Gold futures gained more than 2% in July, ending at the highest level since May and notching the best month of gains since March, as hope for the end of central bank rate hikes and a weaker U.S. dollar help boost the yellow metal.
Price action
-
Gold futures expiring in December
GC00,
+0.18% GCZ23,
+0.18%
gained $9.30, or 0.5%, to settle at $2,009.20 per ounce on Comex, its highest level since May 15, when it settled at $2,022.70. For the month, the yellow metal was up 2.1%, its highest monthly advance since March, according to Dow Jones Market Data. -
September silver
SI00,
+1.61% SIU23,
+1.61%
gained 48 cents, or nearly 2%, to end at $24.97 per ounce, with prices up nearly 8.5% for the month. -
Palladium futures for September
PA00,
+3.26% PAU23,
+3.26%
delivery gained $36, or 2.9%, ending at $1,275.60 per ounce, posting a monthly gain of 4.4%, while October platinum
PL00,
+1.77% PLV23,
+1.77%
rose $14.90, or 1.6%, to settle at $958.60 per ounce and book a monthly advance of nearly 5%. -
Copper for September delivery
HG00,
+2.19% HGU23,
+2.19%
gained 8 cents, or 2.1%, to finish at $4.01 per pound on Monday, with prices up 6.6% in July, according to Dow Jones Market Data.
Market drivers
A weaker U.S. dollar helped boost prices of the yellow metal on Monday, as traders bet that easing inflation in the U.S. might restrain the Federal Reserve from pushing interest rates even higher.
The U.S. central bank last week raised its policy rate target by 25 basis points to a range of 5.25% to 5.5%. Gold bulls were hoping that other major central banks, like the European Central Bank, which also raised rates this month, may nearly be finished hiking rates.
“Gold’s buoyancy is based on the expectation that central banks around the world are coming to the end of their cycle of interest-rate increases,” said Rupert Rowling, market analyst at Kinesis Money.
The ICE U.S. Dollar Index
DXY,
a gauge of the greenback’s strength against a basket of rivals, is off by 0.8% in July, although it has gained 0.2% to 101.83 on Monday, according to FactSet data.
“Gold prices are attempting a bullish break out as optimism grows that the major central banks are all approaching the end of their tightening cycles. The Reserve Bank of Australia (RBA) might be one-and-done this week and the Bank of England (BOA) might be done after a couple more,” wrote Edward Moya, senior market analyst at OANDA.
The RBA will announce its next interest-rate decision on Tuesday, Aug. 1, and policy makers are expected to hike rates by 25-basis-point to 4.35%, the highest level in more than a decade. In contrast, some market participants expect the RBA will hold its cash rate at 4.1% for a second straight meeting after quarterly inflation cooled by more than expected in the second quarter and retail sales surprisingly fell.
Later in the week, the Bank of England looks likely to raise rates by a quarter-point to 5.25% on Thursday, following the surprise 50-basis-point hike in June as central banks around the world continue to grapple with rising inflation.
“Gold’s rally could extend if growth prospects turn sour,” Moya said. “If Wall Street starts aggressively in rate cuts by the first quarter of 2024, gold could easily find a home above the $2000 level. It seems gold will need to wait for Apple’s earnings and the nonfarm payroll report, before it delivers its next big move.”
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