Gold price ticks up, as global stocks near 1-year high amid search for yield
San Francisco (Aug 9) Gold ticked up in quiet trade, as equities worldwide hit their highest level in almost a year dampening the precious metal's appeal as a safe-haven asset while investors engaged in a search for higher dividends amid a continuing rout in global bond yields.
On the Comex division of the New York Mercantile Exchange, Gold for December delivery traded between $1,336.10 and $1,348.45 an ounce before settling at $1,346, up 5.65 or 0.41% on the session. Although Gold has retreated from two-year highs reached in early-July, the precious metal still remains fractionally below its level on July 6 when it hit a 28-month high at $1,374.90. Since opening the year around $1,075 an ounce, Gold has soared approximately 25% year to date and is on pace for one of its strongest years in a decade.
Gold likely gained support at $1,337.50, the low from July 20 and was met with resistance at $1,391.40, the high from March 14, 2014.
Fueled by gains among Health Care and Technology stocks on Tuesday, the NASDAQ Composite index and the S&P 500 Composite index ticked higher to reach fresh all-time intraday highs. Over the last six weeks, the NASDAQ has staged an improbable rebound driven by a 23% rally in the iShares IBB Biotechnology ETF. The S&P 500, meanwhile, has lingered in record territory throughout the summer in broad risk-on trade, while government bond yields hover near record-lows.
Days after the Bank of England cut its benchmark interest rate to a record-low of 0.25%, yields on the UK 10-year slipped below 0.6% on Tuesday for the first time on record. While the spread between the U.S. 10-year and 10-year U.K. Gilts remains near all-time highs, U.S. Treasuries yields are still below 1.60%, down more than 60 basis points over the last year. By comparison, the S&P 500 dividend yielded 2.04% in Tuesday's session, providing market players with an incentive to invest in equities over traditionally safer government bonds.
Meanwhile, the mounting prospects of a 2016 rate hike by the Federal Reserve continues to weigh on Gold. The CME Group's (NASDAQ:CME) Fed Watch tool placed the probability of a December rate hike at approximately 50%, considerably above odds of around 30% before last week's robust U.S. jobs report. The CME Group has also increased the chances of a September rate hike to around 20%, up from 10% last week.
Any rate hikes by the Fed this year are viewed as bearish for Gold, which struggles to compete with high-yield bearing assets in periods of rising rate environments.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.20% to an intraday low of 96.02. The index is virtually flat over the last month.
Dollar-denominated commodities such as Gold become more expensive for foreign purchasers when the dollar appreciates.
Silver for September delivery gained 0.045 or 0.23% to 19.850 an ounce.
Copper for September delivery lost 0.015 or 0.69% to 2.150 a pound.