July 04, 2019
Gold edges up on lower U.S. yields, rate cut hopes
(Reuters) - Gold prices inched up on Thursday, supported by a decline in U.S. Treasury yields amid prospects of an interest rate cut by the Federal Reserve, while investors sought direction from upcoming U.S. non-farm payrolls data.
Spot gold was 0.1% higher at $1,419.23 per ounce, as of 0426 GMT. Prices touched $1,435.99 on Wednesday, their highest since June 25.
U.S. gold futures ticked up 0.1% to $1,421.8 an ounce.
This is a market that expects interest rate cuts, mainly in line with expectations the European Central Bank's next chief would stay dovish, said Helen Lau, analyst, Argonaut Securities.
"Also the U.S. 10-year yield has dropped so low that it makes gold more appealing."
European Union leaders' nomination of IMF Chief Christine Lagarde as Mario Draghi's replacement at the helm of the European Central Bank reinforced expectations of monetary policy easing in the bloc.
Meanwhile, U.S. President Donald Trump nominated Christopher Waller and Judy Shelton to the U.S. Federal Reserve Board - both candidates are seen as dovish in their policy stance.
U.S. Treasury yields fell on Wednesday with 10-year yields hitting their lowest in over 2-1/2 years as euro zone yields tumbled on record lows. ]
Lower yields and expectations of Fed cutting interest rates at its July 30-31 meeting weighed on the dollar. However, Asian stocks tracking sharp gains on the Wall Street, provided headwinds to the bullion's price.
The market's next focus is on Friday's U.S. non-farm payrolls for June, which economists expect to have risen by 160,000 in June, compared with 75,000 in May.
"Next up for the gold rally is the U.S. employment report, nothing short of an incredible number of jobs and wages over the forecast will be enough to dampen the Fed interest rate cut narrative that is keeping the yellow metal on the rise," Alfonso Esparza, a senior market analyst at OANDA, said in a note.
A report by a payrolls processor ADP showed U.S. companies added jobs in June, but fewer than what analysts had forecast, raising concerns the labour market is softening.
On the technical front, spot gold may retest a resistance at $1,435 per ounce, leading to gains in the $1,443-$1,456 range, according to Reuters technical analyst Wang Tao.
U.S. markets will remain shut on Thursday for Independence Day holiday.
Silver was up 0.1% at $15.31 per ounce, and platinum dipped 0.3% to $834.36 per ounce.
Palladium fell 0.4% to $1,565.00 per ounce. The metal touched an over three-month peak of $1,574 on Wednesday.