Gold Boosting on US-China Tensions

Gold Boosting on US-China Tensions

Gold boosting on US-China tensions, but kept in check by U.S. Treasury yields. The yellow metal came off Wednesday’s one-month high after Treasury yields strengthened on a series of hawkish comments by Federal Reserve officials.

The increase in Treasury yields makes gold a less attractive investment for safe-haven investors. San Francisco Fed President Mary Daly, the Cleveland Fed’s Loretta Mester and the Chicago’s Fed’s Charles commented about how much more the central bank will raise interest rates and whether it could move to cut them in early 2023.

Investors are awaiting the Institute for Supply Management’s July services index data and a report on factory orders for June on Wednesday for further direction. Investors are also closely watching for key job reports later this week including the July U.S. employment report due Friday.

Front-month gold futures rose 0.1% Tuesday to settle at $1,789.70 an ounce on Comex. The December contract increased 0.4% in the first two days of the week. Bullion dropped 1.4% in July after falling 2.2% in June and 3.3% in May, its worst month since September. The metal retreated 3.5% in 2021. The December contract is currently down $8.20 (-0.46%) an ounce to $1781.50 and the DG spot price is $1767.80.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.3% Tuesday to 1,002.97 metric tons, Reuters reported.

St. Louis Fed President James Bullard said Tuesday that he still thinks the U.S. economy can avoid a recession, though the Fed will need to continue to raise interest rates to combat inflation. Daly said Fed policymakers remain unified in a goal of getting inflation down around 2%.  The Fed boosted interest rates by another 75 basis points last week, after a similar move at its June meeting as part of an effort to rein in soaring inflation.

The Fed’s favorite inflation measure, the personal consumption expenditures index, reached the highest level since January 1982 in June, data released Friday showed. The PCE rose 6.8% in June, according to the Bureau of Economic Analysis. A previous report showed the U.S. consumer price index rose 9.1% in June.

U.S. manufacturing expanded at the slowest pace in two years in July, data released Monday showed. But the Institute for Supply Management’s gauge of factory activity reached 52.8, slightly above the median projection of 52 in a Bloomberg survey of economists. The figure was 53 in June.

Recession fears, tensions between the U.S. and China over Taiwan, ongoing uncertainty over the pandemic and the war in Ukraine have kept gold prices elevated.

September silver futures fell 1.1% Tuesday to settle at $20.14 an ounce on Comex. The front-month contract decreased 0.3% in the first two days of the week. Silver slipped 0.8% in July after declining 6.2% in June and falling 6.1% in May. It retreated 12% in 2021. Silver prices are tied to industrial demand. The September contract is currently down $0.204 (-1.01%) an ounce to $19.935 and the DG spot price is $20.08.

Spot palladium fell 5.3% Tuesday to $2,100.00. It slid 2.7% in the first two days of the week. Palladium rose 9.9% in July after losing 2.9% in June and 14% in May, the biggest monthly decline since September. It retreated 22% in 2021. The DG spot price is down $72.20 an ounce, currently, to $2048.00.

Spot platinum rose 0.3% Tuesday to $916.20 an ounce. It’s up 1.1% so far this week. Platinum retreated 0.3% in July after losing 7.2% in June. It dropped 9.4% last year. Currently, the DG spot price is down $12.20 an ounce to $905.80.


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