Gold rises on fresh trade tensions, Fed rate cut bets

Marco Green
July 12, 2019

As for other precious metals, silver for September delivery was up 7.9 cents, or 0.52 per cent to close at 15.226 dollars per ounce.

He further said weak global economic outlook and unsolved trade war tensions between the United States and China are the other positive drivers of the yellow metal.

Spot gold rose 1.5 per cent on Wednesday after Fed Chair Jerome Powell's dovish remarks, where he confirmed the U.S. economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war, and said the Fed stood ready to "act as appropriate".

This statement weighed on the U.S. dollar.

Although expectations for a 50-basis-point rate cut at a Fed meeting later this month have evaporated after forecast-beating job gains were reported last week, investors still expect a 25-basis-point cut.

However, the dollar did regain some ground, after data on Thursday indicated a pick-up in underlying inflation in the USA, along with a solid weekly jobs report, which reduced expectations of a more aggressive 50 basis point cut at the Fed's July 30-31 meeting.

In prepared remarks to Congress, Powell said that crosscurrents such as trade tensions and concerns about global growth continue to weigh on the U.S. economic activity and outlook, the Xinhua news agency reported.

Indicative of investor sentiment, holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, rose 0.8 per cent on Wednesday. In May, the WGC had pegged India's gold demand in 2019 at 750-850 tn compared, with 760.4 tn in 2018.

USA gold futures settled 0.9% up at $1,412.50 per ounce.

Gold prices had touched a one-week high of $US1,426 earlier in the session. "The Fed chair's cautious stance on the U.S. economy raised hopes of an imminent interest rate cut that spurred investor sentiments towards safe assets like gold", said Hareesh V, head (commodity research), Geojit Financial Services. Similarly, silver was also up at Dollars 15.24 per ounce in NY.

"Over the past four days we had gold pulling in from a high". On COMEX, the contracts are seen in a range of $1,406-$1,435 an ounce, Kotak Securities said in a report.

Other reports by Click Lancashire

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