Gold Settles at Six Year high, Extends Rally in Electronic Trading

Gold futures notched a fresh six-year high on Thursday, then extended their gains into the electronic trading session on the back of dovish comments from a Federal Reserve official, worsening tensions in the Middle East and a drop in the dollar.

“News of the U.S. Navy shooting down an Iranian drone always adds fuel to the market, but the underlying buying momentum after a break of the $1,425 area has propelled gold back to the next big challenge,” the $1,450 area, Peter Spina, president and chief executive of GoldSeek.com, told MarketWatch late Thursday afternoon.

He also pointed to speculation in the market that a “large supranational organization” is acquiring all ounces of gold produced in North America, citing a tweet from Roy Sebag, founder of GoldMoney.

Traders also saw comments from New York Fed President John Williams as endorsing an interest-rate cut at the Federal Reserve’s policy meeting later this month.

August gold trading GCQ19, +0.01% was at $1,448 an ounce in electronic trade Thursday at 4 p.m. Eastern time. The contract had tacked on $4.80, or 0.3%, to settle at $1,428.10 an ounce on Comex after climbing by 0.9% on Wednesday. The latest settlement was the highest for a most-active contract since May 13, 2013, FactSet data show.

Gold “worked off its ‘overbought’ conditions through time,” said Fawad Razaqzada, technical analyst at Forex.com. “The underlying trend is bullish for both [silver and gold], due to the falling government bond yields and the recent struggles for the dollar and stocks.”

“As things stand, these are good times for buck-denominated and noninterest-bearing precious metals,” he said in a market update.

In electronic trading late Wednesday afternoon, prices took a leg slightly higher shortly after the Beige Book showed that trade U.S.-China tensions were continuing to buffet businesses in the Federal Reserve’s districts.

Gold was “re-energized” by the Beige Book’s “general references to ‘modest’ growth and ‘stable to down’ inflation pressures,” said Brien Lundin, editor of Gold Newsletter, in comments to MarketWatch late Wednesday. “In short, nothing in the report seemed likely to derail the Fed’s plans for a rate cut at their upcoming meeting. This will complete the Fed’s dramatic turn-around from hawk to dove and will be extremely supportive of higher gold prices.”

Jeff Wright, executive vice president of GoldMining Inc., however, warned that “gold will tank” if the Fed doesn’t announce a rate reduction at the end of July.

On Thursday, the U.S. dollar DXY, +0.33% was down nearly 0.1% at 97.132 as gold futures settled, then dropped to 96.704 by the U.S. stock market close. The 10-year Treasury note TMUBMUSD10Y, +1.36% moved down to yield 2.0254% at the stock market close. Both had traded lower on Wednesday. Fading bond yields and a weaker dollar tend to encourage bids for bullion.

Meanwhile, comments from Bridgewater Associates founder Ray Dalio also helped to boost values for precious metals. Dalio wrote in a LinkedIn blog that an environment of central-bank policy easing and negative interest rates in much of the developed world may be a felicitous backdrop for gold gains, adding that it could both be “risk-reducing and return-enhancing to consider adding” the yellow metal as a “portfolio diversifier.”

“While many investors don’t like gold as an asset class given that it doesn’t provide any yield, at one point it may be a necessary portfolio diversifier especially when bonds of developed economies no longer provide a reasonable return,” wrote Hussein Sayed, chief market strategist at brokerage FXTM about Dalio’s comments.

Separately, silver prices climbed to their highest in more than a year.

September silver SIU19, -0.20% added 22.7 cents, or 1.4%, to end at $16.198 an ounce, representing the latest in a series of sharp gains for gold’s sister metal. Most-active contract prices finished at their highest since June 29, 2018, according to Dow Jones Market Data.

“In the short term, the silver market has become the leadership market with yet another sharp range up extension [Thursday] and a return above the psychological $16 level,” analysts at Zaner Metals, wrote in a note.

Among other metals, September copper HGU19, +1.37% settled at $2.71 a pound, down less than a cent, or 0.2%. October platinum PLV19, +0.40% added $2.80, or 0.3%, to $849.90 an ounce, while September palladium PAU19, -0.54% fell $31.30, or 2%, to $1,511.90 an ounce.

Exchange-traded fund SPDR Gold Shares GLD, -1.30% edged up by 0.04%.

- Source, Market Watch