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What’s happening: Gold prices settled higher on Tuesday, after recording losses for four consecutive days.
What happened: Gold prices received support from increased speculations of the US Federal Reserve cutting its benchmark interest rates in September.
However, Kamala Harris replacing President Joe Biden in the US election campaign exerted some pressure on the yellow metal.
Why it matters: Gold prices headed south last week amid concerns over weak retail investment demand worldwide, mainly in China, the number one consumer of the yellow metal. Gold prices fell 0.9% last week after gaining for three weeks in a row.
India’s finance minister Nirmala Sitharaman presented the Union Budget on Tuesday, which included slashing customs duties on gold and silver from 15% to 6%. The custom duty on platinum was also lowered to 6.4%. Prospects of higher demand from India fuelled gold prices.
The US Federal Reserve is set to announce its policy decision at the end of July. While markets expect the central bank to keep rates unchanged at this meeting, there are growing speculations of a rate cut in September.
Following President Joe Biden’s withdrawal from the election campaign, Vice President Kamala Harris has been named as his successor and will be campaigning in the state of Wisconsin.
Some strength in US dollar limited the overall gains for the yellow metal, as a higher greenback makes metals more expensive for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, gained more 0.1% to 104.45 on Tuesday.
Gold for August delivery gained $12.60 to close at $2,407.30 an ounce on Tuesday.
In other metals trading, silver for September delivery added 1 cent to settle at $29.33 an ounce and palladium gained more than 2% to reach $911.10. September copper declined 4 cents to $4.16 per pound, while platinum edged lower to $955.8.
What to watch: Investors await the release of economic data from the US, including GDP, due on Thursday, and personal consumption expenditure (PCE), scheduled for on Friday. The US economy, which grew by an annualised 1.4% in the first quarter, is expected to expand by 1.9% in the second quarter. Analysts expect the annual PCE inflation rate to slow further to 2.4% in June, from 2.6% in May.
Context: The CAD/USD forex pair fell on Tuesday amid weakness in crude oil prices.
Details: The Bank of Canada had slashed its key interest rate by 25bps to 4.75% at its June meeting, in a widely expected move. Policymakers also signalled further rate cuts in case inflation continues to ease as expected.
Markets now widely expect the BoC to cut rates by another 25bps at its meeting later today, after recent economic data showed a slowdown in inflation and a decline in retail sales. Experts are projecting rate cuts of more than 60bps by the end of this year.
Pressure on crude oil prices, one of Canada’s major exports, exerted pressure on the loonie. WTI crude oil for September delivery declined by $2.82 to close at $76.96 per barrel on Tuesday. Strength in the US dollar also weighed on the CAD/USD forex pair.
The CAD/USD forex pair fell more than 0.2% to 1.3786 on Tuesday. The S&P/TSX Composite Index also declined by 0.26% to close at 22,813.75 amid weakness in energy and base metals sectors.
What to watch: Investors await the Bank of Canada’s interest rate decision today, with markets expecting another reduction in interest rates.
Data on new housing price index and manufacturing sales will also remain in focus. New home prices in Canada, which rose 0.2% in May, are expected to increase by 0.1% in June. Analysts expect manufacturing sales to increase 0.6% in June, following a 0.4% rise in the prior month.
Other Markets: US trading indices closed lower on Tuesday, with the Dow Jones index, S&P 500 and Nasdaq 100 down by 0.14%, 0.16% and 0.35%, respectively.
Ukraine reached a preliminary agreement worth more than $20 billion with international creditors to restructure government debt. The news sent the safe-haven US dollar index slightly higher in forex trading this morning.
The Central Bank of Sri Lanka slashed its benchmark interest rates by 25 bps to 8.25%, exerting pressure on the LKR/USD forex pair.
Japan’s au Jibun Bank services PMI climbed to 53.9 in July, versus a final reading of 49.4 in the previous month, which sent the JPY/USD pair higher in forex trading this morning.
Australia’s Judo Bank services PMI business activity index declined to 50.8 in July, from 51.2 a month ago. This being the weakest reading since January exerted pressure on the AUD/USD forex pair.
The American Petroleum Institute said that US crude oil inventories shrank 3.9 million barrels during the week ending July 19. This followed a decline of 4.44 million barrels a week ago and sent the WTI crude oil prices higher this morning.
Germany’s GfK consumer climate, composite PMI, manufacturing PMI and services PMI, Spain’s producer prices change and consumer confidence indicator, France’s composite PMI, manufacturing PMI and services PMI, Eurozone’s composite PMI, manufacturing PMI and services PMI, South Africa’s inflation rate, UK’s composite PMI, manufacturing PMI and services PMI, US MBA mortgage applications, goods trade balance, wholesale inventories, new home sales, composite PMI, manufacturing PMI, services PMI, crude oil inventories, gasoline stocks change, distillate stocks and building permits, Mexico’s mid-month inflation rate, Russia’s corporate profits and industrial production, Indonesia’s foreign direct investment, China’s foreign direct investment, as well as Argentina’s retail sales.
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