FX.co ★ Gold Hovers Near 8-Month Low

Gold traded around $4,030 per ounce on Tuesday, hovering near an almost eight-month low as the Federal Reserve’s restrictive monetary stance coincided with an unwinding of the dollar debasement trade. The metal was on track for an 11% decline in the second quarter, its worst quarterly performance in decades.

Recent stronger-than-expected economic data have reinforced a backdrop that supports the hawkish stance held by many FOMC members. The latest JOLTS report showed the highest number of job openings in two years, and analysts expect another solid gain in non-farm payrolls for June. At the same time, core inflation readings have continued to drift further above the Fed’s 2% target.

The sharp selloff in gold has mirrored a rise in yields on U.S. Treasuries, which has increased the relative appeal of coupon-bearing assets over non-yielding bullion. Fed Chair Warsh also announced the planned creation of task forces to assess the necessity of the central bank’s large balance sheet, laying the groundwork for the bond sales he has long advocated.