In the markets: What to watch this week

Gold and mining

With gold’s current rally from December lows, many have started to use the metal as a safe-haven currency to hedge the potentially over-bought stock market in America and other parts of the world.

But some are sceptical that the safe-haven will continue to rally after such a big move in a month-and-a-half period. From about $1 125/oz in December, it currently flirts with the 100-day-moving-average – a psychologically significant level that is currently around $1 220.

With South African mining and gold production figures for December due to be released on Thursday, many will be searching for a spike in physical demand to back the price increase.

It will be difficult to find demand spikes as the price only started to climb in December, and the Chinese Spring Festival buying spree may not have sprung until later on in December.

China’s imports for December increased by 3.1% and new trade balance figures for January will be released only on Friday.

Mining production figures on a year-on-year (YOY) basis seem to be bottoming out despite a decline of 4.2% in November.

Other market moves and indicators

The dynamics of the manufacturing production on the other hand may be slightly difficult to weigh because of the US’s fiscal stimulus, increasing demand, while the stronger rand makes our exports more expensive.

The strong rand could help improve the foreign exchange reserves due to be announced tomorrow.

Elsewhere in the world, the UK vote to decide to confer power on the prime minister, Theresa May, to notify, under Article 50(2) of the Treaty on European Union, the UK’s intention to withdraw from the EU.

Other important economic announcements due this week include:

Monday

• US: Fed Labor Market Conditions Index

Tuesday

• US: JOLTS Job Openings and Balance of Trade

Wednesday

• US: Crude Oil Inventories
• India: Reserve Bank of India interest rate decision

Thursday

• US: Unemployment Claims
• Germany: Balance of Trade

Friday

• Great Britain: Manufacturing Production and Balance of Trade
• US: Prelim Michigan Consumer Sentiment

Giacomo Bonavera is head of foreign exchange trading at Capilis Asset Managers. Click here to visit the firm’s website.