Gold Prices Boosted By Dollar Slide, Lower Bond Yields Also Supportive

Marco Green
July 17, 2017

USA consumer prices were unchanged in June and retail sales fell for a second straight month, pointing to tame inflation and soft domestic demand that diminished the prospects of a third interest rate increase from the Federal Reserve this year.

Spot gold rose 0.19 per cent to $1,230.91 per ounce as of 0048 GMT. It was poised for a weekly gain of 1.3 per cent, the biggest since mid-May.

The kiwi was battered early in the week by disappointing domestic data but gained sharply toward the end of the week amid speculation the Reserve Bank may be more inclined to hike interest rates in the face of increases and bullish talk from other central banks including the Bank of Canada.

The dollar was little changed against a group of peers early on Friday, as currency investors remained cautious ahead of US inflation data due later in the session.

After Yellen's initial testimony, said Goldman, they see "a 10% probability (vs. 20% previously) that the next rate hike comes in September, 5% in November and 55% (vs. 50% previously) in December".

On Thursday, Yellen said the low unemployment rate would likely force employers to raise pay to attract and keep workers, which in turn should push up prices.

Friday's "data reaffirms the delay", he said.

Gold futures for August delivery were down 0.11% to $1,216.00 as of mid-morning in Asia.

"We also expect iron ore and coal prices to edge lower, which should put some downward pressure on the AUD". The contract finished the week up 1.5 per cent, its first gain in six weeks.

The combination of a weaker dollar and lower yields provided robust support to gold with prices advancing to the $1,230 per ounce area.

The increase in underlying prices was held to 0.1% with a year-on-year rate of 1.7%.

Meanwhile, SPDR Gold Trust slipped 0.43% to 828.84 tonnes on Thursday from 832.39 tonnes on Wednesday.

"A move above US$16.20 could trigger quite a bit of accelerated buying from the funds", he said.

Palladium advanced 0.4 percent to $855.49 per ounce, set to end the week nearly 2 percent higher.

Other reports by Click Lancashire

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