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AGE Daily Gold Update presents a recap on today's action in the precious metals markets. View archives.


7/10/2019: Gold jumps on dovish Fed

Source: Bill Musgrave, American Gold Exchange

Austin — Gold jumped to a one-week high, rising 0.9% to close above $1,412, after Fed Chair Jerome Powell's dovish testimony before Congress weakened the dollar, boosting demand for alternative stores of value.

The metal extended its gains after hours, climbing as high as $1,419.50 in electronic trade after the minutes from the Fed's June meeting underscored its willingness to cut interests rates.

In prepared remarks, Powell told Congress that slowing global growth, weak inflation, falling business investment, and uncertainty about trade wars "continue to weigh" on the US economy. He emphasized that the central bank will monitor developments and "act appropriately to sustain the expansion."

Traders took the statement to mean the Fed will deliver its first interest rate reduction in 10 years when it meets later this month, with the only question being the size. The odds of a half-point cut leapt from 3% to 29% after Powell's testimony, based on Fed-fund futures trading. The likelihood of at least a quarter-point reduction rose from 95% to 100%.

Lower rates are bullish for gold because they weaken the dollar by making it less attractive to foreign exchange investors seeking higher yield. They also reduce the opportunity cost of holding the metal, which generates no yield itself.

The minutes from the Fed's June meeting, released after the Comex close, reinforced the Chair's dovish stand. "Many" members, caught off-guard by deepening weakness in the economy, said they are ready to reduce interest rates if the soft data persists.

The dollar fell 0.4% against major rivals on the revised rate outlook, lifting gold and other commodities priced in it for global trade by making them less expensive overseas.

Also supporting gold, oil prices rose for a fifth session, with WTI crude soaring more than 4% after government data showed US inventories fell by 10 million barrels. Tensions with Iran and extended production cuts by OPEC are also fueling higher prices. Gold often trades in sympathy with oil as a hedge against energy-related inflation.

The other precious metals were also higher, with silver rising 0.5% while platinum and palladium climbed 1.8% and 3.1%, respectively.

At the Comex close: August gold gained $12 to $1,412.50; September silver picked up 8 cents to $15.23; October platinum climbed $14.90 to $830; and September palladium surged $48.20 to $1,588.10 an ounce, a new record.

  

Metal Ask      Change
Gold $2,235.81           Price Change Up Arrow $35.02
Silver $25.08           Price Change Up Arrow $0.26
Platinum $918.61           Price Change Up Arrow $8.25
Palladium $1,051.50           Price Change Up Arrow $22.91
In US Dollars