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August 16. Gold falls on expectations of the next move by the US Federal Reserve

On Tuesday, the price of gold continues to decline moderately – pressure on prices is exerted by expectations of further tightening of monetary policy by the US Federal Reserve.

During yesterday's trading, the precious metal fell from $1818 to $1789 per ounce. The current gold quote is $1791.

Analysts believe that the further dynamics of gold prices will depend on the policy of the US Federal Reserve. Investors expect further growth of the discount rate, which is negative for the precious metal quotes. Tomorrow, the minutes of the July meeting of the US Federal Reserve will be published, which should clarify the issue of how the monetary policy of the regulator will change. If the central bank's rate is raised by 75 basis points in September, gold may continue to fall.

The «hawkish» policy of the American regulator is holding back gold from rising in price, which explains the inability of the asset to gain a foothold at a price above $1800 per ounce. At the same time, some experts say that the process of reducing the rate will not begin even next year.

Additional pressure on gold quotes yesterday was exerted by data from China. According to recent statistics, the country's economic recovery is on the decline, which may lead to a decrease in physical demand for gold from the world's largest consumer.

August 17. Macroeconomic events of the day | August 17​​​​​​​

New Zealand

The Central bank of New Zealand has introduced a policy to combat high inflation in the country, increasing the interest rate by 0.50 basis points – from 2.5% to 3%. This is the fourth year that the New Zealand central bank has raised interest rates.

Great Britain

Inflation in the UK reached double digits for the first time in 40 years: consumer prices rose by 10.1% in annual terms in July. Analysts note that the last time inflation in the UK was above 10% was in 1982. Compared to June, consumer prices increased by 0.7%. At the same time, economists predicted an increase in annual inflation to 9.8%.

Eurozone

According to the second estimate of the European statistical agency Eurostat, the GDP of 19 eurozone countries in the second quarter of 2022 grew by 3.9% year-on-year and by 0.6% quarter-on-quarter. Analysts expected growth of 4% in annual terms and 0.7% in quarterly terms.

The United States

According to the US Department of Commerce, the volume of retail sales at the end of July remained at the level of the previous month – 0.8%. At the same time, analysts expected sales to increase by an average of 0.1%. On a monthly basis, sales increased by 0.7% (excluding gasoline and car sales from calculations).

Oil

According to the official report of the US Department of Energy, commercial oil reserves in the country decreased by 7,056 million barrels per week after an increase of 5 million a week earlier.

August 18. UBS: oil prices will recover to $125 this year​​​​​​​

UBS bank experts have presented a forecast according to which the price of Brent oil may recover to the level of $125 per barrel by the end of this year.

Analysts are confident that despite the fact that Brent has declined by 25% since mid-June due to fears of a recession, limited global oil reserves will lead to an increase in hydrocarbon prices. Two months ago, oil quotes were located near the level of $125 per barrel, today Brent is trading at $96 per barrel.

In addition to concerns about a possible recession in the United States and China, oil prices are being pressured by the risks of an increase in oil exports from Russia and OPEC member countries, as well as progress in nuclear negotiations with Iran, which could lead to more oil on the market.

However, despite all these factors, UBS still believes that the current decline in oil prices does not fully take into account the limitation of global supply, and by the end of the year the price will be able to recover to $125 per barrel.

As you know, OPEC and its allies agreed to increase production by only 100 thousand barrels per day in September, which is one of the lowest rates in the history of the organization. According to the alliance itself, the actual increase in production in September will be only one third of the agreed increase in supply volumes.

Moreover, European countries have agreed to reduce imports of crude oil and petroleum products from Russia by almost 3 million barrels per day by the end of 2022. High prices for coal and natural gas will also contribute to the increase in the cost of oil, as utility companies begin to switch from expensive fuels to cheaper ones for electricity production.

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August 19. The dollar index rose to highs on the signals of the US Federal Reserve​​​​​​​

On Friday, the US dollar shows strengthening to a one-month high in pairs with major competitor currencies. The dollar index is currently 0.17% higher than Thursday's closing level (107.65); the maximum value of the USDX index was reached on July 18 at 107.72.

The US currency is supported by statements by the heads of the US Federal Reserve on the need for further interest rate increases. Next week, the central bank's symposium will be held in Jackson Hole, and it is expected that representatives of the regulator will give new signals about the dynamics of monetary policy.

Earlier, the president of the Federal Reserve Bank of St. Louis, James Bullard, said that he was leaning towards a third consecutive increase in the key rate by 75 basis points at the Fed meeting in September. His colleague from San Francisco, Mary Daly, also believes that an increase of 50 or 75 points would be quite reasonable. Other representatives of the Federal Reserve are also confident that it is too early to ease monetary policy, since inflation is still at record levels.

Additional support for the dollar was provided by yesterday's data on the labor market in the United States. The number of initial applications for unemployment benefits decreased by 2 thousand from the revised figure of the previous week – to 250 thousand. Unemployment in May remained at the April level of 3.6%, and the number of people employed in non-agricultural sectors of the economy increased by 390 thousand people.

The USD/JPY pair has risen to a maximum since July 28 (136.69) and is preparing for the strongest weekly growth since June 10. EUR/USD is still sideways near the level of 1.0086, and the GBP/USD pair has fallen to a minimum since July 21, 1.1895.

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August 22. Oil prices collapsed amid progress in Iranian talks

Oil prices are falling at the beginning of a new trading week, the current Brent quote is $93.10 per barrel. The daily low was marked at $92.97.

Investors continue to monitor the progress of negotiations between the United States and Iran on the nuclear deal. Last weekend, the next stage of the debate took place, which resulted in the achievement of some progress in the negotiations.

«We may be closer to concluding a deal than it was two weeks ago, but the result remains unpredictable, as some contradictions remain,» a White House spokesman said.

At the meeting, US President Joe Biden discussed with the leaders of France, Germany and the United Kingdom the ongoing negotiations on the nuclear deal and the prospects for the return of Iranian oil to the market in the amount of 1 million barrels per day. The parties also discussed the need to strengthen the support of partners in the Middle East region.

In addition, the market is monitoring the situation in China, where the authorities of Sichuan Province have extended restrictions on the supply of electricity to industrial enterprises to combat power outages. All this negatively affects the activity in the industrial sector of the region.

August 23. Business activity in the eurozone falls for the second month in a row​​​​​​​

According to preliminary data from the research organization S&P Global, the composite purchasing managers index (PMI) of 19 eurozone countries in August continues to remain below the level of 50 points – the bar separating the growth of business activity from the fall. The indicator decreased from 49.9 points in July to 49.2 points, that is, business activity in the region is falling for the second month in a row.

Nevertheless, the indicator turned out to be higher than the expectations of market participants (49 points).

The indicator of activity in the service sector decreased to 50.2 points (from July 51.2 points), while updating the minimum since April 2021.

The manufacturing PMI fell to 49.7 (from 49.8 points), reaching the lowest value since June 2020.

Germany's composite PMI in August fell to 47.6 points (from 48.1 points), also to the lowest since June 2020. The indicator in the service sector fell to 48.2 (from 49.7 points), while in industry the indicator rose to 49.8 points from 49.3 points a month earlier.

France's composite PMI was 49.8 points compared to July's 51.7 points. The index of business activity in the service sector decreased to 51 from 53.2 points, in the manufacturing industry – to 49 from 49.5 points.

The UK composite PMI in August, although it remained above 50 points, but fell to the lowest since 2021 – 50.9 points from 52.1 points a month earlier. The indicator in the services sector has updated at least in 1.5 years (52.5 points), and in the manufacturing industry – it turned out to be at the lowest level in 27 months (46 points).

August 24. It will take Germany years to switch to Canadian gas​​​​​​​

German Chancellor Olaf Scholz said that Germany intends to move away from Russian natural gas as soon as possible and switch to Canadian. Earlier, the Prime Minister of Canada has already noted that LNG exports to Germany are possible.

However, despite Canada's willingness to partner with Germany, experts doubt that additional gas shipments may arrive from there in the near future due to the lack of export capacities.

Currently, Canada does not have the infrastructure to export gas abroad – the country is currently only building 2 terminals on the west coast. But it will take at least 3 years to complete the construction of the first terminal, and by that time Europe will have already abandoned Russian fuel. Therefore, it would be more realistic for Germany to turn to countries such as Norway for gas.

Since the introduction of sanctions against Russia, Canada has stated that it has the ability to produce an additional 200,000 barrels of oil and 100,000 barrels of natural gas per day, but due to the lack of infrastructure for export abroad, the vast majority of this fuel is purchased by the United States, which has become the world's largest supplier of LNG.

Before the start of the special operation in Ukraine, Russia supplied 32% of the LNG consumed by Germany. Due to European sanctions, Germany has become one of the countries that have suffered the most due to Europe's rejection of Russian energy resources.