Spot gold rose above the $1,350/oz. resistance level overnight to reach its highest level since April last year. The rise is driven by concerns over global economic growth, particularly in China, and the escalating tensions in the Persian Gulf.
This week alone, the yellow metal climbed 1.1%, its fourth consecutive weekly gain. (Although this morning, profit taking has brought gold back slightly under $1,350.)
U.S. equity futures fell yesterday, along with European stocks, trailing mixed Asian sessions. Also declining on Thursday were the S&P and Nasdaq along with the Stoxx Europe 600 Index, which fell its furthest in two weeks. At the time of this report, all U.S. stocks are trending down.
Economic concerns are bolstering expectations of an interest rate cut by the U.S. Federal Reserve, which would in turn give gold a lift. Fed policymakers are scheduled to meet June 18-19. But traders see just a 23% chance of a rate cut at the June meeting, with 72% predicting that it will happen at the meeting scheduled for the end of July, MarketWatch reported.
Billionaire trader Paul Tudor Jones, founder at Tudor Investment Corp., told Bloomberg that he views gold as the best trade over the next two years. If the yellow metal hits $1,400, it will quickly move to about $1,700, he said.
In economic data, U.S. jobless claims unexpectedly increased to a five-week high in Labor Department statistics released Thursday. The numbers added to signs of potential cooling in the labor market. Retail sales out this morning rose .5% in May, slightly off from the predicted increase of .7%. Gold was unaffected by U.S. industrial production numbers released this morning which showed .4% growth, beating the expected rise of .2%.
Meanwhile, the U.S.-China trade war could trigger competitive currency devaluation across the globe, China’s former central bank governor Zhou Xiaochuan said Friday in Shanghai, according to a report.
Economic reports out of China overnight were mixed, but still indicate a cooling economy. The industrial production increased 5% YOY, off from the forecast of 5.5%; the Fixed Asset Investment rose 5.6% YOY (consensus forecast – 6.1%) as investment growth slowed for both private and public investing. The bright spot was retail sales that show 8.6% YOY increase, well over April’s 7.2% increase and beating the forecast increase of 8.1%. The industrial production number is especially important for silver and platinum, which double as precious and industrial metals.
Gold’s August contract is currently at $1,351.90 an ounce on Comex, up $8.20.
Silver futures are on the uptick. The August contract is at $14.955, up $.029 an ounce on Comex.
Palladium could make its biggest gain in more than a year. Spot palladium gained 2.6% on Thursday and is currently at $1,465. Spot platinum, which is sensitive to the growth of the Chinese automotive industry, was down to $808 at the time of this report, after edging up to $820 on Thursday.
Late Thursday, the U.S. released a video it claims shows Iran moving an unexploded mine from one of the Gulf tankers, and Secretary of State Mike Pompeo blamed Iran for the attacks. The Iranian mission to the United Nations rejected the allegation and condemned the attacks in a tweet.
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