Precious Metals Review

“Gold advanced on ‌Friday, buoyed by a weaker dollar after in-line U.S. inflation readings this week tipped the scales in favor of an interest rate hold by the Federal Reserve next month.

Spot gold gained 0.6% to $4,376.02 per ​ounce by 9:09 a.m. EDT (1309 GMT). Prices declined 1.3% in the previous session ​on profit-taking after touching their highest level since June 5. Bullion is ⁠up around 0.7% for the week so far.

U.S. gold futures rose 0.3% to $4,433.90.

“The lower U.S. dollar ​index is a friendly outside market that’s supporting gold today,” said Jim Wyckoff, a market ​analyst at American Gold Exchange.

The U.S. dollar index slipped 0.3%, making greenback-priced bullion more affordable for buyers overseas.

Gold drew support from an unexpected decline in U.S. nonfarm payrolls in July, and inflation readings this week that ​were largely in line with expectations. This significantly lowered expectations of an increase in interest ​rates next month, with most analysts now seeing the central bank holding the current 3.50% to 3.75% ‌range.

Markets ⁠are pricing in a 31% chance of a rate hike at the September meeting, down from about 55% last week, according to CME’s FedWatch Tool.

“As we expect the Fed not to raise interest rates, gold price therefore still has further upside potential,” Commerzbank said in ​a note.

Lower interest rates ​tend to support ⁠non-yielding gold.

Meanwhile, transit through the Strait of Hormuz appeared to grind to a near-standstill after two more ships were attacked and the United ​States said it could maintain a naval blockade of Iran indefinitely.

Oil ​prices were on ⁠track for weekly gains on the news.

“If crude oil prices continue to rise, that’s going to be a bearish element for the metals market because it would aid inflation and prompt central banks ⁠to ​raise interest rates,” Wyckoff said.

Elsewhere, gold discounts in India widened ​to more than two-month highs.

Spot silver climbed 1% to $65.08 per ounce, platinum gained 0.9% to $1,733.34, and palladium rose 0.9% ​to $1,318.50.”

“Gold’s bounceback is mostly because of five buyers scooping up tons and tons of the precious metal. Who are they? Four foreign central banks and a company that deals in currency—cryptocurrency’s Tether.

Tether is making its massive buys for the very reasons that the central banks are—to diversify its holdings and to hedge against inflation and any significant weakness in the dollar, which Tether’s crypto stablecoin USDT USDTUSD -0.01% is pegged to.

It’s almost as if Tether is a new-age central bank.

In the first half of the year, Tether bought more than 27 metric tons of gold—matching the purchase of Kazakhstan. Only Poland, Uzbekistan, and China made bigger buys.

Gold’s bounceback is mostly because of five buyers scooping up tons and tons of the precious metal. Who are they? Four foreign central banks and a company that deals in currency—cryptocurrency’s Tether.

Tether is making its massive buys for the very reasons that the central banks are—to diversify its holdings and to hedge against inflation and any significant weakness in the dollar, which Tether’s crypto stablecoin USDT USDTUSD -0.01% is pegged to.

It’s almost as if Tether is a new-age central bank.

In the first half of the year, Tether bought more than 27 metric tons of gold—matching the purchase of Kazakhstan. Only Poland, Uzbekistan, and China made bigger buys.

Gold now hovers around $4420 an ounce—a 12% rebound from this year’s low of just under $4000 an ounce from at the start of July.

“Tether is no longer a niche participant, but a meaningful source of incremental physical gold demand,” the Jefferies analysts wrote.

Tether’s CEO, Paolo Ardoino, has acknowledged that the crypto platform’s massive buys could help to prop up the metal in times of volatility.

Tether also issues a tokenized version of gold, converting ownership of the metal into digital rights on a blockchain. The Jefferies analysts argue that Tether Gold should stabilize the price as well.

“We continue to believe that stablecoin reserve management and the broader tokenization of financial assets could become increasingly important sources of incremental gold demand over time,” they said.

Just a week ago, Tether posted Tether Gold’s second-quarter holdings on its website—up 9.5% from the first quarter.

Ardoino pointed out that Tether Gold holders aren’t just buying the tokenized version of the metal when gold is rising.

“They are using periods of market weakness to increase their ownership of physical gold through a product that is fully backed, transparent, portable, and accessible on-chain,” Ardoino said.

It’s also worth noting that Tether is still amassing gold despite volatility in cryptos. Bitcoin BTCUSD -1.28% has tumbled more than 25% this year and other digital currencies such as Ethereum ETHUSD -0.99% and Solana SOLUSD -1.21% are each down nearly 40%.”