2016-07-20 11:36:21

ZEW statistics on Eurozone and German economy, released on Wednesday were much weaker than expected. Index of economic sentiment in Eurozone was -14.7 in July, which was the lowest level since November 2012. Economic sentiment index in Germany in July was -6.8 vs. 19.2 in June. Index of current conditions in Germany was 49.8 in July against 54.5 in June.
President of ZEW institute said that the main reason for deterioration of sentiments is the uncertainty about the consequences of Brexit.

At the same time, US macro-economic data is positive. In June the number of permits to construct and new housing construction has significant grown (1.153 million and 1.189 million, respectively). Yesterday, the USD was rising in all markets. Today, the rise in the USD continues.

Positive US data gives grounds for the interest rate increase by the US Fed before the end of this year (probably in September). Financial markets have already stabilized after the British decision to leave the European Union. It is expected that the US Fed will keep interest rates unchanged at the meeting on 26-27 July. However, it is likely that the American Central Bank will highlight the improvements in the economic growth in July compared to June, and speak about possibility of interest rates increase, if economic data in the next few months will justify expectations.

The rise in the USD will increase expectations of the interest rate hike in the USA and this fact will add pressure on the gold price.

Strengthening in the USD increases its attractiveness for investments and reduces the demand for gold, as it becomes more expensive for holders of the other currencies and the cost of borrowing for its storage and purchase is increasing.

Today’s news will include: UK data on average wage and unemployment rate (10:30 GMT + 2) and ZEW economic sentiment index of Switzerland for July (11:00).

If the USD continues to rise, the price of gold will continue to fall.

XAU/USD: USD is going up. Fundamental analysis for 20.07.2016.