Sep 12, 2019

Futures & Commodities | Gold | Gold Price Report (11:00 a.m. Approx.) : Gold gains over 1.5% on dovish ECB; eyes on Fed

3 minutes - Source: CNBC

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Gold jumped more than 1.5% on Thursday after the European Central Bank cut deposit interest rates and relaunched quantitative easing, bolstering expectations for a dovish stance from the U.S. central bank at its meeting next week.
Spot gold was up 1.1% to $1,512.78 per ounce.  U.S. gold futures rose 1.2% to $1,520.9.
“When the ECB was aggressive as they were this morning the markets are looking at U.S. Federal Reserve - it will definitely be very dovish with rates,” said Bob Haberkorn, senior market strategist at RJO Futures, adding that with this move by ECB there is an increasing money supply in the market causing flight to safety into gold.
The ECB cut its deposit rate to a record low of -0.5%, while promising that rates would stay low for longer and said it would restart bond purchases at a rate of 20 billion euros a month from Nov. 1.
“And the market expects more of this next week with the U.S. bonds earning close to zero, so gold is attractive,” Haberkorn added.
Gold tends to appreciate on expectations of lower interest rates, which reduce the opportunity cost of holding non-yielding bullion.
The U.S. Treasury yields fell across the board with the ECB adopting an aggressive stance on monetary policy.
Meanwhile, the U.S. consumer prices for August were in line with market expectations, but rising inflation is unlikely to deter the U.S. Federal Reserve from cutting interest rates again next week to support a slowing economy.
On the U.S.-China trade front, U.S. Treasury Secretary Steve Mnuchin said Washington looks forward to “making progress” on ties with Beijing. This was after both sides granted concessions on certain goods ahead of the October talks.
In terms of technicals, immediate resistance for gold was at $1,535.00 while support lay at $1,510.00, Jim Wyckoff, senior analyst with Kitco Metals, wrote in a note.
Elsewhere, silver rose 0.2% to $18.11 per ounce, and platinum gained 0.6% to $950.
Palladium was up 1.7% at $1,598 after hitting a near six-month high of $1,610.25 earlier in the session.
“The interest rates environment we are in is helping them (platinum and palladium) pull higher; there’s safe-haven demand for platinum ... it’s more safe-haven demand and industrial demand due to the U.S.-China thaw here,” RJO Futures’ Haberkorn said.

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