Global trade developments will also have a significant influence, with U.S.-China talks scheduled for Aug. 22-23. Positive rhetoric would tend to support gold through a weaker U.S. currency, although the potential for improved risk conditions would also limit any scope for defensive demand.
Alibaba: Buy The Dip Into Earnings
By Victor Dergunov
- Despite having incredibly strong fundamentals, Alibaba has dropped by about 20% in the last 2 months.
- The company just grew revenues by a staggering 58% and is expected to outdo itself this year.
- Alibaba is cheap, and the company is getting set to report earnings this week.
- Given the company’s propensity to beat revenue estimates, and a relatively inexpensive valuation this stock should go much higher into year’s end and beyond.
Crude Oil Price Forecast: Another Step Lower
By Gary Ashton
Analysts remain divided over the medium-term direction of oil prices. On the one hand, they argue that prices are due for an uptick because supplies will tighten by about 1 million barrels per day when U.S. sanctions against Iranian oil exports come into effect in November 2018. They also cite a slowdown in U.S. shale oil production confirmed by the EIA, which now expects U.S. shale production to slow in September to the weakest monthly growth since November 2017.
U.S. shale producers, however, are quick to adapt to new opportunities in other shale plays with better prospects and are lifting their 2018 output projections without raising their capital expenditure budgets. For example, Argus Media says that Marathon Oil Corporation (MRO) increased its full-year production target to 400,000-415,000 barrels of oil equivalent per day, while EOG Resources, Inc. (EOG) expects to pump 706,700-728,300 barrels of oil equivalent per day.
For now, the market looks well supplied in the face of sluggish demand, and this should contribute to the negative price sentiment we are currently seeing in the market.
Facebook Stock Seen Falling By as Much as 15%
By Michael Kramer
Facebook Inc.’s (FB) stock has fallen by more than 20% since the company reported second-quarter results at the end of July. Now some options traders are betting the decline in the stock isn’t over and that it may fall by as much as an additional 15% by November. The technical chart also suggests there may be more trouble ahead for the stock.
Analysts have been slashing their revenue and profit forecasts for the social media company for the coming third quarter and full year. Analysts are now forecasting for the company to see its earnings decline by more than 3% versus last year in the third quarter, a stark contrast to prior views for growth of more than 13%.
It would seem the stock is still sorting out what the impact over the longer term is likely to be, and as long as that uncertainty is an overhang, the stock is likely to continue to struggle.
Pound-to-Canadian Dollar Rate Week Ahead Forecast: Further Losses are Ahead
By Joaquin Monfort
The Pound-to-Canadian-Dollar rate has been in a downtrend since striking a 1.84 high back in March 2018 and is likely to remain under pressure during the week ahead.
The main event for the Pound in the week ahead will be testimony from Bank of England (BOE) governor Mark Carney the Parliamentary Treasury Select Committee, on Wednesday, August 22, covering the inflation and economic outlook.
The Pound is highly correlated with interest rates because of their influence over foreign capital inflows. Higher rates tend to attract greater inflows of capital, which raises demand for Sterling.
The other major release for the Pound is the Confederation of British Industry (CBI) Industrial Trends report for August, with overall activity balance forecast to decline from 11.0 to 10.0 when the report is released on Tuesday, August 21 at 11.00 B.S.T.
The most important release in the week ahead for the Canadian Dollar is retail sales data for June, which is forecast to reveal a 0.3% increase in sales and a 0.1% increase when car sales are removed from the numbers.
The data are due to be released at 13:30 London time on Wednesday. Canadian data has been very good recently, which could mean a better-than-forecast result is more likely than normal. This would boost the Canadian Dollar.
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