Gold prices dipped on Thursday in electronic trade, as the precious metal failed to hold early gains that were sparked by the unrest in Egypt and political troubles in Portugal.
Gold for August delivery GCQ3 -2.36% shed 0.2%, to $1,249.50 an ounce. The move puts a small dent in Wednesday’s jump of $8.50, or 0.7%, on the Comex division of the New York Mercantile Exchange.
Morsi ousted by Egyptian military
The Egyptian military ousted President Mohammed Morsi from office. Simon Constable, Bill Spindle, Jerry Seib, and Nancy Messieh discuss the implications. Photo: AP.
Investors found safety in gold on Wednesday as Egypt’s military pressured President Mohammed Morsi to step down and later led his ouster from office.
Early Thursday, Egypt swore in Adly Mansour as interim leader.
Separately, a worse-than-expected reading on June activity in the U.S. services sector and a surge in borrowing costs for Portugal after the resignation of two government officials also provided upside support for gold, whose prices have been battered this year.
“The jump in Portuguese yields is reminiscent of previous euro-zone crises, which proved to be very positive for gold,” HSBC analyst James Steel wrote in a report Wednesday.
The yield on Portugal’s 10-year government bond jumped to more than 8% for the first time since last November on Wednesday, according to Tradeweb, following the resignations in Portugal of Finance Minister Vitor Gaspar and Foreign Affairs Minister Paulo Portas. The yield was around 7.2% on Thursday.
“Recurrent euro-zone crises from 2009-2011 had a markedly bullish impact on gold as events encouraged capital flows into U.S. Treasuries and lowered U.S. yields,” said Steel. “This helps explain why gold rallied despite [U.S. dollar] strength.”
Gains in other euro-zone bond yields indicated worries about Portugal were growing.
European Central Bank President Mario Draghi at a press conference Thursday may answer questions about Portugal as he addresses the ECB’s view on monetary policy.
Gold prices last week wrapped up the second quarter by sliding 23%, hit in part by fears that strengthening in the U.S. economy will result in the U.S. Federal Reserve paring the flow of monetary stimulus this year.
U.S. markets will be closed Thursday for Independence Day, and regular trading for Comex will resume Friday.
With the Fed monitoring labor-market conditions as part of its assessment of economic conditions, investors will key in on Friday’s release of the U.S. jobs report for June. The economy may have created 155,000 net jobs last month, less than May’s gain of 175,000, according to a MarketWatch survey of analysts.
In other electronic-trading action Thursday, September silver SIU3 -4.29% held tight at $20 an ounce. September copper HGU3 -3.17% lost 2 cents, or 7%, to $3.15 a pound.
Platinum for October delivery PLV3 -1.39% , meanwhile, rose $9.10, or 0.7%, to $1,355.90 an ounce and September palladium PAU3 -0.60% fell $1.50, or 0.2%, to trade at $684.20 an ounce