Investing.com - Gold prices rallied on Friday, closing just below a 27-month peak, amid fading expectations of a Federal Reserve rate hike in the next couple of months and as investors continued to digest the political and economic aftermath of the U.K.’s decision to leave the European Union.
Gold for August delivery on the Comex division of the New York Mercantile Exchange jumped $18.40, or 1.39%, to settle at $1,339.00 a troy ounce by close of trade Friday.
The metal surged to a more than two-year high of $1,362.60 on June 24, after a shock U.K. vote to exit the European Union sent investors flooding into safe haven assets.
For the week, gold futures tacked on $16.70, or 1.27%, the fifth straight weekly gain. The precious metal rose almost 9% in June, its biggest monthly increase since February. Prices are up nearly 25% so far this year, completing one of its strongest first halves on record.
Also on the Comex, silver futures for September delivery spiked 96.5 cents, or 5.18%, on Friday to settle at $19.58 a troy ounce, after climbing to $19.98 earlier in the day, the most since August 2014. On the week, silver futures soared $1.75, or 9.87%, its best week since August 2013.
Market players all but ruled out further rate hikes by the Fed this year in the aftermath of Britain’s vote to leave the EU. In fact, futures markets are now reflecting a chance that the Fed could actually cut interest rates before the end of the year.
According to the CME Fed Watch tool, there’s currently a 0% probability of a Fed rate hike in July and a 3% probability of a rate cut.
The dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, fell to 95.48 at one point Friday, the lowest since June 24.
Dollar weakness usually benefits gold and silver, as it boosts their appeal as alternative assets and makes dollar-priced commodities cheaper for holders of other currencies.
Meanwhile, the political fallout from the Brexit vote continued after former London mayor Boris Johnson abruptly pulled out of the race to become Britain's next prime minister on Thursday.
Britain’s Justice Secretary Michael Gove, one of the main campaigners to take Britain out of the EU, said on Thursday he would run to become prime minister. Interior Minister Theresa May, who campaigned to remain in the EU, also announced her candidacy to lead the party.
Bank of England Governor, Mark Carney indicated on Thursday that more stimulus may be needed over the summer, sparking expectations for an upcoming rate cut.
Elsewhere in metals trading, copper for September delivery added 2.1 cents, or 0.98%, on Friday to end at $2.217 a pound, the highest since May 3. For the week, New York-traded copper prices increased 9.1 cents, or 4.88%, the third straight weekly gain.
Data from the Institute for Supply Management on Friday showed its index of national factory activity rose to a 16-month high of 53.2 in June, topping expectations of 51.4.
Meanwhile, in China, the Caixin manufacturing purchasing managers’ index fell to 48.6 in June, below expectations for 49.1, while the official manufacturing PMI came in at 50.0 last month, in line with expectations.
The disappointing data added to expectations that Beijing will have to roll out more stimulus soon to boost the sluggish economy.
The Asian nation is the world’s largest copper consumer, accounting for nearly 45% of world consumption.
In the week ahead, market players will be shifting their attention slightly away from Brexit-related headlines and more towards economic fundamentals and U.S. monetary policy, with the June nonfarm payrolls report and FOMC meeting minutes in the spotlight. There is also ISM services data on Wednesday.
U.S. financial markets will be closed on Monday for the Independence Day holiday.
Elsewhere, in the U.K., market players will be eyeing the release of the Bank of England’s financial stability report for fresh clarity on the health of the U.K. banking sector in wake of Britain’s shock decision to leave the European Union.
Ahead of the coming week, Investing.com has compiled a list of significant events likely to affect the markets.
Monday, July 4
The U.K. is to release data on construction activity.
U.S. financial markets will be closed for the Independence Day holiday.
Tuesday, July 5
China is to publish the Caixin service sector index.
The Reserve Bank of Australia will publish its interest rate decision.
The U.K. is to release data on service sector activity, while the Bank of England will publish its financial stability report. BoE Governor Mark Carney will hold a press conference shortly after the release of the report.
The U.S. is to produce data on factory orders, while New York Fed President William Dudley will speak at an event in New York.
Wednesday, July 6
The U.S. is to release data on the trade balance, while the ISM will publish its non-manufacturing index. Later in the day, the Fed is to produce the minutes of its June meeting.
Thursday, July 7
Bank of Japan Governor Haruhiko Kuroda will speak at an event in Tokyo.
The European Central Bank is to publish the minutes of its June meeting.
The U.S. is to release the monthly ADP nonfarm payrolls report as well as weekly data on initial jobless claims.
Friday, July 8
The U.S. is to round up the week with the closely watched nonfarm payrolls report.