Gold Strengthens as Dollar Softens on Weak U.S. Data

The price of gold has increased for the second day on Wednesday, as the investors rushed to safe haven assets amid the weakening of the U.S. dollar.

The price of gold has increased for the second day on Wednesday, as the investors rushed to safe haven assets amid the weakening of the U.S. dollar. The greenback weakened after a report of weaker economic data raised concerns that the Federal Reserve would not increase interest rates in the near-term.

On Monday, the precious metal slumped to a one-week low, dragged by the strong U.S. non-farm payrolls on Friday which triggered higher expectations of a short-term interest rate hike.

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However, the yellow metal immediately regained back its strength.

Weak U.S. Data Drags Dollar Lower

The U.S. worker productivity has weakened for the third straight quarter in the spring this year, indicating that corporate profits may extend its downturn and wage growth may continue to be sluggish.

The greenback was unable to gain any support on Tuesday, quickly losing its strength against other major currencies, with the trend continuing during the Asian and European sessions on Wednesday. The trade-weighted U.S. Dollar Index moved 0.50% lower during the day.

As the dollar declined further, the precious metal moved to highs above $1,350 late in U.S. trading. As of 8:24 AM (EDT), the gold is trading at 1,362.70 per ounce, 1.21% higher than its previous closing price.

“If you look at the US Treasury market, those yields are a bit lower, the dollar is off a little bit and then you have some selling off the highs in the S&P 500 … making it a little bit more attractive to hold gold,” said an analyst.

“On the technical charts as well, it’s getting a little bit of a bounce,” the analyst added.

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The unexpected decline in U.S. worker productivity may confirm the U.S. Fed’s fears that the economy could slip into a period of sluggish growth, discouraging the Central Bank from raising the country’s interest rates.

“A better tone to equity markets, coupled with the increasing odds of a Fed move later this year suggests that the dollar should likely do better over the second half of the year. The combination of this should constitute a net negative for gold,” an INTL FCStone analyst mentioned in a note.

The precious metal is highly sensitive to rising U.S. interest rates, as higher interest rates attracts investors to a higher-yielding investments such as the dollar, which pressures the gold’s prices downward. The weakening of the U.S. dollar means that the yellow metal may gain more appeal to the investors in the upcoming days.

Among other precious metals, silver moved 0.60 percent higher to US $19.831 an ounce. Platinum went 0.6 percent higher at $1,155.6. Palladium was 0.3 higher at $692.22.

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Chipotle under fire after firing women

The famous American fast-food chain is back at it with female harassment claims.

After facing various issues and matters regarding the chain’s food safety issues, a series of food-borne illnesses and a failed attempt at a new menu and even a drug scandal since earlier this year, Chipotle has always found a new way to get back up on its feet.

A new bump in the road recently hit the famous chain this time with allegations of female abuse. The very first report then was from a woman named Doris Garcia Hernandez who filed charges stating she was fired after getting pregnant.  Hernandez claimed that she was denied access to drinking water during shifts, got told off that her bathroom breaks  would have to be approved and announced to every employee in the store and later on got fired after leaving early for her doctor’s appointment.

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She, later on, was awarded $550,000 after a Washington, DC jury agreed in her pregnancy discrimination case.

It was also at the same time when another Chipotle employee, Lauren Lindo from Culver City, California was fired by the very same fast-food chain. Lindo sued Chipotle for an unjust termination that is based on her sex and being pregnant. She also won, after filing these charges and was given a jury award of $109,580.

Earlier this year in April, seven former female Chipotle employees from Ohio filed charges with the chain for discrimination.

Also just very recently, three former general managers was awarded $600,000 in damages by a Cincinnati jury for wrongful termination back in 2012 and 2012 based on their gender.

Beef over trademark claims to add on their list of pressing matters

To add to the tally of Chipotle’s to-solve list, as Boston-based chain Tasty Burger was recently reported to have sent cease and desist letter placing a demand to change Chipotle’s Tasty Made name and logo but said to not having received any response.

Back in 2011, Chipotle submitted a claim to Tasty Burger at the U.S. Patent and Trademark Office but was denied eventually stating that the term was just a simple description and that a trademark would not be possible. Along with the claim were three other active applications for the logo and variation of Tasty Made which is Tasty Made Burger Shakes and Fries. Chipotle has left a statement that the two brands can co-exist.

The spokesperson for Chipotle has left a statement saying that they intend to go through the name adding that there is sufficient evidence that the names and logo will not cause confusion.

 

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BoE to leave ‘fiscal stimulus’ to Theresa May

One of the after effects of the Brexit vote is the slowly emerging consequences which have been long predicted by its non-supporters.

To absorb a huge economic impact and to tackle recession, the Bank of England launched its largest stimulus package following the crisis.

Some of which is an interest-rate cut for as low as a record breaking 0.25 per cent, a new £70 billion (HK$710 billion) bond-buying scheme and a £100 billion fund to further encourage banks to pass offer cheap rates to borrowers. An offer which Bank of England governor Mark Carney calls an “exceptional package”.

These are some of the acts that the Bank of England has been persuaded to decisively do weeks after the British Referendum vote. Despite all these efforts, Carney says that the bank expects the biggest growth plunge in twenty years along with the loss of almost 250,000 jobs.

Former Prime Minister David Cameron resigned after the declaration of the British Exit stating that it wouldn’t be right for him to further lead the country through the coming months. Current Prime Minister Theresa May has already set the country’s positions with leaders from countries such as France, Germany and other European nations.

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The current status on the effect of Brexit to the world economy has not been massive so far but the status will depend on the government’s next action after the Bank of England package.

Bond purchases to follow after lower interest rates

After the decision to drop down interest rates for the very first time since 2009, the Bank of England also made the decision to absorb an even bigger Brexit effect by announcing that it would buy £60 billion worth of government debt.

Aside from this, it was also announced that the Bank of England would also launch two new schemes to make sure that banks would keep lending despite the cut in interest rates. One of which is to purchase £10 billion worth of high-grade corporate bonds and another one which could possibly amount to cost up to £100 billion.

Other banks expected to follow rates

After the historic 0.25% drop launched to avoid a recession, Carney also stated that he expected other banks to follow the rate cut and even offered a £100 billion fund in aid. It is also said that customers and borrowers with savings and mortgages following the Bank base rate will be given an automatic cut.

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Chesapeake Energy Corporation Fails to Meet Earnings Forecasts

Chesapeake Energy Corporation (NYSE: CHK), the second largest producer of natural gas posted downbeat earnings results today as oil and natural gas markets struggle to report continuous improvement.

For the second quarter of the current fiscal year, the natural gas producer reported an adjusted loss of 14 cents per share, failing to meet the consensus estimate by 3 cents. Before the adjustments, the natural gas corporation lost approximately $1.8 billion or $2.48 per share during the given period. This loss is primarily due to a $1.045 billion impairment charge against Chesapeake’s oil and natural gas assets.

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In the given period, the company managed to generate revenues of $1.6 billion, missing forecasts of $330 million. The natural gas producer’s revenues have been cut in half on a year-over-year basis.The reason behind this is that the average realized prices on crude oil and natural gas slumped during the quarter.

Due to the ongoing decline in the energy markets, Chesapeake has shed over 90 percent of its market value. Aside from the low oil price environment, the company’s biggest concern at the moment is its high debt load. So far this 2016, the natural gas company employed a number of measures, such as a major debt reduction through swaps.

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Chesapeake CEO Doug Lawler stated, “In 2016, we have made substantial progress on many fronts, including the reduction of more than $1 billion of debt, the reduction of complexity in our portfolio through the purchase of oil and natural gas interests previously conveyed in certain volumetric production payment transactions (VPPs), the continued improvement in our cash cost structure and the optimization of our current portfolio through non-core asset sales.”

After the earnings report, the company’s stock is changing hands at $5.15 during pre-market hours, down by 2.65 percent. As of 10:32 AM GMT -4, the CHK stock is trading at $5.08, down by 3.88 percent or 0.20 points.

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