Gold prices rose during these moments of trading, today, Wednesday, from their lowest levels in one month, which they recorded in the previous session, in conjunction with the decline in the dollar and bonds, one day before the release of important US inflation data in determining the path of the federal interest.
The precious metal prices received tremendous support during the past few hours from Moody's decision to downgrade the rating of several US banks, as gold is a safe haven in times of crisis and economic uncertainty.
Gold and the dollar now
Gold futures rose 0.26% to $1,965 an ounce.
While spot contracts for gold rose by 0.31% to 1931 dollars an ounce.
On the other hand, the dollar index fell by 0.13% to 102.203 points.
gold when settling yesterday
Gold prices declined at the end of trading, yesterday, Tuesday, after the rise of the dollar index, approaching its highest level in four weeks, and after the release of data showing a decline in Chinese foreign trade movement than expected, and a decline in the US trade balance deficit.
Gold prices for August delivery decreased by 0.50%, or the equivalent of $9.4, to reach $1924.1 an ounce, at the close of trading.
Yesterday, official Chinese data showed that exports declined by 14.5% in July on an annual basis, and imports decreased by 12.4%, more than expectations that indicated a decline of 12.5% and 5%, respectively, which reinforced concerns about the prospects for economic recovery.
On the other hand, data from the US Department of Commerce showed a decline in the trade balance deficit by 4% on a monthly basis in July, after imports fell by 13% during the same period.
While exports declined at a lower rate, reflecting the US economy's benefit from the boom in tourism and some other services such as financing services.
The United States imported about $203 billion in Chinese goods during the first six months of this year, 25 percent less than in the same period in 2022, according to the latest non-inflation-adjusted data from the US Department of Commerce.
What does gold need to continue its rise?
Baden Moore, Head of Carbon and Commodities Strategy, National Australia Bank, said: For gold to recover sustainably and continue its rally, we think the market will need to have increased certainty about US interest rate cuts for 2024.
Moore added: We remain cautious about rate cut expectations, as these expectations still face delay risks, adding that markets are awaiting the release of US CPI, initial jobless claims and ISM data.
The data showed that inflation in China slowed in July, as the world's second-largest economy struggled to revive demand and pressure mounted on authorities to launch more stimulus to the economy.
Economic risks support gold
Gold, usually seen as a hedge against economic risk, was also supported by renewed concerns about the health of the world's largest economy after rating agency Moody's downgraded several US banks.
Long-term US Treasury yields fell in response, making non-interest-bearing bullion more attractive.
Credit rating agency Moody's downgraded several small and medium-sized banks in the United States on Monday, warning of possible further downgrades for some of the country's top banks.
Also, the agency warned that the credit strength of the US banking sector will likely be tested by funding risks and weak profitability.
Moody's downgraded 10 banks by one notch and put 6 others under review for possible downgrades, led by Bank of New York Mellon, US Bancorp (NYSE:USB), State Street and Trust Financial.
Moody's said in a note, according to Reuters: The second-quarter results of many banks in the United States showed increasing pressure on profitability that would reduce their ability to create internal capital, at a time when the United States recession looms in early 2024 moderately. She explained that the quality of assets may witness a decline along with the risks related to the commercial real estate portfolios of some banks.
The agency also changed its outlook to negative for 11 major US banks, including Capital One Financial (NYSE:COF), Citizen Financial Group and Fifth Third Bancorp (NASDAQ:FITB).
However, Moody's warned that banks, which have incurred large unrealized losses that are not reflected in their regulatory capital ratios, are at risk of losing confidence amid the current high interest rate environment.
Federal remarks
Thomas Barkin, president of the Federal Reserve Bank of Richmond, said on Tuesday that there is still time for Fed officials to study the data before deciding whether further interest rate increases are needed.
Philadelphia Fed President Patrick Harker said that the US central bank may be at a point where it can leave interest rates as they are, unless there is any sudden change in the upcoming economic data.
other metals
Among other metals, spot silver rose 0.6% to $22.90 an ounce and platinum jumped 0.6% to $905.45. Palladium rose 1% to $1,231.95.
