Commodities
Gold surged on Tuesday, soaring more than $10 an ounce to test 28-month highs, as the dollar slumped to its lowest level since late-June and inflation remained relatively weak, potentially delaying the timing of the Federal Reserve's latest interest rate hike.
On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,353.80 and $1,374.15 an ounce before settling at $1,372.25, up $12.65 or 0.93% on the session. Gold has now closed higher in six consecutive sessions. Since opening the year around $1,075 an ounce, Gold has soared approximately 30% year to date and is on pace for one of its strongest years in a decade.
Gold likely gained support at $1,337.50, the low from July 20 and was met with resistance at $1,391.40, the high from March 14, 2014.
On Tuesday morning, the U.S. Bureau of Economic Analysis (BEA) said Personal consumption expenditures (PCE) rose by 0.1% in June, slightly below consensus estimates of a 0.2% increase following a gain of 0.2% over the previous month. The gains are reflected by an uptick in spending for gas, electricity and healthcare services, which were partially offset by a reduction in spending in new vehicles. Over the last 12 months, the PCE Price Index has increased by 0.9% -- remaining unchanged from the year-over-year gains exhibited in May.
The Core PCE Index, which strips out volatile food and energy prices, inched up by 0.1% in June, in line with consensus estimates and below May's 0.2% monthly increase. On an annual basis, Core personal consumption expenditures are up by 1.6%, unchanged from May's level. At last week's Federal Open Market Committee (FOMC) July monetary policy meeting, the Committee said market-based measures of inflation continue to remain low, as the Core PCE index hovers below its long-term targeted objective of 2%.
While delivering a speech on monetary policy and the global economy in Beijing, Dallas Fed president Rob Kaplan urged the U.S. central bank to raise rates in a "gradual and patient manner," amid continuing challenges facing the U.S. economy. A day earlier, Kaplan told Bloomberg in a televised interview that a September rate hike is still on the table. Last week, the FOMC left its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50% for a fifth consecutive meeting.
Any rate hikes this year are viewed as bearish for gold, which struggles to compete versus high-yield bearing assets in periods of rising rate environments.
Elsewhere, investors kept a close eye on developments out of Japan after Shinzo Abe's cabinet approved a ¥28 trillion stimulus package on Tuesday. Abe's economic stimulus plan was approved mere days after the Bank of Japan surprised markets by implementing only modest easing measures at a closely-watched meeting last week. The $274 billion stimulus is one of the Japanese government's largest since the Financial Crisis and comes amid growing sentiment that Japan's economy will need to rely upon fiscal, not monetary policy in order to stave off deflation. USD/JPY plunged more than 1.5% to an intra-session low of 100.69, falling to near 1-year lows.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell sharply on Tuesday to an intraday low of 94.94, slipping below 95 for the first time since June 24. The Dollar has been in freefall since hitting four-month highs at 97.62 early last week.
Dollar-denominated commodities such as Gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery gained 0.178 or 0.87% to $20.678 an ounce.
Copper for September delivery added 0.009 or 0.39% to $2.208 a pound.
Source Investing.com
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