Gold Prices Edges Higher Despite Boost in Risk Appetite
Gold prices headed higher on Monday as a boost in risk appetite from generally positive economic data was insufficient to derail demand in an environment marked by decreasing yields. Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, gained $1.35, or 0.1%, to $1,413.55 a troy ounce by 9:06 AM ET (13:06 GMT). Even though China registered its worst growth in 27 years during the second quarter, upbeat readings on the country’s industrial production, retail sales and capital spending in June were enough to offer hopes that the world’s second largest economy was stabilizing. The NY Empire State manufacturing index also showed a much-stronger-than-expected bounce in July, although it recovered only half of the ground it lost in June. "The manufacturing sector remains vulnerable, especially if trade talks hit a brick wall," ING chief international economist James Knightley said via Twitter. Despite the positive reaction to the data in global equities on Monday - U.S. futures pointed to new record highs at the open - gold managed to hold its own, continuing to benefit from expectations that interest rates will fall. The Federal Reserve is widely expected to cut interest rates at the end of the month for the first time in a decade, lowering the opportunity cost of holding non-yielding bullion. As expectations for further policy easing across the globe increase, yields have been dropping on most fixed-income products bonds, even those traditionally seen as high-risk in economic downturns. Mohamed El-Erian, chief economist at Allianz, tweeted that “even some high yield (‘junk’) bonds now trade at negative yields -- ie, creditors PAY for the privilege of financing companies with notable default risk." More than $13 trillion of bonds worldwide currently carry negative yields, that is, they yield less than gold in absolute terms. John Reade, chief market strategist at the World Gold Council, suggested that, while gold has essentially been range-bound for the last three weeks, some of its technical factors are improving. Reade said that “the extreme overbought condition saw in June has moderated a lot”, while the “50-day moving average is climbing, making gold look less extended." In other metals trading, silver futures rose 0.4% to $15.293 a troy ounce by 9:07 AM ET (13:07 GMT). Palladium futures advanced 1.5% to $1,565.75 an ounce, while sister metal platinum gained 1.5% to $846.90. In base metals, copper traded up 0.8% to $2.715 a pound.