Gold eases as dollar, yields firm; Fed rate cut hopes lend support

Traders see a 100% chance of rate cut in September as palladium fell to lowest level since 2017 on Monday

By Reuters

Published: Tue 6 Aug 2024, 10:12 PM

Last updated: Tue 6 Aug 2024, 10:40 PM

Gold prices eased on Tuesday on dollar strength and higher bond yields, although expectations of a US rate cut in September and escalating geopolitical tensions in the Middle East kept bullion stable following last session's sharp retreat.

Spot gold fell 0.8% at $2,389.26 per ounce by 12:49 p.m. ET (1649 GMT). The metal fell 1.5% in the previous session, driven by global sell-off as fears of the U.S. tipping into recession lingered.

US gold futures lost 0.6% to $2,430.30.

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The dollar index was up 0.3%, its first day trading higher against the Japanese currency this month, making greenback-priced bullion less affordable for overseas buyers. The benchmark U.S. 10-year yields also rose.

"There's still some weakness in gold mainly driven by dollar strength ... but the macro environment for gold is relatively positive so we'll probably see some range-bound activity in gold over the near term," said Amelia Xiao Fu, head of commodity markets at BOCI.

Lebanon's armed group Hezbollah launched a series of drone and rocket attacks into northern Israel.

Fed policymakers pushed back against the notion that weaker-than-expected July jobs data means the economy is in recessionary freefall, but also warned that rate cuts will be needed to avoid such an outcome.

Bullion is considered a safe asset amid economic uncertainties and benefits from a low interest rate environment.

Investors expect central banks to cut interest rates, which should limit the downside potential for gold, if not lift it to new record highs, said Fawad Razaqzada, market analyst at Forex.com, adding that he expects gold to hit $2,500 in the short term.

Markets see a 930 chance of a rate cut in September, according to the CME FedWatch Tool.

Spot silver fell 0.6% to $27.12 per ounce while platinum rose 1.1% to $916.10.

"The trend towards climate-neutral generation of solar power is likely to continue regardless of economic developments. However, headwinds are coming from falling sales of electric vehicles, in which silver is also used," Commerzbank said in a note.

Palladium gained 3.2% to $876.40 after hitting its lowest levels since 2017 on Monday due to recession fears.

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