Gold falls 1% as US Fed tempers aggressive rate cut hopes

Reuters June 26 | Updated on June 26, 2019 Published on June 26, 2019

Gold fell more than 1% on Wednesday, retreating from a 6-year peak scaled in the previous session, on signs the US Federal Reserve will not resort to aggressive interest rate cuts in July.

Spot gold was down 1.1% at $1,407.80 per ounce as of 0933 GMT, on track to snap a six-session long winning streak.

Gold prices hit their highest since May 14, 2013, at $1,438.63 on Tuesday.

US gold futures fell 0.6% to $1,410.60.

Fed Chairman Jerome Powell stressed the central bank's independence from US President Donald Trump, who is pushing for rate cuts. St. Louis Fed President James Bullard, considered one of the most dovish US central bankers, surprised some investors by saying a 50-basis-point cut in rates “would be overdone.”

“We have had a quite move higher in gold. There is an element of profit taking and the catalyst for that was the comments from the Fed yesterday,” ING analyst Warren Patterson said.

“Perhaps, the markets got ahead of itself over the outlook for rate cuts this year, which had driven gold higher. The realisation that we are not going to see as many cuts as we were anticipating is weighing on gold at the moment.”

Also hurting bullion's appeal, the dollar index gained 0.1% on Wednesday, crawling away from multi-month lows.

Even as the Fed playing down big rate cuts, investors are still expecting at least a quarter percentage point reduction.

Lower interest rates reduce the opportunity cost of holding non-yielding bullion.

Despite falling nearly $30 from the six-year high, gold is still up 8 percent so far this month.

“There will be short term volatility, but our positive conviction on gold has not changed,” said Heng Koon How, head of markets strategy at Singapore's United Overseas Bank, adding the bank saw gold hitting $1,500 by mid-2020.

“Gold has had a strong 'melt up' over the last month. So some short term profit taking is to be expected.”

The next move in gold could be decided by the outcome of trade talks between the United States and China during the G20 summit in Japan on Saturday, analysts said.

Holdings of SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell 0.3% to 799.61 tonnes on Tuesday from 801.96 tonnes on Monday.

Meanwhile, gold demand in India could fall to its lowest level in three years as a rally in local prices to a record high dents retail purchases.

Among other precious metals, silver fell 0.6% to $15.28 per ounce and palladium rose 0.1% to $1,529.40.

Platinum was up 0.3% to $808.29 per ounce.

Published on June 26, 2019

A letter from the Editor

Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.