Investing.com - Gold prices rose on Wednesday as soft U.S. economic numbers pressured U.S. Treasury yields and did little to dent expectations the Federal Reserve is set to cut interest rates later this month.
Gold futures for August delivery on the Comex division of the New York Mercantile Exchange rose 0.88% at $1,420.45 a troy ounce
Ahead of the crucial nonfarm payrolls data due Friday, private payrolls grew by 102,000 last month, falling short of expectations for a 140,000 increase, according to a report released Wednesday by ADP (NASDAQ:ADP) and Moody's Analytics.
Adding to concerns about slowing U.S. growth, the services sector, which accounts for about 80% of domestic growth, also missed economists’ forecasts.
The duo of reports dented expectations for second-quarter U.S. economic growth, pressuring United States 10-Year and boosting gold prices.
In a falling interest rate environment, investor appetite for gold strengthens as the opportunity cost of holding the precious metal decreases relative to other interest-bearing assets such as bonds.
The U.S. economy likely grew by 1.3% in the second quarter, according to the latest update of the Atlanta Fed's GDPNow real-time growth tracker. That estimate, released Wednesday, is down from the 1.5% gain predicted on Monday.
Gold prices, which notched their biggest monthly gain since 2016 last month, recently have been driven higher by expectations for a Fed rate cut later this month.
According to Investing.com’s Fed Rate monitor tool, a July rate cut is fully priced in.
The Fed, however, is not expected to be the sole central bank ready to deliver looser monetary policy measures as many suggest that IMF boss Christine Lagarde, who is in the running to replace ECB president Mario Draghi, could continue to pursue market-friendly policies, supporting gold prices.