Gold Futures Snap 5-Day Winning Streak, Settle Moderately Lower

Gold futures snapped a five-day winning streak and ended moderately lower on Wednesday, weighed down by a strong dollar and higher Treasury yields.

Worries about a possible recession and geopolitical tensions limited gold’s downside.

Tensions between the U.S. and China mounted as U.S. House Speaker Nancy Pelosi arrived in Taiwan and argued for the country’s freedom.

China imposed trade sanctions against Taiwan and summoned the American envoy to Beijing to lodge a stern protest. Terming the situation “extremely dangerous,” Beijing announced six exclusion zones encircling Taiwan to facilitate live-fire military drills from Thursday to Sunday.

The dollar index climbed to 106.82 after data showed an unexpected acceleration in the pace of growth in the U.S. services sector last month. The dollar index subsequently dropped to 106.50, but still remained in positive territory with a gain of about 0.25%.

Gold futures for December ended lower by $13.30 or about 0.7% at $1,776.40 an ounce.

Silver futures for September ended down by $0.245 at $19.894 an ounce, while Copper futures for September settled lower by $0.0515 at $3.4670 per pound.

Comments from some Fed officials pushed up the dollar. Chicago Fed President Charles Evans told reporters on Tuesday that the central bank can raise its benchmark interest rate by half a percentage point in September, but a 75 basis point move could be okay.

San Francisco Fed President Mary Daly said that the central bank still has work ahead to combat inflation.

Loretta Mester, president of the Cleveland Fed, said that inflation hasn’t even peaked yet and the Fed has further to go on raising interest rates.

A report released by the Institute for Supply Management showed an unexpected acceleration in the pace of growth in U.S. services sector activity in the month of July.

The ISM said its services PMI rose to 56.7 in July from 55.3 in June, with a reading above 50 indicating growth in the sector. The uptick came as a surprise to economists, who had expected the index to dip to 53.5.

The unexpected increase by the services PMI came after the index edged down to its lowest reading since May 2020 in the previous month.

A separate report from the Commerce Department showed a significant increase in new orders for U.S. manufactured goods in the month of June.

The report showed factory orders shot up by 2% in June after surging by an upwardly revised 1.8% in May. Economists had expected factory orders to advance by 1.1% compared to the 1.6% jump originally reported for the previous month.

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