News

Gold Soars to Fresh 6-year High on Easing Prospects

Metals

Gold prices soared to a fresh six-year high on Wednesday supported by the higher chances for monetary policy easing by the Federal Reserve in the coming months. Since late May, the precious metal became among the top investment lots for investors as Central Banks around the world were seen shifting their monetary policy bias from tightening to easing. Monetary policy easing means pumping more money supply to the markets aiming at improving the economic outlook, leading investors for investments that can at least protect their worth. The Federal Reserve stopped its "quantitative tightening" last week by cutting interest rates by 25 basis points for the first time since the financial crisis back in 2008. The Fed declared that further interest cuts would be data-dependent. President Donald Trump has been attacking the Federal Reserve stance for the past year, as he believes that the Fed should be cutting interest rates and going for a cheaper dollar to support the economy, where Trump could use the economic growth and prosperity as ammunition for his political campaigns. The latter got mad from the Fed's decision of only cutting rates by 25 basis points and offended again Chairman Jerome Powell. Following the FOMC meeting, Trump refueled the trade clash between China and the United States by imposing 10% tariffs on $300 billion worth of Chinese goods flowing into the US markets starting September. The recent development will increase the downside risks to the global economy and force the Federal Reserve to take further monetary policy easing measures to offset the consequences of the trade disputes. As the CME Fed watch tool was showing a chance of four interest rate cuts this year, the price of a gold ounce climbed to a fresh six-year high of $1510. Meanwhile, the price of a silver ounce rallied to a fourteen-month high of $17.20, and palladium hovered around $1420.

USD

The dollar index which measures the greenback against a basket of major currencies dipped to a low of 97.48 ahead of the European trading session. The recent growing chances of further monetary policy easing by the Federal Reserve had less impact on the dollar strength against other major currencies, as most Central Banks are shifting their monetary policy stance to easing. The US 10-year yields dropped to a low 1.59%, suggesting three additional interest rate cuts by the Fed this year. The dollar was weaker against the safe-haven yen where the USDJPY dropped to retest Monday's low of 105.50, while the EURUSD continued to trade in the consolidation zone between a support level of $1.1170, and a resistance level of $1.1248.

Oil

Oil prices plunged to their lowest levels since early January amid growing concerns over the global economic outlook. The fresh developments on trade between China and the United States, while the global economy is facing a slowdown could drive the world into a recession. On the other hand, the US Energy Information Administration reported that the weekly US crude oil inventories rose by 2.385 million barrels last week. The West Texas Intermediate crude futures dropped to a low of $50.52, and Brent futures tumbled to $55.87. However, oil prices recovered partial losses on stronger Chinese trade balance figures.

Major Economic Events

GMT Country Event Expectation Previous

12:30

US

Initial Jobless Claims

215

215

 
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