Gold Prices Rebound as Havens Sought Ahead of Powell Testimony

  • Commodities News
Gold Prices Rebound as Havens Sought Ahead of Powell Testimony
Credit: © Reuters. -- Gold and silver prices rebounded on Wednesday as the negative implications of President Donald Trump’s speech on Tuesday filtered through to markets – albeit with something of a delay.

In a keynote speech, Trump had again played down talk of a mutual roll-back of tariffs with China and threatened to raise import tariffs much higher. On the evidence of the year so far, such a step could quickly feed through into a further slowdown in the global economy, requiring yet more policy support from the world’s central banks.

Prices were held in relatively narrow ranges as the market awaited Congressional Testimony later in the day from Federal Reserve Chairman Jerome Powell. Markets have all but ruled out any action from the Fed at its December policy meeting, but many still expect it to cut U.S. interest rates again next year against the backdrop of stuttering economic growth.

Consumer inflation data released earlier did not, at first glance, strengthen the case for Fed action significantly. Although the core rate of inflation ticked down to 2.3% from 2.4%, the headline number ticked up to 1.8% from 1.7%.

By 9:45 AM ET (1445 GMT), gold futures for delivery on the Comex exchange had rebounded to $1,464.85 a troy ounce, up 0.8% on the day, and up nearly 1% from Tuesday’s lows below $1,450.

Spot gold was was up 0.4% at $1,463.45 an ounce.

Although the rally in gold and other haven assets has cooled in recent weeks, some point out that the longer-term strategic support to prices from global monetary policy hasn’t gone away.

“Don’t forget the fact that 70% of developed markets worldwide are in negative rate territory, and gold is global,” said World Gold Council managing director Joe Cavatoni in an interview with TD Ameritrade.

Analysts at ABN AMRO (AS: ABNd ) said in a research note that they were keeping their year-end forecast for 2020 at $1,600/oz.

The U.K., a source of much portfolio buying of gold this year, inched closer to its next interest rate cut on Wednesday as the rate of inflation fell to a three-year low of 1.5%, while annual produce price inflation fell to 0.8%, also a three-year low. The Bank of England had warned last week that it may have to cut interest rates in the new year if the prolonged uncertainty over Brexit – along with the global slowdown – continue to create spare capacity in the economy.

Elsewhere, silver futures rose 1.2% to $16.90 an ounce, while platinum futures rebounded 0.4% to $873.90.

U.S. government bond yields fell by between 1 and three basis points, meanwhile.

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