Gold consolidated its rally above $1,400 an ounce in early trading Monday, extending the five-year high reached last week.
This morning, the U.S. dollar fell .2% against rival currencies after closing last week with its biggest weekly drop in four months.
Futures advanced after the U.S. Federal Reserve signaled that it’s positioning for an interest-rate cut as soon as next month. As of this morning, the CME FedWatch Tool put the odds of a rate cut on July 31 at 100%. It was at 86.3% last Tuesday, the day before the latest policy decision.
Gold futures for August delivery settled above the key $1,400-an-ounce resistance level Friday on Comex, capping a 4.1% advance for the week. Currently, the August contract is at $1,410.80, up $10.70. If the market can break through $1,415.40 on Monday, it will signal a resumption of the uptrend, according to James Hyerczyk at FX Empire. Conversely, the signal will shift to a downward trend if gold moves through $1,323.60, he said.
Russia bought 200,000 troy ounces (6 tons) of gold in May, boosting its bullion reserves by 0.3% to 2,190 tons on June 1 from May 1, RT.com reported, citing central bank data released Thursday.
Silver futures rose 3.3% last week to settle at $15.29 an ounce on Comex. This morning, the August futures contract is at $15.365, up $0.034.
Spot platinum, which is sensitive to the growth of the Chinese automotive industry, increased 0.6% last week and is currently at $815.20, while spot palladium gained 2.4% and has risen to $1,523.40.
Fears of a trade war with China have made precious metals attractive as a safe-haven asset in recent weeks. U.S. President Donald Trump and Chinese Xi Jinping are scheduled to meet on the sidelines of the Group of 20 summit in Japan, which starts on Friday. The meeting may set the tone for financial markets for the rest of the summer. Both China and the U.S. should make compromises in trade talks, Chinese Vice Commerce Minister Wang Shouwen said on Monday.
Adding to geopolitical fears are tensions between the U.S. and Iran after the Islamic Republic shot down a U.S. naval-surveillance drone over the Strait of Hormuz last week. The U.S. plans to announce more sanctions against Iran on Monday, but President Donald Trump is also willing to negotiate with Iranian leaders with “no preconditions” to ensure the Islamic Republic never acquires a nuclear weapon, Bloomberg reported Sunday.
In economic data this week, investors will look for signs about the health of the U.S. economy from June consumer confidence figures due out on Tuesday, durable goods orders on Wednesday and finalized first-quarter GDP numbers on Thursday.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.