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What’s happening: Gold prices settled higher on Friday, as investors digested the latest US inflation data.
What happened: Some weakness in the US dollar lent support to the yellow metal.
Despite Friday’s steep climb, gold recorded losses for the second straight week.
Why it matters: China’s central bank putting a pause to its official gold purchases had been exerting pressure on the yellow metal. However, an announcement by India, the world’s second-largest gold consumer, to lower import duties for gold and silver triggered purchases of these precious metals.
Gold gained on Friday following the release of the latest inflation data by the US. The Commerce Department’s Bureau of Economic Analysis showed prices edging higher in June, with the PCE (personal consumption expenditures) price index rising 0.1%, in-line with market estimates.
The US core PCE price index, which is the Federal Reserve’s preferred gauge for inflation, rose by 0.2% in June, above market estimates of a 0.1% rise. The annual PCE rate slowed to 2.5% in June, from 2.6% in the previous month.
US Treasury yields moved lower amid increased speculations of a rate cut by the Federal Reserve in September. Benchmark 10-year note yields declined to a one-week low on Friday. Lower interest rates decrease the demand for non-yielding gold.
Weakness in the US dollar also lent support to gold prices, as a lower greenback makes metals cheaper for foreign currency holders. The US dollar index, which measures the greenback’s performance versus a basket of major peers, edged lower to 104.32 on Friday.
Gold for August delivery gained 27.50, or 1.2%, to close at $2,381 an ounce on Comex on Friday. Despite this, gold prices closed the week with a loss of approximately 0.8%. The safe-haven metal had jumped to an intraday record high of $2,488.40 on July 17.
In other metals trading, silver for September delivery rose 4 cents to settle at $28.02 an ounce, also recording losses for the week. September copper slipped 1 cent to $4.12 per pound, while platinum fell slightly to $944.40 and palladium closed lower at $886.90.
What to watch: The Federal Open Market Committee will meet this next week, which is expected to provide some direction to gold prices. The US dollar and Treasury yields will also remain in focus.
Context: British stocks settled higher on Friday, with mid-cap stocks recording their highest settlement in over two years.
Details: Global market sentiment showed an improvement amid a recovery in tech stocks on Wall Street. Inflation data from the US spurred speculations of a rate cut by the Federal Reserve in September, supporting risk sentiment.
The Bank of England is scheduled to announce its policy decision on August 1, with markets pricing in a 50% chance of a rate cut during the meeting.
On the earnings front, shares of Drax Group jumped around 14% after the company reported higher profits for the first half. NatWest’s stock climbed about 7% after the company raised its forecast for the year. Babcock International’s shares gained more than 8% after the company reiterated its outlook for the full year.
The blue-chip FTSE 100 gained 1.21% to settle at a two-month high on Friday. The FTSE 250, the more domestically focused index, jumped 2.26% to close at 21,356.30, rising to its strongest level since March 2022.
The STOXX Europe 600 Index gained 0.83% to settle at 512.83 on Friday.
What to watch: Investors await the release of economic data on consumer credit, money supply M4 and CBI distributive trades from the UK today. Net consumer credit in the UK, which rise by £1.51 billion in May, is expected to rise by £1.6 billion in June.
Analysts expect money supply to rise 0.1% in June, while the monthly retail sales balance from the Confederation of British Industry (CBI) is projected to improve to -9 in July, from a reading of -24 in June.
Other Markets: US trading indices closed higher on Friday, with the Dow Jones index, S&P 500 and Nasdaq 100 up by 1.21% 0.65% and 1.03%, respectively.
Russia’s Ministry of Defence claimed that its military forces had captured two villages of Prohres and Yevhenivka in the Donetsk region of eastern Ukraine. The news sent the RUB/USD pair higher in forex trading this morning.
Vietnam’s foreign direct investment surged by 8.4% year-over-year to $12.55 billion in the first seven months of the year, lending support to the VND/USD forex pair.
Canada’s government recorded a budget surplus of C$1.1 billion in May, versus C$3.35 billion in the year-ago month. Despite this the CAD/USD pair rose in forex trading this morning.
Brazil’s value of outstanding loans rose by 1.2% to R$6 trillion in June, compared to a 0.7% gain in the prior month, exerting pressure on the BRL/USD forex pair.
China’s industrial profits grew by 3.5% year-over-year to 3,511.03 billion yuan during the first six months of the year, following a 3.4% rise in the previous period. However, the CNY/USD pair fell slightly in forex trading this morning.
South Africa’s money supply M3 and private sector credit, UK’s mortgage approvals, mortgage lending and net lending to individuals, Brazil’s price index IGP-M, gross debt to GDP, government budget value and Central Bank of Brazil focus market readout, US Dallas Fed manufacturing index, Indonesia’s foreign direct investment, China’s foreign direct investment, as well as Mexico’s government budget value.
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