Shrugging off firmness in USD and mild increase in bond yields, gold staged the strongest rally in 2 months as investors again found its safe-haven status appealing. The benchmark contract for the yellow metal jumped to as high as 1218.5 before closing at 1216.7, up +1.46%. Others in the precious metal complex also surged with silver gaining +0.91%. Platinum and palladium also halted their 7-day decline and rose +0.72% and +1.37% respectively. While demand for silver and PGMs can be threatened by slowdown in industrial production, the strength was induced by gold while underlying fundamentals for PGMs remain robust.
Gold jumped after the US reported that initial jobless claims surprisingly rose to 484K (Consensus: 465K) in the week ended August 7 from 479K in the prior week. This is the highest level since February. The 4-week moving average rose to 473.5K from 459.3K in the prior week. Continuing claims fell to 4.296M but it remains at elevated level. The set of data gave more evidence on deteriorated employment situation in the US and intensified worries on economic slowdown.
In the Eurozone, unexpected drop in IP and GDP contraction in Greece added to worries. industrial production for the 16-nation region contracted -0.1% m/m in June, compared with market expectation of a rise of +0.7%, after an upwardly revised +1.1% growth in May. On annual basis, the expansion eased to +8.9% in June from +9.9% in the prior month. In Greece, GDP contracted for a 7th quarter, by -1.5% q/q in 2Q10, while unemployment rate rose to 12% in May from 11.9% in April.
Wall Street plunged with DJIA and S&P 500 losing -0.57% and -0.54% respectively. Risk aversion soared with the VIX climbed +1.34% to 25.73 after surging +13.5% a day ago. USD strengthened against major currencies including Japanese yen amid intervention speculations. Treasuries plunged on profit-taking as bond yields have moved the extremely low levels. With investors staying away from risky assets while 'safe' assets reaching overbought territories, there left few investment options and gave rise for gold's price rally.
Crude oil price slumped for a third straight day as delayed economic recovery is detrimental for oil demand. The front-month WTI contract plummeted to a 1-month low at 75.52 before settling at 75.74, down -2.92%. WTI crude oil price has lost -7.04% over the past 3 days and has been down -8.71% from the 3-month high of 82.97 made on August 4.
We have important economic data from both the US and the Eurozone today. In the US, CPI probably rose +0.2% m/m in July after contracting -0.1% a month ago while core inflation should eased to +0.1% from June's +0.2%. Retail sales probably gained +0.4% m/m in July after contracting -0.5% a month ago while reading excluding auto should have rise +0.3% after a -0.1% decline in June. In the Eurozone, GDP for 2Q10 is expected to have expanded +0.7% following a +0.2% growth in 1Q10.