Gold prices edged higher on Tuesday (July 9) as a resilient US dollar and rising US Treasury yields kept gains in check, with investors awaiting key US inflation data due later this week for clearer cues on the interest rate trajectory.
Global gold ETFs recorded net purchases in June, according to a recent report, but the year-to-date trend for these funds remains net sales.
At the close of New York trading, spot gold was up $5.40/oz, or over 0.2%, at $2,365/oz, according to Kitco Exchange data.
As of 7 a.m. Vietnamese time on July 10, spot gold was trading at $2,366/oz in the Asian market, up $1/oz from the previous session’s close. This equates to nearly VND 72.6 million per tael, a VND 100,000 increase from the previous day, based on Vietcombank’s selling exchange rate.
Gold struggled to break through as the Dollar Index, which measures the value of the US currency against a basket of six major currencies, edged higher, ending Tuesday’s session at the 105 level. The index continued to climb in the morning, reaching 105.1 points.
Yields on 10-year US Treasury notes also inched up, rising 2.7 basis points to 4.295%.
According to Bart Melek, chief strategist at TD Securities, gold prices are being supported by expectations that the Federal Reserve will cut interest rates in September. Recent US economic data has pointed to weakness, particularly in the labor market and consumer spending, bolstering the likelihood of an early shift towards a more accommodative monetary policy.
Testifying before the Senate Finance Committee on Tuesday, Fed Chair Jerome Powell stated that inflation remains above the Fed’s 2% target but has shown improvement in recent months. However, Powell remained cautious, indicating that more positive data on inflation is needed before the Fed can consider lowering interest rates.
In the interest rate futures market, traders are betting on a roughly 70% chance of the Fed’s first rate cut coming in September, down slightly from 71% on Monday, according to the CME’s FedWatch Tool.
“The market had hoped for a slightly softer tone from Powell, given the string of weak economic data recently. But he didn’t come across as dovish as expected,” said Thomas Uranjo, co-head of investment at Sage Advisory.
Although Powell will testify again before the House on Wednesday, markets anticipate no deviation from his Senate testimony. Investors’ attention now turns to the upcoming CPI and PPI reports for June – key inflation indicators scheduled to be released by the US Labor Department on Thursday and Friday, respectively.
Han Tan, chief analyst at Exinity Group, suggested that if these reports indicate stubbornly high inflation, gold’s recent gains may prove short-lived.
On Tuesday, US Treasury Secretary Janet Yellen acknowledged that persistently high housing prices are a key factor keeping inflation elevated. However, she predicted that inflation would continue to ease as supply chain disruptions and labor market tightness abate.
A Reuters poll forecasts that the June CPI for the US will rise 3.1%, slowing from the 3.3% increase recorded in May, while core inflation is expected to hold steady at 3.4%.
According to a recent report by the World Gold Council (WGC), global gold-backed ETF holdings increased by 17.5 tons in June, equivalent to an additional $1.4 billion in value. This marks the second consecutive month of net inflows for these ETFs.
However, during the first half of the year, global gold ETFs experienced net outflows of $6.7 billion, the largest six-month outflow since 2013.
Gold ETFs listed in Europe recorded net purchases of 17.9 tons of gold in June, worth $1.42 billion. In contrast, North American gold ETFs sold 8.2 tons of gold, valued at $573 million.
Asia continued to play a pivotal role in gold’s price performance, with gold ETFs listed in the region recording their 16th consecutive month of net gold purchases. In June, Asian gold ETFs bought 7.2 tons of gold, worth $560 million.
