Just when it looked like gold’s rally was starting to founder, the US Federal Reserve and an escalation in the US-China trade fracas have given the metal new life.
Gold, which had been headed for a weekly loss on Friday morning, closed at a fresh six-year high after the US-China trade fight intensified and Fed Chairman Jerome Powell said the US economy faces significant risks from slowing global growth.
Bullion’s rebound came after mixed economic data and doubts expressed by some US central bank officials on further US interest-rate cuts crimped demand for the metal earlier in the week.
With the rebound on Friday, prices have posted seven straight weekly gains, the longest run since 2011.
“With the macro environment deteriorating, i.e. China ratcheted up tariffs today, Brexit, Hong Kong, and the weakness of European bank balance sheets, you can now add a supportive US central bank,” Kitco Metals Inc senior analyst Jim Wyckoff said in an e-mailed report. “Fed Chairman Powell indicated the Fed would do what was necessary to keep the economy rolling, adding new momentum to gold prices.”
Trade-policy uncertainty seems to be playing a role in the global slowdown and in weak manufacturing and capital spending in the US, Powell said in the text of remarks Friday in Jackson Hole, Wyoming.
“We will act as appropriate to sustain the expansion,” he said.
That bolstered expectations the central bank will cut US interest rates further.
“That’s a very accommodating statement,” Bob Haberkorn, senior market strategist at RJO Futures in Chicago, said by telephone. “They’re going to keep this thing going for as long as they can.”
Traders of fed funds futures jacked up their expectations for the amount of easing they expect from the US central bank this year after Powell’s remarks.
The outlook for lower rates might help revive investor demand for gold, which erased a weekly loss. Lower rates are a boon for the metal, which does not pay interest.
Gold futures for December delivery rose 1.87 percent to settle at US$1,536.75 an ounce on the Comex in New York, after falling as much as 0.4 percent earlier.
The contract is up 0.9 percent for the week.
The new salvos on the trade dispute also added to concerns that demand for copper and other industrial metals will be further hurt.
December copper futures fell 1.1 percent to US$2.5375 a pound on the Comex, the lowest since May 2017.
A gauge of gold miners climbed to a three-year high on Friday, led by Toronto-based miners Yamana Gold Inc and Kinross Gold Corp, while an index of global base-metals companies touched an eight-month low.
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