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Gold Poised for Strong July Performance

July 31, 2017 at 16:50 by Andrew Moran

Gold futures are sliding to kick off the trading week, but the yellow metal is poised for a strong July performance. Due to a slipping US dollar, foreign tensions in Asia, and political turmoil in Washington, gold is on track to record a near 3% gain in July.

August gold futures tumbled $0.40, or 0.03%, to $1,274.90 per ounce at 16:34 GMT on Monday. The precious metal is trading at a seven-week high and is ready to post a 2.6% gain in July. This comes as gold advanced 1.1%, reporting its third straight weekly gain last week.

Silver, the sister commodity to gold, is rallying to start the trading week. September silver futures climbed $0.14, or 0.87%, to $16.84 an ounce. The white metal also recorded a weekly increase of 1.6% last week. Silver is on track to be relatively flat for the month.

The precious metals are benefiting from a weaker currency as the US dollar dropped 0.35% on Monday and dipped 2.6% in July. A weaker US dollar is good for commodities like gold and silver because it makes it cheaper for foreign investors to purchase. With the US dollar falling, low inflation rates, and mixed US economic data coming out, there are some concerns among investors that the Federal Reserve will wait until the end of the year to raise interest rates.

Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

Meanwhile, tensions in North Korea are prompting traders to seek refuge in gold. The Pyongyang regime tested yet another missile over the weekend, causing the US military and regional powers to initiate defense mechanisms against a possible attack by Kim Jong-un. Reportedly, the North Korean government has listed Hawaii and Alaska as potential targets of an attack.

This has encouraged investors to boost their long positions in gold. According to Commodity Futures Trading Commission (CFTC) statistics, traders have increased their net speculative long positions from 28,900 to 73,600 contracts in the week ending July 25.

If you have any questions and comments on the commodities today, use the form below to reply.

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