Gold prices kicked off August in the red as the appreciation of the U.S. dollar weighed on precious-metals prices even after the latest data on the U.S. manufacturing sector showed it contracted for the ninth consecutive month in July, while employment openings in the U.S. edged lower in June.
Price action
- Gold futures expiring in December GC00, -1.33% GCZ23, -1.33% declined by $ 30.40, or 1.5%, to settle at $ 1,978.80 per ounce on Comex.
- September silver futures SI00, -2.11% SIU23, -2.11% fell by 65 cents, or 2.6%, to end at $ 24.33 per ounce.
- Palladium futures for September PA00, -3.07% PAU23, -3.07% declined by $ 38.50, or 3%, to settle at $ 1,237.10 per ounce, while platinum futures for October PL00, -2.02% PLV23, -2.02% fell by $ 18.20, or 1.9%, to finish at $ 940.40 per ounce.
- Copper futures HG00, -2.46% HGU23, -2.46% fell by 10 cents, or 2.5%, ending at $ 3.91 per pound.
Market drivers
Gold futures were under pressure on Tuesday as Treasury yields edged higher and the U.S. dollar firmed, despite mixed batch of economic data which offers more insight into the state of the U.S. economy.
“Gold is going to need to see Treasury yields come down, but that might not happen until the market fully prices all the longer-dated issuance that is coming from the Treasury,” Edward Moya, Senior Analyst at Oanda wrote in a note. “Gold’s moment in the sun is coming, but first markets need to see the bond market selloff end.”
The Institute for Supply Management’s manufacturing survey, a barometer of business conditions at American factories, advanced 46.4% in July from 46% in the previous month, but fell short of the market expectation of 46.8%. The index has been below the 50% level for nine months, signifying a contraction.
Meanwhile, job openings in the U.S. dipped to 9.6 million in June, which marks the lowest level of openings since April 2021, according to a Labor Department report on Tuesday. However, the number suggests the demand for workers is still quite strong and points to a stable labor market.
Traders are looking ahead to Friday, when the next U.S. monthly jobs is due out from the Department of Labor. Economists expect the data to show 200,000 new jobs were created in June.
Gold prices rose in July, snapping a two-month streak of losses, and recording their biggest such gain since March on Monday, according to Dow Jones Market Data, but the recovery of the U.S. dollar has limited gains in the past week.
“The U.S. dollar is pushing higher again this week which is weighing heavily on gold prices currently,” said Manoj Ladwa, director at ARJ Capital, in emailed commentary.
The ICE U.S. Dollar Index DXY, +0.41%, a gauge of the dollar’s strength against a basket of rivals, increased by 0.5% to 102.39 on Tuesday.
“Despite the market no longer pricing in any further Fed rate hikes this year, the drive seems to be linked to the resilience of the U.S. economy, as shown through recent data strength,” Ladwa said.
Alex Kuptsikevich, senior market analyst at FxPro, said the fundamentals on the precious metal’s side include investor sentiment that the Fed is done raising interest rates after a string of weak inflation data in recent weeks.
“The ability of the bulls to defend the $ 1,947 level for the third time in less than a month could encourage them to buy, taking the price to the area of the historic highs at $ 2,050 and renewing them from there,” Kuptsikevich said. “This is the base case scenario.”