Gold prices hit 1-month high: Here we decode why
What's the story
Gold prices have surged to their highest level in over a month, driven by a weaker US dollar and lower Treasury yields. The increase comes as investors await progress in trade talks ahead of an August 1 deadline. Spot gold was stable at $1,889.98 per ounce earlier today after hitting its highest point since June 17. Meanwhile, US gold futures remained steady at $1,902.90 an ounce.
Market dynamics
US dollar index is not faring well
The US dollar index is hovering near a more than one-week low against its rivals. This makes greenback-priced gold cheaper for other currency holders. Benchmark 10-year US Treasury yields also hit a more than one-week low yesterday. Kelvin Wong, Senior Market Analyst at OANDA, said, "Gold's move on the upside has been pretty much supported by positive technicals and as well as reinforced by a broad base of dollar weakness."
Global factors
Geopolitical tensions influencing gold prices
Geopolitical tensions are also influencing gold prices. The European Union is considering countermeasures against the US as the trade talks stall. US President Donald Trump has threatened 30% duties on European imports if no deal is reached by August 1. Reacting to this, Wong said, "There could be a possibility that US and the respective trading partners may not agree to the terms and condition...and that potentially could see a bit of uncertainty."
Policy impact
What about interest rates?
The European Central Bank is likely to keep interest rates steady after a series of cuts. Meanwhile, the US Federal Reserve's monetary policy will be announced next week. Traders are pricing in around a 59% chance of a rate cut by the Fed in September, according to CME FedWatch Tool data. Gold usually does well in low-interest-rate environments.