Gold Futures Settle Higher As Dollar, Bond Yields Drop

Gold prices climbed higher on Thursday as the dollar and U.S. bond yields drifted down after the European Central Bank announced a bigger than expected 50 bps interest rate hike.

Gold prices fell earlier in the session as the dollar moved up ahead of the ECB’s rate decision.

The dollar index, which dropped to a low of 106.42, recovered to 107.32 but pared gains again and was down marginally at 106.98 a little while ago.

Gold futures for August ended higher by $13.20 or about 0.8% at $1,713.40 an ounce, recovering smartly from the session’s low of $1,678.40. Gold futures had dropped by about 0.6% on Wednesday.

Silver futures for September ended up by $0.051 at $18.719 an ounce, while Copper futures for September settled at $3.2985 per pound, down $0.0265 from the previous close.

The European Central Bank today announced its decision to raise interest rates by 50 basis points, marking the first rate hike in over a decade.

“The Governing Council judged that it is appropriate to take a larger first step on its policy rate normalisation path than signalled at its previous meeting,” the ECB said.

In U.S. economic news, data from the Labor Department showed initial jobless claims crept up to 251,000 in the week ended July 16th, an increase of 7,000 from the previous week’s unrevised level of 244,000. The uptick surprised economists, who had expected jobless claims to edge down to 240,000.

A separate report released by the Federal Reserve Bank of Philadelphia showed regional manufacturing activity unexpectedly contracted at a faster rate in the month of July.

The Philly Fed said its current general activity index slumped to a negative 12.3 in July from a negative 3.3 in June, with a negative reading indicating a contraction in regional manufacturing activity. Economists had expected the index to rebound to a positive 0.4.

The Conference Board also released a report showing its index of leading economic indicators decreased for the fourth straight month in June. The report said, the CB’s leading economic index slumped by 0.8% in June after falling by a revised 0.6% in May.

Economists had expected the leading economic index to decline by 0.5% compared to the 0.4% drop originally reported for the previous month.

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