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Gold Futures Settle Modestly Higher

Gold prices edged higher on Tuesday, bouncing back from losses in the previous two sessions, as geopolitical tensions and Federal Reserve Chairman Jerome Powell's cautious remarks about an economic recovery pushed up demand for the precious metal.

Gold gained in strength despite strong stock markets and a firm dollar.

The dollar index rose to 97.25 around mid-morning but eased to 96.98 later on. However, it was still holding in positive territory, gaining nearly 0.3% from the previous close.

Gold prices briefly fell into the red twice before noon but moved higher after Powell's testimony before the Congress.

Gold futures for August ended up $9.30 or about 0.5% at $1,736.50 an ounce, recovering from the day's low of $1,721.80 an ounce.

Silver futures for July moved up $0.250 or 1.5% to $17.652 an ounce, while copper futures for July edged down marginally to $2.5645 per pound.

Testifying before the Senate Banking Committee, Powell cautioned that "significant uncertainty remains about the timing and strength of the recovery."

Powell noted some recent indicators have pointed to stabilization and even a modest rebound in economic activity following the coronavirus-induced downturn.

He specifically cited the Labor Department's recent jobs report showing employment unexpectedly jumped by 2.5 million jobs in the month of May.

The Fed chief attributed the surprise job growth to some businesses reopening amid the easing of restrictions on mobility and commerce and the extension of federal loans and grants as well as stimulus checks and unemployment benefits supporting household incomes and spending.

However, Powell noted that output and employment levels remain far below their pre-pandemic levels and warned that there continues to be significant uncertainty about the economic outlook.

"Much of that economic uncertainty comes from uncertainty about the path of the disease and the effects of measures to contain it," Powell said. "Until the public is confident that the disease is contained, a full recovery is unlikely."

In other economic news, data from the Commerce Department said retail sales skyrocketed by 17.7% in May after plunging by a revised 14.7% in April. Economists had expected retail sales to spike by 8% compared to the 16.4% nosedive originally reported for the previous month.

Excluding a substantial rebound in auto sales, retail sales still surged up by 12.4% in May after plummeting by 15.2% in April. Ex-auto sales were expected to jump by 5.5%.

A report from the Federal Reserve said industrial production jumped by 1.4% in May after plummeting by a downwardly revised 12.5% in April. Economists had expected industrial production to surge up by 2.9% compared to the 11.2% plunge originally reported for the previous month.

The National Association of Home Builders released a report showing a continued rebound in U.S. homebuilder confidence in the month of June.

The report said the NAHB/Wells Fargo Housing Market Index spiked to 58 in June from 37 in May, continuing to rebound from the nearly eight-year low of 30 set in April. Economists had expected the index to climb to 45.

A report released by the Commerce Department showed business inventories tumbled by 1.3% in April after falling by a revised 0.3% in March. Business inventories were expected to fall by 0.8% compared to the 0.2% drop originally reported for the previous month.

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