Gold Market Bets Powell to Deliver Tamer Hikes

The gold market is wagering that Fed Chief Jerome Powell will deliver with tamer hikes in the New Year or it could be no hikes at all.

Shiny gold close up photo.

Benchmark futures of the yellow metal in New York hit one-week highs in Thursday’s trade, expanding the past session’s run-up, which ended with the largest one-day gain in over a month, after Powell signaled a step back of his hawkish stance.

February futures on COMEX gained $6, or 0.5%, at $1,230.40 per troy ounce. The session high was $1,234.60, a top not seen since November 21. On Wednesday, February gold settled up or 0.8% for its largest one-day advance since October 23.

In his speech at the New York Economic Club on Wednesday, Powell said the Fed’s “slow pace of raising interest rates has been an exercise in balancing risks,” but added “there is no preset policy path.” That sent a dovish signal to traders that the central bank will do the much-expected fourth rate hike of 2018 in December, then hold off for 2019 relying on how well the U.S. economy performs.

In its November policy meeting minutes, released 30 minutes after COMEX gold’s settlement on Thursday, the Fed indicated a December rate hike was probable as it touted stable inflation and strong labor market data.However, there was little clearness on what the central bank was thinking further down the road, leaving Powell as gold traders’ best wager for now.

“Gold is taking comfort from the remarks yesterday by Chairman Powell, who has lifted a major burden from the shoulders of gold investors,” said George Gero, precious metals analyst at RBC Wealth Management in New York.

“Next year’s impaired agricultural commodity outlook due to predictions of horrible storms, as well as Brexit pressures and deficits in the U.S., also gives plenty of reasons for gold to be a haven besides the dollar,” Gero added.

The Dollar Index, a contrarian wager to gold was up 0.1% at 96.78, 30 minutes after the announcement of the Fed’s November meeting minutes. The Dow increased 0.2%.

Fed-watch aside, investors through financial markets are on the lookout for any chance of a trade war resolve between the U.S. and China at the G20 summit beginning Friday in Buenos Aires.

A U.S.-China trade deal could go any way for gold, as Chinese physical demand for bullion could ramp up costs while an equities rally could also pull money out of the yellow metal. President Donald Trump will meet his Chinese counterpart Xi Jinping for a working dinner during the G20 Saturday.

Among other valuable metals on COMEX, silver was down 0.5% to $14.39 per ounce.

Palladium moved up 0.1% to $1,153.30 per ounce, while sister metal platinum slipped 0.6% to $821.30.

In base metals, COMEX copper shed 0.8% to $2.79 per pound.

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