Gold had reclaimed a bit of turf this morning after yesterday’s positive U.S. economic reports, but then the yellow metal dipped upon new U.S. GDP Q2 growth number. Gold futures headed for their first weekly drop since early June on Comex, while silver is poised for another advance.
The just release GDP data shows 2.1% growth, beating the expected 2% rise. This is the last major economic report before Federal Reserve policy makers meet next week.
Yesterday’s positive U.S. economic news reduced gold’s luster as a hedge against uncertainty and caused it to fall from a weekly high. Weekly U.S. jobless claims fell to a three-month low last week and new orders for key U.S-made capital goods surged 1.9% in June.
Investors remain focused on the central banks. Thursday, the European Central Bank signaled that an interest-rate cut could be coming, saying it expects its key rates to remain “at their present or lower levels” through at least the first part of 2020. The Fed is widely expected to cut rates July 31.
ECB President Mario Draghi said at a press conference after the meeting that “a significant degree of monetary stimulus continues to be necessary to ensure that financial conditions remain very favorable and support the euro area expansion.”
Expectations of a Fed rate cut and geopolitical tensions in the Middle East are making precious metals more attractive as a hedge against uncertainty. The CME FedWatch Tool has kept the odds of a July 31 rate cut at 100% since the Federal Open Market Committee’s last meeting in June. The tool lowered the odds of a 50-basis-point cut to 19.4% after the release of the GDP number. The likelihood of a 25-basis-point reduction is at 80.6%.
Iran test-fired a medium-range ballistic missile earlier this week that traveled more than 600 miles, Fox News reported, citing an unnamed U.S. official. And the U.K. government has started sending a warship to accompany all British-flagged vessels traversing the Strait of Hormuz, the BBC said. But U.S. Secretary of State Mike Pompeo told Bloomberg that he would go to Iran for talks if necessary.
August gold is still a little up this morning, at $1,417.70 after slipping 0.6% to $1,414.70 an ounce Thursday. It reached a six-year settlement high of $1,428.10 last week. The Dollar Index is up this morning to a new high for the year.
Silver futures continued to outpace gold on Comex. The metal increased 1.3% in the first four days of the week, adding to last week’s 6.3% advance. The most-active September contract settled at of $16.411 an ounce Thursday. This morning, the contract sits at $16.335
Spot platinum and spot palladium were both lower early Friday. Platinum rose 2.6% in the first four days of this week, while palladium gained 1.5%.
Disclaimer: This editorial has been prepared by Dillon Gage Metals for information and thought-provoking purposes only and does not purport to predict or forecast actual results. This editorial opinion is not to be construed as investment advice or as a recommendation regarding any particular security, commodity or course of action. Opinions expressed herein cannot be attributable to Dillon Gage. Reasonable people may disagree about the events discussed or opinions expressed herein. In the event any of the assumptions used herein do not come to fruition, results are likely to vary substantially. It is not a solicitation or advice to make any exchange in commodities, securities or other financial instruments. No part of this editorial may be reproduced in any manner, in whole or in part, without the prior written permission of Dillon Gage Metals. Dillon Gage Metals shall not have any liability for any damages of any kind whatsoever relating to this editorial. You should consult your advisers with respect to these areas. By posting this editorial, you acknowledge, understand and accept this disclaimer.