Markets

Gold gains on Fed rate cut hopes, trade worries

Gold prices advanced on Thursday as demand for the safe-haven metal rose on expectations of an interest rate cut by the US Federal Reserve following soft inflation data, and on escalating trade tensions between the worlds top two economies.

FUNDAMENTALS

Spot gold was up 0.3 per cent at $1,336.48 per ounce, as of 0542 GMT. US gold futures were 0.2 per cent higher at $1,339.80 an ounce.

“We can see strong support at $1,330 for gold, and the metal looks to trade upside with expectations of lower interest rates,” said Peter Fung, head of dealing at Wing Fung Precious Metals.

“Also, we are still worried about the (US-China) trade war and people are still looking at gold as a safe haven,” he said.

Data from the Labor Department showed on Wednesday US consumer prices barely rose in May, pointing to moderate inflation that together with a slowing economy increased pressure on the Federal Reserve to cut interest rates this year.

Fed policymakers are scheduled to meet on June 18-19 against the backdrop of rising trade tensions, slowing growth and a sharp step-down in hiring in May which have led financial markets to price in at least two rate cuts by the end of 2019.

Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The dollar index versus a basket of six major currencies was down 0.1 per cent on Thursday, having risen more than 0.3 per cent overnight.

On the trade front, US President Donald Trump said he had a “feeling” a US-China trade deal could be reached, but reiterated his threat of increasing tariffs on Chinese goods if there is no agreement.

However, Trump declined to set a deadline for levying tariffs on another $325 billion of Chinese goods and called the relationship with Beijing good but “testy”Read More – Source

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