· Gold prices jumped over 1% on Thursday supported by an interest rate cut by the U.S. Federal Reserve and as uncertainty surrounding a U.S.-China trade deal bolstered the metal’s safe-haven appeal.
· Spot gold was 1.2% higher at $1,512.81 an ounce as of 5:17 p.m. ET, having earlier risen to a near one-week high of $1514.20. Prices were set for a monthly gain of more than 2%.
U.S. gold futures settled up 1.2% at $1,514.8.
· “The Fed lowered rates and that’s inflationary so people think lower rates should create inflation and that’s a trigger for gold,” said Michael Matousek, head trader at U.S. Global Investors.
· The U.S. central bank on Wednesday cut interest rates for the third time this year to help sustain U.S. growth despite a slowdown in other parts of the world, but signalled there would be no further reductions unless the economy takes a turn for the worse.
The dollar fell to a 10-day low against a basket of major currencies as investors evaluated whether the Fed would continue to cut rates.
· Gold is highly sensitive to any reduction in interest rates, which decreases the opportunity cost of holding non-yielding bullion. Rate cuts also weigh on the dollar, in which gold is priced.
Gold is on an uptrend and if it goes above the $1,535 level it would be the next leg in the bull market in gold, Matousek said.
· Uncertainties on the trade front also supported bullion, with the cancellation of an Asia-Pacific economic cooperation summit in Chile next month, at which U.S. and China were expected to sign an interim deal to ease hostilities in their long-running trade war.
· “A ‘Phase One’ deal is expected to have only a limited positive outcome for the US economy,” UBS strategist Joni Teves said in a note, adding “it is premature to expect a more substantial deal.”
· Also, Bloomberg earlier reported that Chinese officials have doubts about whether it is possible to reach a comprehensive long-term trade deal with Washington and U.S. President Donald Trump.
· Meanwhile, U.S. weekly jobless claims showed the number of Americans filing applications for unemployment benefits rose slightly more than expected last week, adding to gold’s gains.
· Elsewhere, palladium was down 0.5% at $1,797.06 an ounce, having hit a record high of $1,824.50 on Wednesday. The autocatalyst metal was set for a third straight monthly gain, up 7% in October.
· Silver rose 1.4% to $18.12 an ounce while platinum rose by 0.7% to $932.26, with both metals set for monthly gains.