Gold Price Volatility Climbs as XAUUSD Rallies on Dovish Fed

Cornelia Mascio
Luglio 12, 2019

Gold futures on the COMEX division of the New York Mercantile Exchange rose significantly on Wednesday as US Federal Reserve Chairman Jerome Powell's testimony boosted hopes for interest-rate cuts.

Internationally, spot price of gold is now pegged at $1,420.80 an ounce (approximately Rs 34,019 per 10 grams).

Spot gold rose 1.2% to $1,414.60 per ounce as of 2:20 pm ET (1820 GMT), having made its way to a high of $1,417.20 an ounce.

"We have a slightly weaker USA dollar, tensions in the Middle East and once again, prolonged trade dispute between the USA and China, which are all supportive", said Michael McCarthy, chief market strategist, CMC Markets.

Spot gold rose 1.5% on Wednesday after Fed Chair Jerome Powell's dovish remarks, where he confirmed the US economy was still under threat from disappointing factory activity, tame inflation and a simmering trade war, and said the Fed stood ready to "act as appropriate". Gold is considered a safe investment during political and financial uncertainty.

Also, a slightly weaker dollar was helping gold's case, making the metal cheaper for investors holding other currencies.

The Federal Reserve last month downgraded its USA inflation projection for 2019 to 1.5% from the 1.8% projected in March.

"Once we get a quarter-point rate cut, which markets are widely expecting, Powell will keep all options open on the table, and that means the dollar's outlook is uncertain", said Manuel Oliveri, an FX strategist at Credit Agricole in London.

However, the dollar did regain some ground, after data on Thursday indicated a pick-up in underlying inflation in the US, along with a solid weekly jobs report, which reduced expectations of a more aggressive 50 basis point cut at the Fed's July 30-31 meeting. XAUUSD is also rallying off technical support around the $1,380 price level which aligns with the 78.6% Fibonacci retracement of its August 2018 to June 2019 trading range.

As for other precious metals, silver for September delivery was down 8 cents, or 0.53 percent to close at 15.146 dollars per ounce.

Gold prices had touched a one-week high of $US1,426 earlier in the session.

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