Gold inches higher amid hopes of a US rate cut

Bengaluru — Gold prices inched up on Thursday, supported by a decline in US Treasury yields amid prospects of an interest rate cut by the Federal Reserve, while investors sought direction from upcoming US non-farm payrolls data.

Spot gold was 0.1% higher at $1,419.23/oz, as of 4.26am GMT. Prices touched $1,435.99 on Wednesday, their highest since June 25.

US gold futures ticked up 0.1% to $1,421.8/oz.

This is a market that expects interest rate cuts, mainly in line with expectations the European Central Bank’s next chief would stay dovish, said Argonaut Securities analyst Helen Lau.

“Also the US 10-year yield has dropped so low that it makes gold more appealing.”

EU leaders’ nomination of IMF chief Christine Lagarde as Mario Draghi’s replacement at the helm of the European Central Bank reinforced expectations of monetary policy easing in the bloc.

Meanwhile, US President Donald Trump nominated Christopher Waller and Judy Shelton to the US Federal Reserve Board — both candidates are seen as dovish in their policy stance.

US Treasury yields fell on Wednesday, with 10-year yields hitting their lowest in more than two and a half years as eurozone yields tumbled on record lows.

Lower yields and expectations of the Fed cutting interest rates at its July 30-31 meeting weighed on the dollar. However, Asian stocks tracking sharp gains on the Wall Street provided headwinds to the bullion’s price.

The market’s next focus is on Friday’s US non-farm payrolls for June, which economists expect to have risen by 160,000 in June, compared with 75,000 in May.

“Next up for the gold rally is the US employment report. Nothing short of an incredible number of jobs and wages over the forecast will be enough to dampen the Fed interest rate cut narrative that is keeping the yellow metal on the rise,” Alfonso Esparza, a senior market analyst at Oanda, said in a note.