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Gold Slips Below $1,500 on Trade Talks Progress, Capped by Expected Rate Cut

October 28, 2019 at 14:46 by Andrew Moran

Gold futures slipped below the crucial $1,500 threshold to kick off the trading week as US-China trade talks are reportedly progressing. But the yellow metal’s descent was capped by a widely expected cut to interest rates later this week as the Federal Reserve holds its monthly policy meeting.

December gold futures tumbled $9.80, or 0.65%, to $1,495.50 per ounce at 14:31 GMT on Monday on the Comex division of the New York Mercantile Exchange. Last week, gold recorded a 0.8% weekly gain, lifting its year-to-date jump to about 17%.

Silver, the sister commodity to gold, is also sliding to start the trading week. December silver futures dropped $0.055, or 0.3%, to $17.87 per ounce. The white metal also enjoyed a huge 2.3% for the week, padding its YTD boost to 15.5%.

Metals are sinking on reports that US and China trade representatives are close to finalizing the so-called phase one of their comprehensive trade agreement. After some hiccups that drew skepticism over a new deal, investors are now optimistic that the first phase will be signed next month in Chile during the Asia-Pacific Economic Cooperating (APEC) meetings. This would be bearish for gold.

But anticipation over an October rate cut helped offset the gold-negative events. According to the CME Group FedWatch tool, there is a 94% chance that the Federal Open Market Committee (FOMC) pulls the trigger on a quarter-point rate cut, the third in 2019. This would bring the target range down to between 1.50% and 1.75%.

Investors are almost certain that a rate reduction will happen following last week’s disappointing economic data that found new orders for manufactured durable goods declined 1.1% in September and new home sales fell 0.7% last month.

Gold is generally bullish on a low-rate environment because it diminishes the opportunity cost and sends traders away from yield-bearing assets.

The US dollar slid 0.09% to 97.75, from an opening of 97.85. A lower buck is good for dollar-denominated commodities because it makes it cheaper for foreign investors to purchase.

December copper futures added $0.0085, or 0.32%, to $2.685 per pound. December platinum futures shed $8.50, or 0.91%, to $924.80 an ounce. December palladium futures surged $22.10, or 1.27%, to $1,766.30 per ounce.

If you have any questions and comments on the commodities today, use the form below to reply.

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