Gold Scales More Than One-Month High On Softer Dollar

(July 18,2023- Reuters)

Gold scaled more than a one-month high on Tuesday, bolstered by a softer dollar and lower Treasury yields, while investors focused on the outlook for the Federal Reserve’s monetary policy path beyond its July 25-26 meeting.

Spot gold was up 1% to $1,974.99 per ounce, the highest level since June 2. U.S. gold futures advanced 0.9% to $1,973.40.

The dollar index wobbled near more than a one-year low, making bullion more affordable to buyers holding other currencies. Benchmark Treasury yields ticked lower for the second straight day.

“The technical posture for the gold market has improved significantly, there’s strong support around $1,950. Gold can certainly move towards $2,000 if incoming data suggests the Fed will back off after one more hike this month,” said Jim Wyckoff, senior market analyst at Kitco.

Gold traders also took stock of data showing headline U.S. retail sales rose less than expected in June, though consumer spending appeared to be solid, which likely kept the economy afloat in the second quarter.

While the data boosted the idea of a less hawkish Fed materializing by the end of this year, which would help gold, prices could fall to the $1,900 range if the central bank goes the other way, Wyckoff added.

On Monday, U.S. Treasury Secretary Janet Yellen said she did not expect the economy to enter a recession.

Over the short-term period, gold could trade in a range until there is more clarity on how the U.S. central bank views the recent data, UBS analyst Giovanni Staunovo said.

Traders are pricing in another 25-basis-point rate hike at the Fed’s meeting next week.

Higher interest rates increase the opportunity cost of holding zero-yielding gold.