Gold prices dropped to almost a one-week low on Tuesday, July 23, 2019, after the extension of the U.S. debt limit. The debt ceiling extension strengthened the dollar. It gained 0.3% against several rival currencies to reach its highest valuation since July 9 at 97.56.
President Donald Trump and leaders of the U.S. Congress have reached an agreement to extend the federal spending caps and debt limit for two years in order to prevent a government default.
U.S. gold futures dropped by 0.6% to $1,419 per ounce, while spot gold prices dipped by 0.4% to $1,418.39 an ounce.
According to Capital Economics analyst Ross Strachan, gold prices posted significant increases in the past weeks. Now that the momentum is lost, short-term investors are encouraged to get into profit-taking mode.
The U.S. Federal Reserve is expected to reduce benchmark interest rates at the end of July. The European Central Bank (ECB) is also likely to do the same on July 25.
Some investors in Britain have expressed concern that newly elected British Prime Minister Boris Johnson could pull out of the European Union without having settled a trade agreement just to appease his Conservative Party.
Reuters technical analyst Wang Tao predicts that gold may fall into the $1,401-$1,409 price range. He also expects gold to experience losses in the coming trading days.
In related developments, the holdings of the largest gold-backed exchange-traded fund (ETF) SPDR Gold Trust increased by 0.6% on Monday. During the same period, the holdings of the largest silver-backed ETF iShare Silver Trust gained by 2.6%. Silver ETF holdings have increased by a total of 2.6% in July.
For the price movement of other precious metals, platinum dropped by 0.3% to $841.50 per ounce while palladium fell by 0.7% to 1,518.01 an ounce. Only silver posted positive price performance, gaining 0.2% to $16.42 per ounce.