Gold futures are extending their gains to finish a disappointing July. The yellow metal has been clobbered since the Federal Reserve began its tightening cycle, which has led to a strengthening US dollar. But with renewed recession fears, can gold prices touch $1,800 again next month?
September gold futures surged $13.50, or 0.76%, to $1,782.70 per ounce at 15:56 GMT on Friday on the COMEX division of the New York Mercantile Exchange. Gold is poised for a weekly rally of about 3.6%, paring its year-to-date loss to below 3%.
Silver, the sister commodity to gold, has turned things around this week, topping $20 an ounce. September silver futures soared $0.392, or 1.97%< to $20.26 an ounce. The white metal will enjoy a huge 8% weekly gain, bringing its July gain to 0.05%. Year-to-date, the white metal is down about 13%.
The metal commodities are benefiting from a weaker greenback and tumbling Treasury yields.
The US Dollar Index (DXY), which gauges the greenback against a basket of currencies, tumbled 0.35% to just below 106.00. The index will drop 0.69% this week, but it is still up 10.45% year-to-date. For July, the DXY added 0.8%.
A weaker buck is good for commodities priced in dollars because it makes it cheaper for foreign investors to purchase.
The US Treasury market was mostly in the red to close out the volatile trading week, with the benchmark 10-year yield down 5.6 basis points to 2.625%. The one-year bill added 2.3 basis points, while the 30-year bond slipped 6.3 basis points to 2.976%.
Falling yields is good for gold because it lowers the opportunity cost of holding non-yielding bullion.
Ultimately, it comes down to the Federal Reserve. As the US economy slides into a technical recession, investors are ebullient on the prospect that the central bank will be less aggressive on future interest rate hikes, something that Fed Chair Jerome Powell alluded to at this week’s post-Federal Open Market Committee (FOMC) policy meeting.
So, did gold hit a bottom of $1,675? Analysts say that gold may still try to form a bottom, but with markets pricing in monetary easing, the metals market could see some near-term gains.
In other metal commodities, September copper futures added $0.91, or 2.6%, to $3.565 per pound. September platinum futures tacked on $15.30, or 1.74%, to $892.10 an ounce. September palladium futures picked up $49.80, or 2.39%, to $2,130.00 per ounce.