Gold futures found support on Tuesday on the back of weakness in the U.S. dollar, but rising global interest rates and signs of weakness in demand for the metal in China and India looked to limit gains for gold prices.
- August gold
added $1.60, or 0.1%, to $1,842.20 per ounce following a loss of 1.9% last week. U.S. markets were closed for the Juneteenth holiday on Monday. .
- July silver
tacked on 25.3 cents, or 1.2%, $21.84 per ounce.
- July copper
traded at $4.055 a pound, up 4.15 cents, or 1%.
- July platinum futures
climbed $13, or 1.4%, to $943.20 per ounce.
- September palladium
rose $83.30, or 4.6%, to $1,882 per ounce.
What analysts are saying
Gold has been “pushed around within the $1,800-$1,875ish range over the past couple of weeks amid all the central bank rate hikes, inflation worries and recession talk,” said Fawad Razaqzada, market analyst at City Index and FOREX.com, in a Tuesday note.
“There are clearly conflicting factors at play which has prevented the metal from making a decisive move in one or the other direction,” he said. “Rising yields and a generally strong dollar are never positive influences for assets that pay no interest or dividends, yet the fact it hasn’t completely broken down means there are other factors supporting it.”
Still, “if I can point to one reason, it is this: rising interest rates,” said Razaqzada. While the Bank of Japan decided not to raise rates, “all other major central banks have either already started or promised to start a hiking cycle,” he said, “making making government debt more attractive as an asset class to hold for yield-seekers.”
For now, however, gold has held onto a gain so far this year. “Whether prices continue higher will surely result from the ongoing battle between rising rates and a dollar that just won’t stop going up,” Adam Koos, president of Libertas Wealth Management, told MarketWatch.
The recent rise in the dollar “tells me that this is a different kind of inflation — one we haven’t seen before,” he said. “If we see rates continue to complete a bottoming process, all while inflation settles down with the re-opening and stabilization of factories in Asian countries as they move away from a “zero-COVID” policy, then we could see gold prices break down and head lower through year-end.”
Meanwhile, a team of analysts at Commerzbank said data point to relatively weak demand in China and India.
“As the Swiss Federal Customs Administration has reported today, Switzerland exported a good 105 tons of gold in May. Less than half of this total went to China and India. At 10 tons, gold exports to China were the lowest in 14 months. This may well be related to the coronavirus lockdowns that had severely restricted public life,” the team wrote in a note to clients.