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Gold Pulls Back From Six-Year High, Still Poised to Book a Weekly Gain

August 16, 2019 at 14:12 by Andrew Moran

Gold futures are pulling back from their best levels in six years, though they are still on track to record a weekly gain. Traders were ostensibly taking profits on Friday and diving back into equities, but the consensus is that the yellow metal has plenty of legs in its current bull run amid the lingering US-China trade war and central bank easing.

December gold futures tumbled $7.10, or 0.46%, to $1,524.10 per ounce at 13:49 GMT on Monday on the Comex division of the New York Mercantile Exchange. Gold prices are poised for a weekly jump of 1%, lifting their year-to-date increases to 18.5%.

Silver, the sister commodity to gold, is also trading in the red and will post a stellar weekly boost. September silver futures slipped $0.045, or 0.27%, to $17.17 an ounce. The white metal is set for a gain of 1.3% this week.

After a strong run this month, the yellow metal appears to be taking a breather as investors return to equities. Financial markets kicked off the Friday trading session with triple-digit gains, buoyed by better-than-expected retail data and housing numbers.

In July, retail sales advanced 0.7%, up from 0.3% in June. Building permits for last month spiked 8.4%, up from the 5.2% contraction in the previous month.

Precious metals are getting hit by a strengthening dollar as the greenback rose 0.18% to 98.32. The dollar is getting ready for a weekly surge of 0.85%. A stronger buck is bad for dollar-denominated commodities because it makes it more expensive for foreign investors to purchase.

But there are a few developments that have supported gold and will drive the metal commodity higher.

The first is that there remains uncertainty in the US-China trade conflict as it is expected to continue for the rest of the year. Though Washington did delay the new tariffs until December, it is unclear if Beijing will reciprocate.

The second is that central banks are signaling that they fear a steep economic downturn, proven by their demand for bullion – these institutions have been purchasing large volumes of gold over the last two years.

The third is that $15 trillion, or one-quarter, of the government bond market is delivering negative yields, spurring demand for metals.

Lastly, the market is penciling another rate cut by the Federal Reserve next month. According to the CME Group FedWatch tool, investors widely anticipate the Fed to cut interest rates for the second time in a decade, bring the target range to 1.75% to 2.00%.

In other metal markets, September copper futures were flat at $2.59 per pound. October platinum futures dipped $1.00, or 0.12%, to $841.00 per ounce. October palladium futures added $6.00, or 0.42%, to $1,444.60 an ounce.

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