Gold Price Eases, Investors Await Clarity On Fed Policy
London (Aug 22) - Gold inched lower on Thursday as investors locked in profits with focus shifting to a speech by U.S. Federal Reserve Chairman Jerome Powell at Jackson Hole for clarity on the direction of monetary policy.
Spot gold was down 0.2% at $1,498.37 an ounce by 0947 GMT. U.S. gold futures dipped 0.5% to $1,508 an ounce.
“The markets are waiting for Jackson Hole. After prices failed to stay above the important $1,500 mark, it’s not surprising that investors are taking the chips off the table,” Commerzbank analyst Eugen Weinberg said, adding that demand for the metal would remain strong overall.
“Geopolitical tensions, trade uncertainties and above all, developments in financial markets... will support gold. Interest rates world-wide keep falling and in this environment, gold emerges as a solid investment.”
Minutes of the Fed’s July meeting showed policymakers were divided over whether to cut interest rates but united in wanting to signal they were set on more cuts.
The immediate focus shifts to Powell’s speech for further clues on interest rate cuts, especially after an inversion in the Treasury yield curve highlighted the risk that the U.S. economy may fall into recession.
Fed funds futures are fully pricing a quarter-point cut in rates next month and more than 100 basis points of easing by the end of next year.
“The appeal of the non-yielding metal is likely to be diminished if Mr Powell and company appear unwilling to commit to big-splash rate reductions,” said Ilya Spivak, senior currency strategist with DailyFx.
He added that there was immediate technical support for gold at $1,480.00 but a daily close below that level could open the way to $1,437.70 - $1,452.95.
Lower U.S. interest rates put pressure on the dollar and bond yields, increasing the appeal of non-yielding bullion.
Traders are also looking at the Group of Seven summit this weekend for clues on what additional steps policymakers may take to boost economic growth.
Meanwhile, hopes for U.S. fiscal stimulus took a knock when President Donald Trump reversed course and said he was not looking at cutting payroll taxes.
Spot gold may rise to $1,524 per ounce as it has found support at $1,497, Reuters analyst Wang Tao said.
Holdings of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.8% to 851.91 tonnes on Wednesday.
Silver fell 0.5% to $17.02 per ounce and platinum slipped 0.5% to $848.28.
Palladium dipped 0.6% to $1,462.17 an ounce.
Reuters
