GOLD: Bullion Stabilises As US Dollar Strengthens

Gold was slightly lower on Monday after Friday’s rally post comments from Fed Chair Powell suggesting that risks could warrant shifting policy. The stronger US dollar (BBDXY +0.5%) and higher yields pressured prices 0.2% lower to $3365.89/oz after reaching a high of $3376.28 but are up 2.3% in August. They are currently down to around $3362.5 and continue to move in a narrow range. 

• Pricing for a September 17 Fed rate cut moderated over yesterday but remains above 80%. Easing should be positive for non-interest bearing gold but with upside inflation risks from increased import duties the resumption of rate cuts is likely to be cautious. July PCE price data is released on Friday.
• The medium-term trend for gold remains bullish but the sideways move since April appears corrective. Initial resistance is at $3409.2, 8 August high, while support is $3311.6, 20 August low. However, hedge funds have reduced their bullish positions to a 6-week low according to CFTC data, according to Bloomberg.
• Silver fell 0.8% to $38.575, close to the intraday high, after reaching $39.001 early on Monday. The metal is up 5.1% this month but off the August 22 high of $39.064. It currently trading around $38.54.
• Equities were weaker with the S&P down 0.4% and Euro stoxx -0.8%. The S&P e-mini is currently up 0.1%. Oil was stronger with WTI +1.7% to $64.74/bbl. Copper was flat.

• MNI: UK AUG BRC SHOP PRICES +0.2% M/M, +0.9% Y/Y

The early bias in Aussie bond futures is modest weakness, in line with US Tsy futures softness from Monday trade. 10yr (XM) futures were last around 1.52bps lower, tracking at 95.675, while 3 yr futures (YM) were also down 1.5bps to 96.595. These shifts keep us within recent ranges. 

• In the cash government bond yield space, we are +1-1.5bps firmer in the first part of dealings, so slightly lagging the moves seen in US Tsy yields from Monday's session. US yields were 2-3bps firmer, led marginally by the front end. Treasuries opened weaker - scaling back a fair portion of Friday's post-Chair Powell speech in Jackson Hole that left the door open to a possible rate cut at the next FOMC. Liquidity was likely impacted with UK markets out. Treasury futures also maintained losses after higher than expected new home sales data.
• The 10yr Aussie bond yield sits just under 4.30%, while the 3yr is close to 3.40%.
• On the data front today, the focus is on the RBA Minutes from the August policy meeting. They will likely be monitored for further details on its concerns regarding lacklustre productivity growth, its view on the labour market and any discussion of the risks around its inflation outlook. The vote to ease was unanimous.