The Optimism of a Rate Hike Pause is a Primary Reason Gold Futures Are Closer to $2000

Gold Futures Rise on Decreased Default Risk and Debt Ceiling Optimism

Gold futures basis the most active August 2023 Comex contract is currently trading up $13.40 or 0.67% and fixed at $1995.50. The less likely risk of a default by the largest creditor in the world has added to the bullish sentiment in gold. The bipartisan legislation went to Congress yesterday where it passed in a vote of 314 to 117.

All that is left is for the Senate to pass the legislation raising the debt ceiling until 2025. According to one Senator, it is not if but when the legislation will be passed. Sources believe this could happen as early as tonight. It seems that the bill negotiated contains a compromise as both some

Democrats and Republican legislators are unhappy with the bill. The House passing the bill with an approximate 3 to 1 vote gives traders confidence that the Democrats having the majority (51 to 49) will pass this bill quickly.

U.S. Treasury Secretary Janet Yellen should now be able to authorize and pay the financial obligations of the United States unimpeded.

Fed Rate Hike Expectations Soften

There have been a few Fed officials that have been calling for another rate hike at the FOMC meeting this month. This tone has softened in the last 24 hours as seen through the eyes of the CME’s FedWatch tool. Exactly one week ago this probability predictor indicated a 48.3% likelihood that the Fed would begin a rate hike pause, it is now predicting a 79% probability that the Fed will begin to pause hikes as early as this month. The latest US manufacturing report revealed a contraction now the seventh consecutive month as new orders continued to drop in the number of new US jobless claims increased slightly last week.

Solid Gains Pushed Gold Futures to a High Above $2000

On a technical basis, gold futures tested the 50-day simple moving average at $2000.40 in trading today. Making today’s intraday high the new level of resistance that traders will attempt to take out soon. But because traders are now placing positions in the August contract month the support levels have risen slightly due to the higher bid-ask spread in the August contract month.

Gold opened at $1981.30, made a low of $1970.10, and remains within striking distance of that elusive and key psychological benchmark at $2000 per ounce.

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Wishing you as always good trading,

Gary S. Wagner