A golden end to July was triggered by Israel’s assassination of a Hamas leader in Tehran, which sent prices surging close to the unheard-of US$2,500 an ounce level.
Gold’s big July was a solo performance. Silver, oil, copper, and iron ore all ended with losses, but US bond yields fell sharply as prices surged. The 10-year bond lost 32 points for the month, with more than 25 of those points lost in the last five trading days.
Rising Middle East tensions and weakening US bond yields helped gold traders ignore the Fed’s expected decision at its latest meeting to hold rates steady, while signaling a possible cut at its next meeting in September.
The FOMC statement indicated that the American economy had moderated but inflation remained “somewhat elevated.” The Fed stated its intention to see annual inflation return to 2% before cutting rates, noting some progress in this area.
The US$40 an ounce rise boosted gold’s gain for the month to nearly 5.4%, as the price peaked at US$2,496 an ounce on the last day of July. A weaker Australian dollar pushed the World Gold Council’s Australian dollar price to $A3,740 an ounce.
Silver climbed to US$29.15 an ounce but suffered a monthly fall of more than 5% as investors favored gold. Despite a rise of more than 2% on Wednesday, copper closed July down more than 7% at US$4.19 a pound. Weak Chinese data has not helped copper’s outlook.
Oil prices rose strongly on Wednesday, with US crude up more than 5% for the day but still losing nearly 6% for July. Brent crude experienced a similar rise and ended the month down more than 6%.
Iron ore prices were weak throughout the month, losing 5% in July and dipping below US$100 a tonne twice.
Wednesday’s decision by the Bank of Japan to further normalize its monetary policy stance had little impact. The Bank raised its main interest rate to 0.25% from zero and announced a halving of its government bond buying. The news boosted the yen against the greenback.
The tighter monetary policy in Japan, initiated in March, combined with the increasing likelihood of US interest rate cuts this year, has shifted global investment flows, including the unwinding of so-called “carry” trades.