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Gold looks to score another record-high settlement, but it’s ‘no gold rush’ in the West

Metal’s rise comes from a jump in speculative betting and physical demand from China: analyst Gold futures extended their rally on Tuesday and may mark a third consecutive session at a record settlement, but don’t call it a “gold rush” in the West, according to one analyst.

Weak U.S. economic data lifted expectations that the Federal Reserve will cut interest rates later this year, and contributed to declines in the U.S. dollar and Treasury yields, raising safe-haven investment interest in the precious metal.

Gold’s latest run to new record highs, however, has come on a “jump in speculative betting,” Adrian Ash, director of research at BullionVault, told MarketWatch.

There is ”no gold rush among Western investors right now, not in physical bullion and not outside Comex futures and options,” he said.

Gold ETFs continue to “shrink to pre-pandemic size; coin shops are slashing their premiums and buy-back prices to try clearing the flood of customer selling,” said Ash.

There was no sign of that weakness in physical demand on Comex Tuesday. Gold for April delivery GC00, +0.65% GCJ24, +0.65% climbed $11.90, or 0.6%, to $2,138.20 an ounce, with front-month prices looking to top Monday’s record-high settlement of $2,126.30.

Record settlements Prices also reached a fresh record high on Friday, when the Institute for Supply Management (ISM) said its manufacturing index dropped to 47.8 in February, “signifying economic contraction,” said Ryan McIntyre, managing partner at Sprott Inc. 

This has helped the gold price as the precious metal “typically does well in times of economic uncertainty” and economic contraction is more likely to “lead to decreases in interest rates, which lessens the opportunity cost for holding gold,” he told MarketWatch.

On Tuesday, the ISM said its service-sector PMI fell more than expected, to 52.6% in February from 53.4% in the prior month.

Following the data, the ICE U.S. Dollar index DXY edged lower and the yield on the 10-year Treasury BX:TMUBMUSD10Y fell by 6.3 basis points to 4.15% as markets awaited midweek testimony from Federal Reserve Chairman Jerome Powell as well as Friday’s monthly U.S. jobs report.