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Gold Posts 1% Weekly Gain on Weaker Dollar, Dovish Fed

July 12, 2019 at 19:08 by Andrew Moran

Gold futures are trading higher to finish the trading week, bringing the yellow metal’s weekly gain to more than 1%. The yellow metal’s strong performance this week was driven by a dovish Federal Reserve that will likely cut interest rates later this month, sending the US dollar lower on Friday. Investors are also keeping eye on the sliding consumer interest in physical gold in top Asian markets.

August gold futures soared $10.60, or 0.75%, to $1,417.30 per ounce at 18:49 GMT on Friday on the Comex division of the New York Mercantile Exchange. Gold prices are poised for a weekly surge of 1.2%, raising their 2019 gains to just under 11%, which were mostly generated in the second quarter.

Silver, the sister commodity to gold, is also rallying to end the trading week. September silver futures rose $0.115, or 0.76%, to $15.26 an ounce. The white metal is on track for a weekly jump of close to 2%, but it is still down 2% year-to-date.

The yellow metal is building momentum on a central bank that is looking to further ease monetary policy by cutting interest rates by at least 25 basis points to a target range of 2.00% to 2.25% at its next Federal Open Market Committee (FOMC) policy meeting. This was hinted in the recent FOMC minutes from the June powwow and Fed Chair Jerome Powell’s recent testimony in front of the Congress and Senate, who essentially made the case for a rate cut amid a strengthening labor market and strong economic growth.

As a result, the US Dollar Index tumbled 0.24% to 96.82, from an opening of 97.08. The buck will record a weekly drop of 0.5%, paring its YTD gain to under 0.7%. A weaker greenback is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

Investors seem to concur that there is a lot of uncertainty in the global economy. This feeling is supported by central banks not only maintaining easy money policies – low rates, bond buying, and money-printing – but they might also follow the Fed’s lead and cut rates even more.

The European Central Bank (ECB) head, Mario Draghi, has already confirmed that he is ready to bring rates into subzero territory and his likely successor, Christine Lagarde, has defended negative rates on multiple occasions. In Japan, the central bank has also noted that it is ready to ease policy further, a sentiment shared by the People’s Bank of China (PBOC).

On the data front, the producer price index (PPI) climbed 0.1% in June, sending the wholesale prices to their lowest levels since 2017 to 1.7%.

In other metal markets, August copper futures tacked on $0.01, or 0.4%, to $2.70 per pound. September platinum futures added $3.80, or 0.46%, to $834.70 an ounce. September palladium futures cratered $17.90, or 1.15%, to $1,541.20 per ounce.

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