Gold & Silver

Gold rises on fresh trade tensions, Fed rate cut bets

Reuters July 12 | Updated on July 12, 2019 Published on July 12, 2019

Gold up nearly 0.6 per cent so far this week. File Photo   -  BusinessLine

Palladium off from 16-week highs

Gold prices rose on Friday and were on track to post a weekly gain, consolidating above $1,400 as renewed Sino-US trade tensions amid global growth jitters and prospects of an interest rate cut by the US Federal Reserve stoked safe-haven demand.

Spot gold was up 0.3 per cent at $1,407.69 per ounce as of 0426 GMT. Gold has risen nearly 0.6 per cent so far this week. US gold futures were up 0.2 per cent at $1,409.90 an ounce. “We have a slightly weaker U.S. dollar, tensions in the Middle East and once again, prolonged trade dispute between the U.S. and China, which are all supportive,” said Michael McCarthy, chief market strategist, CMC Markets.

Fed Chair Jerome Powell indicated on Thursday that a rate cut is likely at the Fed's next meeting as businesses slow investment due to trade disputes and a global growth slowdown. Meanwhile, US President Donald Trump said China was not living up to promises it made on buying agricultural products from American farmers. The trade spat has spilled over to global markets and exacerbated economic jitters, with weak economic data from Singapore becoming the latest indicator of this trend.

Investors will now scan trade and lending data from China on Friday for confirmation on the fallout of the dispute, with the world's second-largest economy expected to have slowed to its weakest pace in at least 27 years. Adding to global uncertainties, Iran's alleged attempt to block a British-owned tanker heightened tensions in the Middle East in the wake of attacks on tankers and the downing of US drone by Iran in June.

Gold is considered a safe investment during political and financial uncertainty. Also, a slightly weaker dollar was helping gold's case, making the metal cheaper for investors holding other currencies.

However, the dollar did regain some ground, after data on Thursday indicated a pick-up in underlying inflation in the US, 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. “Stronger inflation data has had an impact on expectations of a rate cut, but it hasn't changed the direction,” said McCarthy.

Lower interest rates would support gold because they reduce the opportunity cost of holding non-yielding bullion. On the technical side, spot gold is biased to break a support at $1,404 per ounce and retrace to the next support at $1,387, according to Reuters technical analyst Wang Tao.

Among other precious metals, silver rose 0.2 per cent to $15.14 per ounce, while platinum was steady at $820.50. Palladium fell 0.3 per cent to $1,556.01 an ounce, edging away from a 16-week peak touched in the previous session.

Published on July 12, 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.