Gold Inches Up As Rate Hike Expectations Fade

gold bar

On Monday, gold prices rose to near a two-week high as concerns over an interest rate hike in the U.S. waned. It is mainly due to mixed signals from U.S. employment for June. The decline in U.S. Treasury yields and the weaker dollar also exerted upward pressure on the precious metal.

Spot gold is currently trading at $1,791.40 per ounce as of 0916 GMT.

The Labor Department reported on Friday that U.S. nonfarm payrolls grew by 850,000 jobs in June. It is the highest employment growth in ten months. However, the unemployment rate increased to 5.9, from 5.8 in May. Also, the growth of average hourly earnings slowed down and workforce participation was almost unchanged.

SPI Asset Management managing partner Stephen Innes said the U.S. jobs data sent mixed signals and were not strong enough to influence the Federal Reserve. He predicted that the Fed’s hawkish stance would limit the upside potential of the precious metal.

DailyFX strategist Margaret Yang added that the medium-term price outlook remains bearish. Central banks around the world are getting close to scaling back pandemic-era financial stimulus that would weigh the gold prices, she explained. Yang also noted price consolidation in a tight range between $1,750 and $1,795 per ounce.

In physical trading, the bullion was sold at a premium in India last week. Dealers charged as much as $3 per ounce premium. Retail demand recovered as COVID-19 restrictions were relaxed. In China, gold premiums fell slightly from $3-6 to $3-4. In Hong Kong and Singapore, premiums averaged around $1 per ounce. Japanese dealers charged only around $0.50 an ounce as the demand for physical gold remains subdued.

On the technical front, Reuters technical analyst Wang Tao predicted that spot prices might break a resistance price level at $1,789 and climb to $1,813 per ounce. It was based on wave pattern and retracement analysis.

In a related development, the U.S. Commodity Futures Trading Commission reported that market speculators cut their net long positions in COMEX gold contracts for the week that ended on June 29. Also, the holdings of the largest gold-backed exchange-traded fund in the world, SPDR Gold Trust, fell from 1,043.16 tons on Thursday to 1,042.58 tons on Friday.