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Gold up 3% for July, Regaining Shine on Dovish Fed’s Wings

CommoditiesJul 30, 2021 03:25PM ET
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© Reuters.

(Updates with monthly gains)

By Barani Krishnan

Investing.com - Gold settled up for the week and month despite a price drop on Friday as a Federal Reserve standing resolute against any immediate talk of stimulus tapering or rate hike restored some shine to the yellow metal.

Front-month gold on New York’s Comex settled down $18.60, or 1%, at $1,817.20 an ounce. For the week, it rose 1%. More importantly, for July, it finished up almost 3%, after June's 7% plunge.

“Gold’s great week is ending on a down note, but bullion bulls are probably feeling pretty optimistic,” said Ed Moya, head of research for the Americas at New York’s OANDA. “Gold appears to be close to triggering technical buying following the aftermath of the Fed, persistent delta variant concerns, and depressed global bond yields.”

After two weeks of anemic action, gold longs got a break on Wednesday when Federal Reserve Chair Jerome Powell said the central bank wasn’t ready to even think of raising U.S. interest rates as it was still focused on buying assets to support an economy recovering from the coronavirus pandemic.

Powell also refused to go near any talk of when the Fed might consider tapering the combined $120 billion the Fed was plonking each month into Treasury bonds and agency mortgage‑backed securities. His mantra: It isn’t time.

Getting toward the Fed’s twin mandates of maximum employment for Americans and sustainable inflation were the goals, he reasoned.

U.S. jobless claims stood at 400,000 and above for a second week in a row, according to Labor Department data on Thursday that suggested a continued challenge for the fragile labor market recovery amid the coronavirus pandemic.

The Personal Consumption Expenditure Index, the Fed’s preferred gauge for inflation, rose by 3.5% year-on-year in June — its most in 30 years — when stripped of volatile food and energy prices.

Since January, gold has been on a tough ride that began in August last year — when it came off record highs above $2,000 and meandered for a few months before stumbling into a systemic decay from November, when the first breakthroughs in Covid-19 vaccine efficiencies were announced. At one point, gold raked a near 11-month bottom at under $1,674.

After appearing to break that dark spell with a bounce back to $1,905 in May, gold saw a new round of short-selling that took it back and forth between $1,700 and $1,800.

Gold is currently consolidating between the 50- and -100 day simple moving averages. If it clears $1,850 next week, it might be able to make a run toward $1,900.

The risk, however, is U.S. jobs showing a bigger-than-expected gain for July in the Labor Department’s monthly nonfarm payroll report due next week. If that overshoots forecasts, it could complicate the Fed’s aim of keeping the stimulus on for the foreseeable future and rates lower for longer. Gold might be caught in treacherous waters again if the job numbers surprise.

Gold up 3% for July, Regaining Shine on Dovish Fed’s Wings
 

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Comments (7)
Ajeli James
Ajeli James Aug 01, 2021 6:04PM ET
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hello
simone scelsa
simone scelsa Jul 31, 2021 9:17AM ET
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Dovish Fed, hawkish Fed, it does not really matter; the infinite money machine did already its irreparable damage. A currency reset is unavoidable.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 30, 2021 8:32PM ET
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Gold is much smarter than the Fed governors and their brothers. Gold and stocks are playing who blinks first game. Goldie is waiting for stocks to plunge to go up, Stocks are selling Goldie to buy stocks, but stock droppings will be much larger soon releasing Goldie from constipation, only difference is gold will go up first and then down fast.
MuraliKrishna Brahmandam
MuraliKrishna Brahmandam Jul 30, 2021 8:24PM ET
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Powell is constipated or stocks are; big chunky lumpy droppings in stocks are not happening for gold to go up. pressure is mounting, sooner or later chunky droppings will come in stocks for gold to go up
Shinobi Jack
Shinobi Jack Jul 30, 2021 7:14PM ET
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The US Dollar is being lead to the sacrifical alter by the socialists and they don't even realise that once it's dead, they're fairy tail will become a nightmare as the reality of hard economics puts an end to their Money-printing/MMT party and imports sky rocket in price. China and Russia are waiting in the wings with huge gold reserves. They will form new payment networks with their PM packed currencies.  Physical commodities/assets are where it's at, and I'm not talking about massively over valued real-estate that depends on near zero percent loans to prop-up it's value, by funding the buyers.
Vincenzo Tilotta
Vincenzo Tilotta Jul 30, 2021 7:14PM ET
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Excellent analysis. Indeed, the rest of the world will not believe in the us dollar any longer, and then the collapse will be really quick, it is just a matter of weeks now, before the rest of the world recognizes that the usd is nearly worthless. Yellen busy raising that debt ceiling a bit higher still, desperate as she is, but the game is up, but other countries are moving to hard assets and there is no way back for the US. The money printer has always killed the owner in the end
Aazam Khan
Aazam Khan Jul 30, 2021 6:56PM ET
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Gold will touch 2000 by this year end and will make new all time high of 2600 by the end of next year without a breath.
King Tolba
King Tolba Jul 30, 2021 4:28PM ET
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The US Federal Bank continues its criminal activity in destroying the price of gold and silver and is determined to throw gold from the balcony on a regular and systematic basis. To what extent will the US Federal Reserve continue to rig the price of gold and rig the markets completely? Please advise
Barani Krishnan
Barani Krishnan Jul 30, 2021 4:28PM ET
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To no end, I can assure you.
Vincenzo Tilotta
Vincenzo Tilotta Jul 30, 2021 4:28PM ET
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I hope so, true value is probably at around 5k right now. They have been rigging for decades, not even Basel3 is making any change or improvement in the situation, the rigging will continue hard as long as they have their dirty hands on the levers, I fear, they really do not want a fair and just market
 
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