Monday, July 15, 2024

Gold gains as dollar weakens, U.S. rate cut hopes dim

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Gold prices posted a weekly gain after back-to-back weekly losses, helped by a softer dollar and safe-haven demand from the turmoil in the Middle East, even as U.S. Federal Reserve officials dented hopes of early rate cuts this year.

The dollar index recorded its first weekly decline in nearly two months amid a break in the recent rally built on expectations that the Fed would delay rate cuts.

The benchmark 10-year U.S. Treasury yield also fell for the week, losing 4 bps to 4.26%; lower interest rates raise the appeal of holding non-yielding bullion.

Fed Governor Christopher Waller said on Thursday that he was in “no rush” to cut interest rates, supporting sentiment against rate cuts before June.

Copper and gold likely would see the largest immediate price boost in the commodities sector from potential Fed rate cuts, Goldman Sachs analysts said this week.

Front-month Comex gold (XAUUSD:CUR) for February delivery finished Friday +0.9% to $2,038.60/oz, gaining 1.3% for the week, and front-month February silver (XAGUSD:CUR) also was +0.9% Friday to $22.969/oz, up 2% this week.

ETFs: (NYSEARCA:GLD), (GDX), (GDXJ), (NYSEARCA:IAU), (NUGT), (PHYS), (GLDM), (AAAU), (SGOL), (BAR), (OUNZ), (SLV), (PSLV), (SLVP), (SIVR), (SIL), (SILJ)

A Reuters report this week said a surge of interest in bitcoin ETFs is causing some investors to swap out holdings in gold-backed ETFs, as spot bitcoin ETFs could offer investors looking to hedge against inflation an alternative to gold.

Since U.S. regulators gave the green light for ETFs that track bitcoin prices on January 10, two of the biggest new spot bitcoin ETFs – iShares Bitcoin Trust (IBIT) and Fidelity Wise Origin Bitcoin Fund (FBTC) – accumulated $5.45B and $4.13B in assets respectively as of February 14, LSEG Lipper data shows.

The largest gold-backed ETF, New York’s SPDR Gold Trust (GLD), saw outflows of nearly $769M during the same period, while the iShares Gold Trust (IAU) had outflows of $284.6M, according to the report.

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