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Gold July 02, 2024 02:50:44 PM

Gold Drifts Lower, Investors Eye Powell's speech

Paul Ploumis
ScrapMonster Author
Lower rates reduce the opportunity cost of holding zero-yielding gold.

Gold Drifts Lower, Investors Eye Powell's speech

SEATTLE (Scrap Monster):  Gold prices slipped on Tuesday as the U.S. dollar held firm, while investors awaited comments from Federal Reserve Chair Jerome Powell and key jobs data for further clues about the interest rate outlook.

Spot gold was down 0.2% at $2,327.06 per ounce, as of 0710 GMT. U.S. gold futures steadied at $2,339.10.

The dollar was supported by rising U.S. bond yields, making bullion less attractive.

Benchmark 10-year Treasury yields rose to their highest levels since late May on Monday, with analysts attributing the move to expectations of Donald Trump winning the U.S. presidency and raising tariffs and government borrowing.

In order for gold prices to break above the current range, the market needs to see further weak data points that increase the possibility of a Fed rate cut in September, said Kelvin Wong, a senior market analyst for Asia Pacific at OANDA.

Lower rates reduce the opportunity cost of holding zero-yielding gold.

Traders will look for cues on rate cuts when Powell speaks later in the day. Other data points on their radar include ADP employment, ISM services PMI and minutes from the Fed's latest policy meeting, due on Wednesday, as well as the nonfarm payrolls report, scheduled for release on Friday.

U.S. manufacturing contracted in June, while a drop in a measure of prices paid by factories for inputs suggested that inflation could continue to subside.

Separately, analysts at Citi said they expect gold investment demand to rise to absorb almost all mine supply over the next 12-18 months, but added that the main downside risk to their bullish base case forecast is China retail demand being lower than anticipated, owing to quotas on imports.

"Weaker central bank demand or a delay to the Fed normalizing interest rates are also risks to the strong investment demand thesis," they said in a note.

Spot silver fell 0.5% to $29.34, platinum lost 0.4% at $981.30 and palladium firmed 0.8% to $979.23.

Courtesy: www.reuters.com

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