· Gold jumped more than 1.5% on Friday, breaking above $1,400 for the first time since September 2013, as hints of a rate cut from the U.S. Federal Reserve took a toll on the greenback and U.S. Treasury yields.
· Tensions in the Middle East also boosted gold’s rally, which has lifted the precious metal nearly 5% this week and almost 10% so far this year.
· Spot gold was up 1.2% at $1,404.35 per ounce as of 0537 GMT, after earlier hitting its highest since Sept. 4, 2013, at $1,410.78.
· Gold is set to post its biggest weekly gain since the week ended April 29, 2016, and was also on track for its fifth consecutive weekly rise.
· U.S. gold futures rose 0.9% to $1,408.90 an ounce.
· “The dovishness of the Fed and ECB, geopolitical tensions in the Middle East, and a technical breakout above $1,350 with volumes gave strong support for the metal,” said Jigar Trivedi, a commodities analyst at Mumbai-based Anand Rathi Shares & Stock Brokers.
“Momentum is positive for the next half of the year. The way prices have risen, there could be a technical profit-booking, but the undertone is positive,” he said.
· The Fed earlier this week said it was ready to battle growing global and domestic economic risks, hinting at interest rate cuts beginning as early as next month.
With the Fed possibly easing its policy soon, and other central banks such as the European Central Bank (ECB) and the Bank of Japan likely to follow in their wake, government bonds were on a bullish footing.
Since Wednesday, bullion has risen $70 after Fed’s dovish comments and increased Middle East tensions.
· “A global wave of monetary policy easing has the impact of pushing global bond yields lower and is a key positive driver for gold,” said Heng Koon How, head of markets strategy at Singapore’s United Overseas Bank
The dollar was set for a weekly loss against major currencies, and U.S. benchmark 10-year Treasury yields dropped below 2% for the first time in more than 2-1/2 years.
“We maintain our ... bullish call for gold and it looks like our mid-2020 target of $1,450 may be reached much sooner,” How said.
· Adding to the global anxiety were fresh worries about Middle East tensions after Iran shot down a U.S. military drone, raising fears of a military confrontation between Tehran and Washington.
· Gold’s rally isn’t over yet by any means, as one analyst sees the upward momentum continuing.
- Phil Streible, senior market strategist at RJO Futures, told Kitco News that prices for the yellow metal may still see much higher levels from here.
“We should continue to see that break through $1,400 and I anticipate that a lot of the short sellers will end up giving up at that level. So, no telling how high we can go from here, it’s kind of got that perfect storm going on with increasing geopolitical risks and then also a dovish Fed,” Streible said.
- Paul Tudor Jones of Tudor Investment has said that once $1,400 an ounce is breached, the next level is $1,700, and Streible said that is definitely possible.
“It is entirely possible. The Fed, it’s factored in at 100% that they will cut next meeting. If you look at the last time we had this aggressive hike cycle followed by rate cuts, they had higher levels to go down from, so with the Fed only being at 2 and a quarter right now, if they cut a half, that doesn’t give them much firepower in order to stabilize the economy,” he said.
Another round of quantitative easing could happen, Streible added, and that could push gold much higher.
· Gold pierces through key 1400 levels, fresh six-year highs
The buying interest around Gold remains unabated so far this Friday, prompting the yellow metal to break through the key 1400 psychological mark to hit the highest levels in six years amid dovish tilt by major global central banks and escalating Middle-East tensions.
· Among other precious metals, silver gained 0.3% to $15.43 per ounce, its highest in nearly three months and on track to post its biggest weekly percentage gain this year.
Platinum climbed 1.1% to $811.08 per ounce.
Palladium rose 1% to $1,492.82 an ounce and was headed for a third consecutive weekly gain.
Reference: Kitco, FXStreet, CNBC
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