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Gold Climbs to Two-Week High on Dollar, Fed Pause

February 18, 2019 at 18:32 by Andrew Moran

Gold futures are trading at their best levels in two weeks on Presidents’ Day. The yellow metal is benefiting from a wide range of factors to kick off the holiday-shortened trading week, from a lower US dollar to progress in US-China trade talks to the Federal Reserve potentially hitting the pause button on raising interest rates.

April gold futures rose $7.30, or 0.54%, to $1,329.30 per ounce at 16:52 GMT on Monday. Gold has not traded this high since the beginning of February, bringing its year-to-date gains to 3%.

Silver, the sister commodity to gold, is heading in the opposite direction to start the week. March silver futures dipped $0.025, or 0.15%, to $15.75 an ounce. The white metal is still up so far on the year 1.3%.

The yellow metal is flirting with $1,330 on a weaker greenback as the US dollar slipped 0.14% to 96.79. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

Why is the dollar tumbling?

The Federal Reserve has made it clear that it is pausing its rate hikes based on available data. By adopting a “patient” approach to monetary policy, the market may not see any more movements on interest rates until at least June, though the CME Group FedWatch tool has not penciled in a rate hike for the remainder of 2019. Minutes of the Fed’s January Federal Open Market Committee (FOMC) meeting are scheduled for release on Wednesday, which should provide some more clarity.

Gold is generally sensitive to a rising-rate environment because it lifts the opportunity cost and sends investors into yield-bearing assets.

On the data front, the central bank is likely combing through the retail sales report that showed receipts plunge 1.2% in December, the steepest drop in nine years. The Fed also noticed jobless claims rising to a one-year high. The producer price index (PPI) also slipped 0.1%.

Meanwhile, US-China trade deliberations continue, and investors are optimistic about how the meetings are developing. Time is running out on the March 1 deadline, but President Donald Trump suggested that he might extend the deadline and prevent tariffs on $200 billion worth of Chinese goods from rising. Traders took this that a trade deal is near, or, at the very least, last week’s talks progressed well.

In other metals markets, March copper futures tacked on $0.0375, or 1.34%, to $2.835 a pound. April platinum futures edged up $1.10, or 0.14%, to $808.00 per ounce. April palladium futures soared $25.80, or 1.83%, to $1,433.00 an ounce.

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