Gold prices see August’s biggest daily percentage gain

Price action

• Gold futures for December delivery
  GC00,
  -0.27%

  GCZ23,
  -0.27%
  gained $22.10, or nearly 1.2%, to settle at $1,948.10 per ounce on Comex. That was the biggest daily percentage rise for a most-active contract since July 31, according to FactSet data.

• Silver futures for September delivery
  SI00,
  -0.52%

  SIU23,
  -0.52%
  rose by 94 cents, or 4%, to $24.39 per ounce, with price posting their largest single-session rise since July 12.

• Platinum futures for October delivery
  PL00,
  -0.24%

  PLV23,
  -0.24%
  gained $12.70, or 1.4%, to $938.20 per ounce, while palladium futures for September delivery
  PA00,
  -0.61%

  PAU23,
  -0.61%
  rose by $16.60, or 1.3%, to $1,281.40 per ounce.

• Copper futures for September delivery
  HGU23,
  +0.27%
  gained 5 cents, or 1.4%, to $3.81 per pound.

Market drivers

After being battered by rising Treasury yields and a strengthening U.S. dollar, gold prices showed signs of life, with the yellow metal up more than 1% for the week.

Still, some analysts believe the recovery could soon fade unless something happens to change the fundamental outlook for the metal. Recently, expectations that the Federal Reserve could keep interest rates higher for longer have weighed on gold, since higher yields increase the appeal of other safety plays like bonds and the dollar.

Gold prices have moved lower over the last month, with the sharp rise witnessed in the 10-year Treasury yield, analysts at ICICI Bank wrote in a Wednesday note.

“U.S. nominal and real yields have moved higher reflecting a re-positioning from expectations of a ‘hard-landing’ scenario to expectations of a ‘soft-landing’ scenario of the U.S. economy,” they said. The market has also “responded to guidance from the FOMC that it could still consider raising rates at the November policy meeting by 25 [basis points] while keeping rates higher for longer given tight labour markets and CPI inflation remaining above the 2% target level.”

For the rest of this year, analysts at ICICI Bank said they see a “bearish trading environment for gold prices given that U.S. yields both real and nominal are unlikely to fall sharply.”

They now see gold prices trading in a range of $1,850 to $1,950 this year, with downside potential of $1,800.

Going in to 2024, they see a “possible uptrend emerging in gold prices contingent on our expectations that the lagged effect of U.S. monetary tightening works to weaken U.S. growth in the process.”

For now, gold’s attempt to recover from recent losses is a “positive signal for the metal as it shows that buyers are returning to be active,” said Carlo Alberto De Casa, external market analyst at Kinesis Money.

Still, “we cannot yet consider the current movement to be a proper inversion. What is missing is a major catalyst with the strength to trigger a rise big enough to offset the decline of the last few weeks,” he said in emailed commentary.

In Wednesday dealings, the ICE U.S. Dollar Index
DXY,
a gauge of the greenback’s strength against other major currencies, fell 0.2% to 103.33.

Meanwhile, the yield on the 10-year Treasury note
BX:TMUBMUSD10Y
was off by 13 basis points at 4.1.94%. The move followed data showing a decline in the S&P flash U.S. services PMI reading to a six-month low of 51 in August from 52.3. The S&P flash U.S. manufacturing PMI also dropped to a two-month low of 47 in August from 49.

Gold still looks attractive as a long-term portfolio hedge, especially given “the uncertain global growth outlook, volatile equity market dynamics, and unsettled geopolitics,” wrote analysts at UBS in a Wednesday note.