What’s happening: Gold prices rose sharply on Tuesday as investors digested recent comments from US Federal Reserve officials.
What happened: There was an increase in demand for the safe-haven asset after remarks from Fed members fuelled prospects of the US central bank cutting interest rates in September.
Gold prices jumped to fresh highs despite better-than-expected data on US core retail sales.
Why it matters: Data released last week showed consumer prices in the US fell 0.1% in June following a flat reading in the previous month.
President of the Federal Reserve Bank of San Francisco Mary Daly said there is growing confidence in inflation moving toward the central bank’s 2% target. Fed chief Jerome Powell said on Monday that the latest inflation data added to the confidence of Fed policymakers about pricing pressures being on course to remain at lower levels. Lower interest rates increase the attractiveness of holding non-yielding gold.
Strength in the US dollar limited the gains in gold prices, 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 around 0.1% to 104.27 on Tuesday, but is still down around 1.4% month-to-date.
Gold prices have jumped more than 19% year-to-date, following a 13% surge in the prior year. Gold prices also received support following the assassination attempt on former President Donald Trump.
US gold futures for August delivery gained $38.90 to close at $2,467.80 per ounce on Tuesday.
In other metals trading, Silver for September delivery climbed 52 cents to settle at $31.46 per ounce. September copper declined 8 cents to $4.45 per pound. Platinum prices edged higher to $1,011.5, while palladium settled higher at $956.80 on Tuesday.
What to watch: Investors will continue monitoring inflation levels and comments from Fed members, which are expected to provide direction to gold prices ahead.
Data on US housing starts, building permits and industrial production, due to be released on Wednesday, will also remain in focus. Industrial production in the US, which rose 0.7% in May, is expected to grow by 0.3% in June.
Context: Shares of Bank of America Corporation gained on Tuesday after the company posted better-than-expected second-quarter results.
Details: BofA recorded a decline in profit for the second quarter as higher deposit costs impacted interest income. However, the bank’s overall results still managed to top market expectations amid a surge in investment banking and trading.
Bank of America’s investment banking fees climbed 29% to $1.6 billion during the latest quarter, while sales and trading revenues grew by 7% to $4.7 billion, recording growth for the ninth straight quarter on a year-on-year basis.
The second biggest US lender reported a quarterly net income of $6.9 billion and earnings of 83 cents per share, down 7% from the year-ago period, but topping consensus estimates of 80 cents per share. Revenues net of interest expense rose 0.8% year-over-year to $25.54 billion, surpassing Wall Street expectations of $25.22 billion.
Net income for the Consumer Banking segment fell to $2.595 billion, from $2.853 billion in the year-ago period, while Global Wealth and Investment Management’s net income climbed to $1.03 billion, from $978 million. Global Banking’s net income fell to $2.12 billion, from $2.65 billion in the year-ago quarter, while net income for Global Markets surged to $1.41 billion, from $1.18 billion.
The bank’s average loan and lease balance rose 0.5% year-over-year to $1.05 trillion, while average deposits increased 2% year-over-year to $1.91 trillion. Its NII declined 3% to $13.7 billion during the second quarter.
Bank of America said it expect the Fed to cut its benchmark interest rates by 25 basis points in the fourth quarter.
How shares responded: Bank of America’s shares climbed 5.4% to close at $44.13 on Tuesday, following the release of quarterly results. The stock has jumped around 37% over the past six months.
What to watch: Investors will watch upcoming interest rate decisions by the US Federal Reserve, which are expected to significantly impact Bank of America’s overall results ahead.
Other Markets: European indices closed lower on Tuesday, with the FTSE 100, DAX 40, CAC 40 and STOXX Europe 600 Index down by 0.22%, 0.39%, 0.69% and 0.28%, respectively.
Japan is reportedly making final arrangements to provide a $3.3 billion loan to Ukraine using interest from Russia’s frozen assets. The news sent the RUB/USD slightly lower in forex trading this morning.
Australia’s Westpac-Melbourne Institute Leading Economic Index came in flat in June. However, the six-month annualised growth rate for the index increasing to -0.13% in June, from -0.28% a month ago lent support to the AUD/USD forex pair.
New Zealand’s annual inflation rate eased to 3.3% during the second quarter, versus 4% in the prior quarter. The latest reading coming in better than market estimates of 3.5% sent the NZD/USD pair higher in forex trading this morning.
Japan’s Reuters Tankan sentiment index for manufacturers improved to a reading of +11 in July, from +6 in the previous month. Although this was the strongest reading in seven months, the easing of the region’s services sector exerted pressure on the JPY/USD forex pair.
The American Petroleum Institute said US crude oil inventories contracted by 4.44 million barrels in the week ended July 12, compared to a decline of 1.9 million barrels in the prior week, which sent the WTI crude oil prices slightly higher this morning.
UK’s inflation rate, producer price inflation and retail price index, Indonesia’s value of loans and Bank of Indonesia’s interest rate decision, Eurozone’s inflation rate, South Africa’s retail sales, US MBA mortgage applications, capacity utilisation, manufacturing production, crude oil inventories, gasoline stocks change, distillate inventories and Fed Beige book, Canada’s foreign investment in securities, as well as Russia’s producer price inflation.