Gold looks to stretch gains to a third session as Fed’s Powell sends dovish signals on rates

Gold looks to stretch gains to a third session as Fed’s Powell sends dovish signals on rates

July 11, 2019

Gold on Thursday looked to stretch its gains to a third consecutive session, as recent remarks by Federal Reserve Chairman Jerome Powell were seen signaling a rate cut remains likely at the end of the month.

Gold for August delivery on Comex GCQ19, +0.08% rose $3.40, or 0.2%, to $1,415.90 an ounce. Prices for the most-active contract are trading at their highest since July 3, when they settled at $1,420.90—their highest since May 2013. September silver SIU19, -0.17% was up 1.4 cents, or about 0.1%, at $15.24 an ounce.

“Bullish forces have returned in force with the presence of a ‘Fed put’ providing the most significant buying impetus” for gold, analysts at Zaner Metals said in daily commentary. “In fact, the Fed was definitively more dovish than anticipated and the odds of additional cuts beyond the widely anticipated August 1st cut have been expanded.”

Also, “Given the wide-ranging comments from the U.S. Federal Reserve Chairman yesterday regarding the global economy, one could suggest gold will also see economic uncertainty buying ahead,” the analysts said.

In his prepared remarks Wednesday, Powell said the economy hasn’t improved since June and the central bank is prepared to act as needed to support demand. Powell is testifying on Capitol Hill for a second day Thursday, appearing before the Senate Banking Committee.

Powell’s dovish tone sent the U.S. dollar lower Wednesday and it remained a bit weaker Thursday. The ICE U.S. Dollar Index DXY, -0.05% a measure of the currency against a basket of six major rivals, fell 0.1% Thursday to 97.009, trading 0.3% lower so far this week. A weaker dollar can be a positive to commodities priced in the greenback as it makes them less expensive to users of other currencies.

“Gold surged past the $1,400 mark thanks to the softer [U.S. dollar] as the inverse relationship between the two markets continues to be strong. Gold remains in its bullish trend, and it might look to retest the $1,439 region,” said David Madden, market analyst at CMC, in a note.

Among economic data Thursday, the U.S. government reported that the consumer price index rose 0.1% in June, but consumer inflation was largely held in check by falling energy prices.

Rounding out trading in Comex metals, October platinum PLV19, -0.34% fell by 70 cents, or nearly 0.1%, to $829.30 an ounce, while September palladium PAU19, -1.92% lost $27.50, or 1.7%, to $1,560.60 an ounce.

Palladium had settled at a fresh record of $1,588.10 on Wednesday with unions reportedly holding talks with major South African mining companies, raising concerns over the potential a workers’ strike.

September copper HGU19, -0.50% was off 1.4 cents, or 0.5%, at $2.681 a pound.

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