Gold Futures’ Front-Month Breaks Beyond $2,000

By Barani Krishnan

Investing.com - U.S. gold futures’ front-month contract finally pierced the $2,000-an-ounce mark on Tuesday as the dollar resumed its fall after a brief respite, sending safe-haven seekers back toward the yellow metal.

The October gold contract on New York’s Comex settled up $35.20, or 1.8%, at $2,001.20. Its session peak of $2,014.15, meanwhile, set an all-new high for a benchmark gold futures contract on Comex.

Notwithstanding that, Comex’s December gold, which has attracted even more volume and open interest than October futures, surged even higher. December gold on Comex hit a record high of $2,027.30 before settling at $2,021, up $34.70 or 1.7% on the day.

“Gold is catching fire again on stimulus bets, some dollar weakness, and as risky assets get a boost on improving economic data and improving virus outlook,” Ed Moya, analyst at online trading platform OANDA said.

“Gold is now the favorite safe-haven as Treasury yields continue to slide.  Real yields are deeper in negative territory and the U.S. could be one bad labor report from seeing the 10-year Treasury yield fall towards the March 9th record low of 0.318%.”

While gold is up more than 30% on the year, its rally took a backseat in recent days as the dollar climbed in anticipation of a positive U.S. nonfarm-payrolls report for July, due on Friday.

Doubts Now Over Friday’s Nonfarm Payrolls Data

Both the May and June issues of the nonfarm payrolls report had outsized U.S. jobs recovery from the Covid-19, thanks to the Labor Department’s revised methodology. For July, analysts polled by Investing.com had an initial consensus for a 1.6 million-jobs gain — a forecast that boosted the dollar.

But even if the jobs data surprised to the upside, some say the Dollar Index, which pits the greenback against a basket of six competing currencies, will face more serious headwinds ahead.     

“Overall, the U.S. dollar continues to look like a buy-on-dips scenario in the near-term,” said Jeffrey Halley, OANDA’s Sydney-based analyst. 

Adds Halley:

“The price action in the bigger picture though, looks like a bullish correction to a longer-term bear market. A tentative global recovery, combined with negative U.S. real yields, multi-trillion-dollar deficits, bottomless free money from the Federal Reserve, along with electoral uncertainty Covid-19 concerns, does not make a compelling case for dollar strength.”

Silver, which rose alongside gold through most of July, was also swept up in Tuesday’s rally.

The white metal’s front-month contract on Comex, September, settled up $1.61 cents, or 6.2%, at $26.03 per ounce. September silver earlier hit a one-week high of $26.18.

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