Gold at its highest value since 2011Jul 8, 2020
- EUR/USD 1.1270
- DOW JONES 25’890.18
- USD/CHF 0.9425
- SMI 10‘207.96
- EUR/CHF 1.0630
- CRUDE OIL 40.35
- USD/RUB 71.50
- XAU/USD 1’794.50
The EUR/USD parity further consolidated in the 1.1200–1.1400 range over the week. A shorter trading session on Friday in New York due to a national holiday the next day and the start of the summer holidays greatly reduced volumes. However, the encouraging economic figures published in recent days could have encouraged more trades. First, we have US unemployment figures from last Thursday. 4.8 million jobs were created in June, a new absolute record after the figure of May of 2.7 million, which was revised upwards. The unemployment rate continued to fall to 11.1% in June, from 13.3% in May. The ISM institute’s manufacturing index rebounded strongly and jumped above 50 to 52.6 points in June, against 43.1 in May. The 50-point bar marks the separation between a growing economy and a contracting one, On Monday, this same institution published the non-manufacturing index for the month of June and it turned out as clearly better than the previous one and even higher than expectations. At 57.1 against expectations at 50.2 and a level last month of 45.4, it also shows a strong rebound in the US economy and achieves the largest increase in the index since its creation in 1997. In Europe too, the figures are encouraging. The eurozone PMI rebounded strongly even if it remains below 50 points at 48.5 against 31.9 previously and retail sales rose 17.8% compared to April, also above the expectations of economists who expected an increase of 15%. Finally in the United Kingdom, the PMI increased to 50.1 against 40.7 in May, which means the country is growing for the first time since February. However, the markets have nevertheless taken these statistics with caution, examining the evolution of the pandemic and the resurgence of cases of coronavirus in several countries. And as the Fed mentioned in the minutes of its last meeting, it will have to support the US economy for several years in order to stem the economic collapse due to the COVID-19 crisis. The Fed will use all the tools necessary until it returns to a “normal” situation of full employment and stability, it said.
The Central Bank of Australia has kept its two reference rates unchanged at 0.25%, i.e. the overnight rate and the 3-year government bond yield. Like the Fed, it expects to have to support its economy for a long time. It will not hesitate to increase its asset buyback programme if necessary and hopes that the worst is over but nevertheless expects a difficult recovery still vulnerable to a possible resurgence of the pandemic. A general lockdown was imposed in the state of Victoria.
The rating agency Fitch confirmed its maximum rating “AAA” with a stable outlook for Swiss sovereign debt despite the deterioration of finances due to the crisis. After three months of decline, the KOF economic barometer rebounded in June to 59.4 points from 49.6 in May. Several sectors are showing signs of improvement, such as the processing industry, while others such as the hotel industry or private retail are still struggling. Demand deposits with the SNB increased by 5.4 billion francs in June after 17.8 in May and 36.6 in April. The national bank is still monitoring the level of the franc, which for the moment is stabilising above 1.0600 against the single currency
Talks between the UK and Europe to reach a post-Brexit trade agreement have resumed in London. The British government is negotiating with Brussels to try to establish an advantageous commercial relationship with the EU at the end of the transition period set for 31 December. Discussions have so far failed to make any real progress, while the deadline is fast approaching with the risk of a “no deal” result, which would be devastating for the economy. The British currency thus remains under pressure against the euro and the franc even if Michel Barnier, the European chief negotiator, declared that an agreement could be concluded in spite of serious differences. For his part, Boris Johnson reiterated that his country was ready for a hard Brexit if talks failed.
Gold hit a high since 2011 at $1,797.39 an ounce yesterday. Interest in the yellow metal has not waned in this context of low interest rates and economic uncertainty. ETF’s purchases of gold this year surpassed the previous record set for a year in 2009. These ETFs currently hold more than 3,200 tonnes of gold, an increase of 655 tonnes only for this year.