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Gold Ticks Higher As Market Forecasts Weaker Growth, Waits for Rate Cut

July 8, 2019 at 14:47 by Andrew Moran

Gold futures are trading higher to kick off the trading week, buoyed by expectations of weaker economic growth and a Federal Reserve that could cut interest rates as early as this month. In the spotlight this week is the head of the central bank delivering his semi-annual testimony to Congress and inflation numbers.

September gold futures rose $1.90, or 0.14%, to $1,402.00 per ounce at 14:29 GMT on Monday on the Comex division of the New York Mercantile Exchange. Last week, gold prices recorded a 1% boost, bringing their year-to-date gains to just under 10%.

Silver, the sister commodity to gold, is rallying to start another week of trading. August silver futures added $0.07, or 0.48%, to $15.07 an ounce. The white metal posted a weekly loss of 0.6%, declining 3% so far on the year.

A bearish sentiment is what is driving precious metals on Monday.

The consensus on Wall Street is that the US economy will weaken in the second half of 2019. As a result, Fed Chair Jerome Powell will potentially need to pull the trigger on one or two rate cuts, which could happen as early as the July Federal Open Market Committee (FOMC) meeting. The market will be paying close attention to the Fed head’s semi-annual testimony in front of the House of Representatives and Senate this week, which could provide hints as to what investors can anticipate in the near future.

According to the CME Group FedWatch tool, most traders are expecting a 25-basis-point reduction this month and another quarter-point drop in September.

Either way, it is good news for gold.

If the economy contracts, then investors will pour into the safe-haven asset. If the Fed slashes rates, then the money will be allocated to bullion because low rates diminish the opportunity cost of holding non-yielding bullion, which impacts the buck and makes gold cheaper for foreign investors to purchase.

On the data front, inflation figures for June will be released. The median estimate for June inflation is 1.6% and the producer price index (PPI) is slated to clock in at 1.6%.

In other metal markets, September copper futures were up $0.01, or 0.3%, to $2.67 per pound. August platinum futures surged $8.10, or 1.00%, to $819.50 an ounce. August palladium futures shed $7.40, or 0.47%, to $1,556.80 per ounce.

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

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