Fed chair Jerome Powell’s rate cut hints buoy gold

Bengaluru — Gold prices rose to a one-week high on Thursday, extending gains from the previous session after US Federal Reserve chair Jerome Powell’s dovish remarks bolstered the expectation of an interest rate cut in July.

Spot gold rose 0.1% to $1,419.64/oz at 11.48am GMT, after earlier hitting its highest since July 3 at $1,426. The metal gained 1.5% in the previous session.

US gold futures jumped 0.6% to $1,421.60/oz.

“Powell’s testimony last night is giving gold a significant lift, with the market taking an indication that there is going to be a rate cut of 25 basis points coming soon,” said Ross Norman, CEO at bullion dealer Sharps Pixley.

In his testimony to Congress, Powell pointed to broad global weakness clouding the US economic outlook amid uncertainty on the fallout from the Trump administration’s trade conflict with China and other nations.

Echoing the dovish sentiment, the minutes from Fed’s June policy meeting showed many policymakers thought more stimulus would be needed soon, reinforcing the case for a US interest rate cut in July.

Attention is now turning to US consumer price index (CPI) data at 12.30pm GMT.

The US treasury yield curve steepened and the dollar came off three-week highs following the congressional testimony, further supporting bullion.

“The bonds market has been indicating for a while now that the global economic backdrop is darkening. The mood in gold is pretty upbeat on the basis of that,” Norman said.

“During the bull run from $1,280, gold has had relatively few pauses and dips have been pretty shallow, indicating that underlying sentiment remains positive.”

Gold rallied to a six-year peak of $1,438.63/oz in June, largely due to the expectation of rate cuts by central banks amid concerns over the global economy.

“A break above $1,438 may lead to further buying orders with $1,500 being the next level traders looking to target,” Hussein Sayed, chief market strategist at FXTM, wrote in a note.

Mirroring gains seen in gold, silver rose 0.1% to $15.26/oz.

Platinum rose 0.4% to $827.76, while palladium fell 0.5% to $1,581, after hitting its highest since March 22 at $1,605.52.

“Besides being supported by firm base metals, palladium and platinum may have profited from concerns about a possible strike in the SA platinum mining industry,” Commerzbank wrote in a note.

The world’s top platinum miners kicked off talks with SA’s unions on Tuesday, with negotiations on wages expected to be tough.

Reuters