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Metals Stocks: Gold prices steady as strong U.S. jobs data spurs bets on big Fed rate hike

Gold futures were steady on Monday as July’s jobs report cleared the way ahead for more interest rate hikes, but investors still await Wednesday’s inflation data for fresh guidance on the rate outlook.

Price Action

Gold for December delivery
GC00,
+0.74%

GCZ22,
+0.74%

jumped $7.40, or 0.4%, to $1,798.60 per ounce. 

Silver for September delivery
SI00,
+3.90%

SIU22,
+3.90%

rose 44 cents, or 2.2%, to $20.29 per ounce. 

Palladium
PAU22,
+5.44%

for September delivery was up $89.30, or 4.2%, to $2,217.50 per ounce, while platinum
PLV22,
+2.29%

for October delivery climbed $12.30, or 1.3%, to $937.10 per ounce. 

Copper
HGU22,
+1.51%

for September delivery was off one cent, or 0.3%, to $3.56 per pound.

Market Drivers

Gold futures traded higher on Monday after Friday’s jobs report showed the pace of hiring unexpectedly surged last month, suggesting the Federal Reserve may have to remain aggressive in its effort to cool the economy.

The yellow metal ended lower last week as Treasury yields and the U.S. dollar rebounded, making gold less appealing for other currency holders. The dollar index stood at 106.35
DXY,
-0.46%
,
close to Friday’s peak of 106.88. Benchmark U.S. 10-year Treasury yields
TMUBMUSD10Y,
2.783%

slightly climbed to 2.803%, while the yield on the 2-year Treasury note
TMUBMUSD02Y,
3.185%

rose to 3.230%. 

Geopolitical tensions still remained in focus this week after U.S. House Speaker Nancy Pelosi’s visit to Taiwan, which ramps up U.S.-China relations, threatens to spark the biggest geopolitical crisis since Russia’s invasion of Ukraine. China said on Monday it is extending threatening military exercises surrounding Taiwan.

Gold has been traditionally considered a safe-haven asset with investors turning to it during times of turmoil. In data going back to 2006, money managers have always had a net long position in Chicago-traded gold futures and options, with more of them betting prices will rise than fall, according to data compiled by Bloomberg.  However, investment funds have taken out a rare net short position and counted on gold weakness with their net positioning being short by 10,474 contracts as of July 26. Net short positions have only cropped up on a handful of occasions toward the end of 2015 and 2018, according to a Bloomberg article (see chart below).

SOURCE: COMMODITY FUTURES TRADING COMMISSION, BLOOMBERG

On Wednesday, the latest look at U.S. inflation will be released for the month of July. Core inflation is expected to nudge 0.2% higher to 6.1%, according to market estimates.

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