Gold Gains as Investors Weigh Growth Concerns, ECB Rate Hike

(Bloomberg) — Gold held onto gains and headed for its first weekly advance since early June as investors weighed renewed concerns over economic growth.

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A gauge of the greenback has retreated from a record hit July 14. Fears of a recession are mounting after data Thursday showed US jobless claims at an eight-month high and a slump in one regional factory outlook. An index of leading economic indicators is pointing to a contraction.

“We are finally starting to see some weakness in the US dollar index, as gold bounces off an oversold level, recovering above $1,700 for now,” said John Feeney, business development manager at Sydney-based bullion dealer Guardian Gold Australia. “We now expect this initial flight to the US dollar to start rotating back into gold as investors search for a true and reliable hedge against inflation.”

Investors will closely watch the Federal Reserve’s meeting on July 26-27 for clues about its monetary policy path. On Thursday, the European Central Bank raised its key interest rate by 50 basis points, the first increase in 11 years, as it confronts surging inflation.

Exchange-traded fund investors selling their holdings has become a major driver “generating price pressure,” Commerzbank AG analyst Carsten Fritsch said in a note. Investors have withdrawn more than 100 tons from gold ETFs during the past four weeks, Fritsch said.

“ETFs recently saw outflows on 17 consecutive days,” he said.

Spot gold rose 0.3% to $1,724.27 an ounce by 12:24 p.m. in London. Prices rose 1.3% Thursday after first dropping to the lowest intraday level since March 2021. The Bloomberg Dollar Spot Index rose 0.1% to pare a weekly decline. Silver fell, while platinum and palladium edged up.

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