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Gold Kicks Off 2020 Glittering As Metal Returns to Three-Month High

January 2, 2020 at 16:48 by Andrew Moran

Gold futures are kicking off 2020 higher as the precious metal returned to its best level in three months. Gold prices are keeping an eye on minutes from last month’s Federal Reserve policy meeting, the Chinese central bank’s latest monetary easing, and a potentially weaker US dollar this year.

February gold futures rose $7.60, or 0.5%, to $1,530.70 per ounce at 15:24 GMT on Thursday on the Comex division of the New York Mercantile Exchange. Gold is just coming off its best year since 2010 as it surged nearly 19%.

Silver, the sister commodity to gold, is also starting off the new year in the green. March silver futures tacked on $0.11, or 0.61%, to $18.03 per ounce. The white metal climbed more than 15% in 2019, its best performance in nine years.

On Friday, the US central bank will release minutes from its December Federal Open Market Committee (FOMC). Investors think that it will give them additional insight into the Fed’s plans for 2020. Right now, the dot-plot and Fed Chair Jerome Powell’s comments suggest any extra cuts to interest rates will not happen unless the national economy called for it. The minutes might provide further coverage into its monetary policy actions, particularly quantitative easing and bailouts in repo markets.

In other central banking news, the People’s Bank of China (PBoC) announced on Wednesday that it will slash its reserve requirement ratio (RRR) for all financial institutions by 0.5% to 12.5% as of January 6. The official RRR will decrease to 12.5% for large lenders and 10.5% for smaller banks. This move will inject $115 billion into the banking system in an effort to add more liquidity to the system and approve more bank loans to the country’s cash-strapped small businesses.

A stronger US dollar has capped gold’s ascent as the greenback surged 0.32% to 96.70, from an opening of 96.48. The buck advanced 0.2% last year, but it wiped out nearly all of its gains after surging as high as 3%. A lower currency might have contributed to the gold’s year-end rally, and many analysts expect the dollar to be weaker in 2020. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

For the rest of the year, traders will watch out for geopolitical developments, including Brexit, the 2020 presidential election, Hong Kong protesters, and North Korean tensions.

Should there be a correction in prices, you could see some greater capital flows into gold as markets hedge against a potential downturn.

In other metal markets, March copper futures picked up $0.01, or 0.4%, to $2.801 per pound. February platinum futures added $14.00, or 1.43%, to $991.80 an ounce. February palladium futures soared $24.20, or 1.27%, to $1,933.50 an ounce.

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