Gold buoyed as investors buy the dip and U.S. bond yields ebb, but the bullion is being kept in check by a stronger dollar and aggressive interest rate hike fears.
The dollar index jumped to a new 20-year high after a positive U.S. economic report made it more likely that the Federal Reserve will announce a large interest-rate hike at its meeting of policymakers later this month. The 30-year U.S. Treasury yield was near the highest level since 2014.
Front-month gold futures fell 0.6% Tuesday to settle at $1,712.90 an ounce on Comex. U.S. financial markets were closed Monday for the Labor Day holiday, so there was no settlement. The December contract decreased 1.6% last week. Bullion dropped 3.1% in August after declining 1.4% in July. The metal retreated 3.5% in 2021. Currently, the December contract is up $9.9 (+0.58%) to 1722.80 and the DG spot price is $1713.30.
Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.2% Tuesday to 971.05 metric tons from Friday, Reuters reported.
Services PMI – an indicator of economic activity in the services sector – grew for a 27th straight month, according to data released Tuesday by the Institute for Supply Management. The Services PMI composite index came in at 56.9% in August, 0.2 percentage point higher than July’s 56.7%. It was the second consecutive monthly increase after three months of declines.
Investors are now betting there’s a 74% chance of a 75-basis-point increase Sept. 21, with just 26% projecting a 50-basis-point rate hike, according the CME FedWatch Tool. The Fed raised rates by 75 basis points each in June and July and has increased rates by 225 basis points this year to combat surging inflation.
While gold is a traditional hedge against inflation, the anticipated rate increases in response to it are bearish.
Investors will look to comments Wednesday from Cleveland Fed President Loretta Mester, Fed Vice Chair Lael Brainard and Fed Vice Chair for Bank Supervision Michael Barr for further direction. The Fed’s Beige Book – a report on the economic status in the central bank’s 12 regions – is also due out Wednesday. Fed Chairman Jerome Powell and Chicago Fed President Charles Evens are set to speak Thursday, the same day U.S. initial jobless claims come out.
Front-month silver futures rose 0.2% Tuesday to settle at $17.91 an ounce on Comex. The December contract dropped 5% last week. Silver tumbled 12% last month after slipping 0.8% in July. It retreated 12% in 2021. Silver prices are tied to industrial demand. The December contract is up $0.322 (+1.80%) an ounce currently to $18.230 and the DG spot price is $18.37.
Spot palladium decreased 3.1% Tuesday to $1,989.00 an ounce. It fell 4.3% last week. Palladium retreated 3.3% in August after rising 9.9% in July. It dropped 22% in 2021. The current DG spot price is up $29.80 an ounce to $2036.00
Spot platinum gained 1.8% Tuesday to $860.20 an ounce. It dropped 3.2% last week. Platinum tumbled 6.1% in August after decreasing 0.3% in July. It fell 9.4% last year. Currently, the DG spot price is up $13.70 an ounce to $874.10.
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