Gold Futures Fail To Hold Early Gains, Settle Modestly Lower

Gold futures failed to hold early gains and ended weak on Wednesday as the dollar gained in strength.

Gold prices surged higher earlier in the day, supported by Fitch’s downgrade of the U.S. credit rating, and recent data showing a slowdown in global manufacturing activity in July.

The dollar index climbed to 102.78 before easing to 102.56, but still remained positive, gaining about 0.25%.

Gold futures for December ended lower by $3.80 at $1,975.00 an ounce.

Silver futures for September ended down $0.454 at $23.872 an ounce, while Copper futures for September settled lower by $0.0650 at $3.8435 per pound.

Fitch Ratings downgraded U.S.’ sovereign credit rating, citing fiscal deterioration and repeated debt ceiling standoffs.

The agency downgraded the U.S. credit rating by one notch to AA+, citing high debt burden at the federal, state, and local levels and a concerning decline in governance standards over the last two decades.

In U.S. economic news, payroll processor ADP released a report showing U.S. private sector employment jumped by much more than expected in the month of July.

ADP said private sector employment shot up by 324,000 jobs in July after surging by a downwardly revised 455,000 jobs in June.

Economists had expected private sector employment to increase by 189,000 jobs compared to the spike of 497,000 jobs originally reported for the previous month.

“The economy is doing better than expected and a healthy labor market continues to support household spending,” said ADP chief economist Nela Richardson. “We continue to see a slowdown in pay growth without broad-based job loss.”

While the report points to continued strength in the U.S. labor market, the data may lead to renewed concerns about the outlook for interest rates.

“The gold market is going to struggle as long as re-steepening of the US curve continues. The VIX is rising and it seems Wall Street is getting nervous here,” says Edward Moya, Senior Market Analyst at OANDA.

“Gold will eventually act like a safe-haven as stocks remain vulnerable given rising downbeat outlooks and as the UAW labor strike risks grow following the ambitious demands provided by the UAW president,” adds Moya.

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