On July 9, the gold futures ended lower and pulled back a day after recording another settlement at the highest level since September 2011. However, the precious metal held its ground above $1,800 per ounce after data revealed weekly jobless claims in the US remained well above the one-million mark.
The chief market analyst at AvaTrade, Naeem Aslam, commented:
“The U.S. economy is in recovery mode, but the recovery isn’t that smooth as per the data. There is a feeling that momentum in terms of recovery has slowed or started to level off.”
Notably, the number of initial jobless claims dropped by around 100,000 to a 4-month low of 1.31 million in the week that ended on July 4. In the meantime, the number of individuals getting traditional jobless benefits through the states dropped to 18 million during the week that ended on June 27 from about 18.8 million. These are the people who make up what is known as continuing claims.
In the scenario that all eight state and federal assistance programs are included, the continuing claims cumulated to an unadjusted 32.9 million during the seven days ended June 20. That is the most recent data available. It marks an increase from 31.5 million in the previous week.
Data Effect On Markets
Based on that data, the gold futures spent some considerable amount of time paring some of the losses that they experienced shortly before that release. U.S. benchmark stock indexes were trading lower while the gold futures settled. However, the Nasdaq Composite COMP, +0.52%, and S&P 500 SPX, -0.56% have held strongly onto their gains for that week so far.
The chief market strategist at FXTM, Hussein Sayed, said in a market update:
“If investors truly believed that the economy was returning to pre-pandemic levels soon, gold wouldn’t be standing today at [a] 9-year high, so it’s evident that investors who are participating in this risk-on rally are also hedging their positions by adding safe havens for their safety net.”
August gold GCQ20, 0.10% lost $16.80, or 0.9%, to settle at $1,803.80 an ounce in the same day that the most-active contract rose 0.6% to reach at $1,820.60; the highest level since Sept. 14, 2011, according to FactSet data. The prices on July 9 touched a low of $1,799.60.
The precious metal markets have mainly benefited from expectations for a long period of the central bank and government stimulus packages designed to support economies majorly harmed by the COVID-19 pandemic. Nevertheless, some of the analysts say that July also has been a seasonally strong period for gold as a result of the increased physical demand and appetite from the exchange-traded funds.
Interestingly, the World Gold Council stated that global net inflows for the gold-backed exchange-traded funds increased to reach $39.5 billion; topping the previous yearly inflow record of $23 billion from 2016, according to a report issued on July 7.
The Soft Dollar Favors Gold Futures
There is a softness in the US dollar which most commodities seem to be priced in. That softness has provided some support to precious metals according to some experts and commentators. On July 9, the ICE U.S. Dollar index DXY, 0.16% was up 0.3%.
But, the gauge of about six currencies has been down by 0.6% so far this week; based on the reports issued by FactSet data. A technical analyst at Newton Advisors, Mark Newton, wrote in a research report:
“The most significant development [in the market] seems to concern the breakout in the precious metals given ongoing U.S. dollar weakness at a time when yields also remain weak. This time in July should be a sweet-spot for metals strength, and over-weighting silver and gold futures should be favored for additional upside in the weeks ahead.”
In the meantime, September silver SIU20, 0.33% lost 20 cents which translates to 1% to settle at $18.962 an ounce. The drop happened after its 2.5% rise on July 8 to the highest level for a most-active contract since September 2019. For this week, the silver futures have gained at least 3% so far.
The chief market strategist at Ploutus Capital Advisors, James Hatzigiannis, told reporters that he is very bullish on silver. He also added that the metal is likely to outpace the move in gold futures for the rest of this year. He thinks that silver could easily reach the $25 level unless a coronavirus cure comes up. Hatzigiannis said:
“a further spread of the pandemic will cause silver to move up as the dollar should decrease in value; …and silver mining production will start to shut down again.”
Looking elsewhere on Comex, October platinum PLV20, +0.17% fell by 4.2% to $846.90 an ounce; while September copper HGU20, 0.07% settled 0.5%, higher at $2.8385 a pound. On the other side, September palladium PAU20, -0.13% gained 1.3% to $1,963.20 an ounce; which brought its weekly gain this far to about 1.9%.