Gold gains in Asia as investors shrug of Fed rate hike views

– Gold posted gains in Asia on Wednesday as investors followed an overnight trend in the face of renewed expectations of a Fed rate hike this year and better than expected machinery orders data from Japan.

On the Comex division of the New York Mercantile Exchange, gold for December delivery rose 0.52% to $1,353.65. Silver futures for September delivery jumped 0.89% to $20.027 a troy ounce, while copper futures for September delivery gained 0.19% to $2.156 a pound.

In Japan, core machinery orders jumped 8.3%, well above the 3.1% gain seen month-on-month and posted a 0.9% drop year-on-year, better than the 4.2% fall seen. As well PPI figures showed a 3.9% decline, a tad below the 4.0% drop seen year-on-year.

Overnight, gold ticked up in quiet trade, as equities worldwide hit their highest level in almost a year dampening the precious metal’s appeal as a safe-haven asset while investors engaged in a search for higher dividends amid a continuing rout in global bond yields.

Fueled by gains among Health Care and Technology stocks on Tuesday, the NASDAQ Composite index and the S&P 500 Composite index ticked higher to reach fresh all-time intraday highs.

Over the last six weeks, the NASDAQ has staged an improbable rebound driven by a 23% rally in the iShares IBB Biotechnology ETF. The S&P 500, meanwhile, has lingered in record territory throughout the summer in broad risk-on trade, while government bond yields hover near record-lows.

Across the pond, the Stoxx 600 Index ticked up 0.4% while Britain’s FTSE 100 gained 0.62% to 6,851.30, as the U.K. initiated fresh easing measures approved by the Bank of England (BOE) last week. Consequently, the MSCI All-Country World Index jumped 0.5% to hit its highest level since last August.

Days after the BOE cut its benchmark interest rate to a record-low of 0.25%, yields on the UK 10-Year slipped below 0.6% on Tuesday for the first time on record. While the spread between the U.S. 10-Year and 10-year U.K. Gilts remains near all-time highs, U.S. Treasuries yields are still below 1.60%, down more than 60 basis points over the last year. By comparison, the S&P 500 dividend yielded 2.04% in Tuesday’s session, providing market players with an incentive to invest in equities over traditionally safer government bonds.

Meanwhile, the mounting prospects of a 2016 rate hike by the Federal Reserve continues to weigh on gold. The CME Group’s (NASDAQ:NASDAQ:CME) Fed Watch tool placed the probability of a December rate hike at approximately 50%, considerably above odds of around 30% before last week’s robust U.S. jobs report. The CME Group has also increased the chances of a September rate hike to around 20%, up from 10% last week.

Investing.com
August 10,2016