· Gold prices edged lower on Monday as increasing expectations that the U.S. Federal Reserve will not aggressively cut interest rates later this month boosted the dollar, making gold expensive for holders of other currencies.
· Spot gold fell 0.2% to $1,396.56 per ounce at 01:44 p.m. EDT (1744 GMT). U.S. gold futures settled at $1,400 per ounce.
· “With the strong jobs report the bets on 50 basis point rate cuts have dropped from almost 30% to 2%. The fact is that the runaway projections of interest rate declines are not going to happen and that’s what is hurting gold,” INTL FCStone analyst Edward Meir said.
· Stronger than expected jobs data reported on Friday reduced the likelihood of a steep rate cut at the Fed’s July 30-31 meeting and lifted the dollar to three-week highs.
· However, the central bank was still expected to cut rates by a quarter point, given modest wage gains and other economic data suggesting the U.S. economy was losing steam.
· Markets are now looking ahead to Fed Chairman Jerome Powell’s semi-annual testimony to the U.S. Congress on the economy this week for clues on the near-term outlook for monetary policy.
· Gold hit $1,438.63 for the first time in six years last month and has been trading above key technical levels, supported by expectations of a rate cut by major central banks and lingering concerns about the global economy.
· “Continuing tensions with Iran and headlines about central banks around the world being strong buyers of the yellow metal are supporting prices,” said David Meger, director of metals trading at High Ridge Futures.
· The Chinese central bank increased its gold reserves for a seventh straight month in June, data showed. China is the world’s biggest consumer of the yellow metal.
Adding to existing tensions between the United States and Iran, Tehran said on Sunday it will shortly boost its uranium enrichment above a cap set by a landmark 2015 nuclear deal, prompting a warning “to be careful” from U.S. President Donald Trump.
· Commerzbank looks for gold to rise to $1,500 an ounce by the end of 2019, according to a research report released on Friday.
Analysts made the prediction even as gold was slipping due to a strong U.S. jobs report. As of 10:30 a.m. EDT, spot gold was trading $24.90 lower to $1,390 an ounce.
“Even if some short-term setbacks cannot be ruled out following the recent steep price rise, the environment for gold remains positive,” Commerzbank said. “The still-low interest rates and numerous political risks are likely to generate further investment demand and thus counterbalance the weaker physical demand in Asia. In addition, our currency strategists expect a weaker US dollar, as the Fed has significantly more scope for interest-rate cuts than the ECB [European Central Bank].
“We are therefore revising our gold price forecast noticeably upwards and expect a price of $1,500 per troy ounce by year’s end (previously $1,400). We envisage another – albeit moderate – price rise in 2020.”
· Gold prices can continue to climb even after they hit a multi-year high last week, a global investment strategist said Monday.
In fact, prices are set to “reach $2,000 by the end of the year,” predicted David Roche, president and global strategist at London-based Independent Strategy.
Gold prices have been on an upward trend amid recent expectations of a Federal Reserve interest rate cut and heightened geopolitical concerns — conditions that might weigh on the stock market, according to Roche.
However, gold prices went down slightly on Monday, potentially responding to the United States’ announcement on Friday that it had recorded stronger-than-expected nonfarm payrolls. That report tempered investors’ expectations of a Fed rate cut.
Despite that, Roche projected gold prices would continue going up, partly because international trade tensions will add to the negative sentiment of stock market investors.
“I think the trade conflict with the United States is a much far, wider-reaching, global conflict, which will undermine growth expectations in equity markets,” he said.
Given that outlook, Roche recommended investors hold gold in their portfolios, alongside some European fixed income and U.S. Treasurys.
· Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, fell 0.18% to 796.97 tonnes on Friday from 798.44 tonnes on Wednesday.
· Among other precious metals, silver gained 0.4% to $15.03 per ounce, while palladium dipped 0.4 % to $1,560 per ounce and platinum rose 1.6% to $817 per ounce.
Reference: Reuters, CNBC, Kitco
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