Gold held its rally on a cocktail of positive drivers including weak macroeconomic data, sinking Treasury yields and expectations for fresh easing from the U.S. Federal Reserve.
Bullion held above $1,400 an ounce and headed for the highest close since May 2013 ahead of a U.S. holiday Thursday. Donald Trump has tapped two economists to the Fed’s board who are both seen as likely to support the president’s call for lower interest rates. Meanwhile, weaker than expected U.S. payrolls and service industry data overshadowed a decline in jobless claims.
“The longer-term picture looks positive for gold,” Georgette Boele, coordinator of FX and precious metals strategy at ABN Amro Bank NV, told Bloomberg Television. Still, she suggested prices are probably overshooting at the moment. “The market has been too aggressive pricing in rate cuts” both from the Fed and other central banks, she said.
“What’s important is the European central banks all seem to be pretty dovish all of a sudden”
George Gero, managing director at RBC Wealth Management
Gold is trading near a six-year high as simmering geopolitical and trade tensions boost demand for havens. Earlier in the week, the metal was boosted by a run of weaker manufacturing activity from Asia and Europe, similar data from the U.S that disappointed investors, and tariffs against a longer list of European goods.
“What’s important is the European central banks all seem to be pretty dovish all of a sudden,” George Gero, a managing director at RBC Wealth Management, said by phone. That along with Trump’s dovish Fed picks and the weaker payrolls data, all amplify safe-haven demand for gold, he said.
Trump is “trying to shift the balance on the FOMC to super dove,” said Stephen Innes at Vanguard Markets Pte, referring to the rate-setting Federal Open Market Committee. Both picks require Senate confirmation. Investors will be watching jobs data on Friday, for more clues on Fed’s moves this month.
Gold futures climbed as much as 2.3% in early trading before paring gains to $1,420.40 by 10:57 a.m. on the Comex in New York. Prices rose about 1.4% on Tuesday. A gauge of the dollar held Tuesday’s losses, while Treasury yields sank to the lowest since November 2016. Holdings in gold-backed exchange-traded funds snapped 14 days of gains Tuesday, but are still near the highest since 2013.
Gold prices trading above $1,400 again suggest that demand remains strong, said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “It’s a rollback to the yesteryears of loose monetary policies, which whetted the appetite of gold bulls consistently.”
In other precious metals, silver gained on the Comex. Platinum and palladium both gained on the New York Mercantile Exchange.