Gold rose early Monday as geopolitical tensions from the Middle East added to the yellow metal’s luster as a hedge against uncertainty.
A British-flagged oil tanker, the Stena Impero, was seized by the Iranian Revolutionary Guard on Friday in the Strait of Hormuz after the Iranian government said it was “violating international maritime rules.” Another tanker, the British-owned MV Mesdar, was also boarded by armed guards but released, the BBC reported.
August gold was up early Monday on Comex after advancing 1% last week as expectations of an interest-rate cut by the U.S. Federal Reserve at the end of the month solidified. Currently, the August contract is at $1,427.40, up $0.70.
The CME FedWatch Tool has kept the odds of a July 31 rate cut at 100% since the Federal Open Market Committee’s last meeting in June. The tool put the odds of a 50-basis-point cut at 27.6% this morning. The likelihood of a 25-basis-point reduction is to 72.4%. The central bank enters a quiet period this week ahead of the meeting.
A survey of central banks conducted by the World Gold Council and YouGov and released last week showed that 54% of respondents expect global gold holding to climb in the next 12 months amid concerns about risks in other reserve assets, Bloomberg reported. Two-thirds see gold’s share of reserves staying the same or rising in five years’ time.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.72% to 820.49 metric tons Friday from Thursday, Reuters reported. And hedge funds and money managers boosted their bullish positions in Comex gold in the week ended July 16, according to the latest report from the Commodity Futures Trading Commission.
Gold’s next big test will be $1,450 an ounce and, if it breaks that, the yellow metal may head for $1,500, Todd Horwitz, chief strategist of BubbaTrading.com told TheStreet.com.
Silver futures outpaced the gain in gold last week, with the most-active September contract climbing 6.3% on Comex. They settled at a one-year high of $16.198 an ounce Thursday. Futures were little changed on Friday. This morning, the September contract is at $16.365, up $0.17.
Spot platinum and spot palladium were both higher early Monday. Platinum rose 1.7% last week, while palladium fell 2.5%.
Key events expected this week that could affect metals prices include the announcement of U.K. Prime Minister Theresa May’s successor on Tuesday – with Boris Johnson seen as her likely successor. The European Central Bank is forecast to signal its readiness to cut interest rates in a policy decision on Thursday, and it could potentially broaden stimulus, Bloomberg reported. The ECB meeting will be followed by a briefing by ECB President Mario Draghi.