Gold Edges Up as Treasury Yields Ease

The price of gold recorded some gains on Tuesday as yields on U.S. Treasuries eased and there was news of de-escalation in the conflict between Israel and Hezbollah in Lebanon. However, there were mixed signals on progress in talks between Iran and the U.S.

Spot gold gained 0.8% to reach $4,517 an ounce while gold futures for delivery in August recorded a 0.9% gain to go for $4,547 an ounce.

Brian Lan, the managing director of GoldSilver Central, commented that gold prices are ticking upwards because of the easing conflict in Lebanon between the Israelis and Hezbollah. At the same time, gold prices were bolstered by the easing of yields on United States Treasuries, especially for the 10-year note.

This easing is good for gold because it reduces the opportunity cost for holders of non-yielding gold.

Hezbollah’s announcement of a partial ceasefire with the Israel Defense Forces put the brakes on a simmering conflict that has resulted in thousands of deaths in Lebanon. The same conflict has added a layer of complexity to talks to end the war between the United States and Iran since Iran insists that strikes on Lebanon by Israel have to stop if any deal is to be agreed to in the Iran war.

Earlier on, state media in Iran had revealed that Tehran was pulling out of indirect negotiations with Washington and could pull the plug on the current ceasefire between the two countries. However, President Trump wrote on social media that discussions with Iran were taking place “at a rapid pace.” These mixed signals have left traders and investors unsure about the status of the Middle East conflict.

Focus is therefore glued to the anticipated nonfarm payroll data due to be released this week in the U.S. The employment report is also expected this week, and both sets of data will reveal how resilient the labor market is amid growing concerns about rising inflation as a result of the war in the Middle East.

Monetary policy direction is also in focus as investors await comments from Fed policymakers. Special attention is being directed at what Fed Governor Michael Barr and Beth Hammack, the president of the Cleveland Fed, will have to say.

If gold can regain the $5,000 mark, traders will be reenergized to look at the precious metal as one that is finally seeing its price move in line with what underlying fundamentals suggest it should be doing. Bullion’s price movement over the coming weeks will be closely watched by Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) and traders as well as the general investment community.

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