Gold skyrocketed to the highest level in more than five years and the Standard & Poor’s 500 Index climbed to a record on Thursday after the U.S. Federal Reserve signaled that it’s positioning for an interest-rate cut, possibly as soon as next month.
Gold futures for August delivery topped the key $1,400-an-ounce resistance level in intraday trading early Friday. Futures rose 3.6% Thursday to the highest level for a most-active contract since September 2013 and settled at $1,396.90 an ounce on Comex. Currently, the August contract is at $1,401.10, up $4.20.
The U.S. dollar index has also softened on economic news, set for a weekly loss against major currencies, while U.S. 10-year Treasury yields dropped below 2% for the first time in more than 2-1/2 years.
The S&P 500 closed up 1% at 2,954.18, beating its April 30 record, on the Fed rate-cut hopes and escalating geopolitical tensions with Iran that also sent oil climbing. (The impact on the price at the pump by the massive oil refinery fire in Philadelphia overnight has yet to be determined. It’s the largest refinery on the East coast, processing 335,000 barrels of oil daily). The Dow Jones Industrial Average gained 0.9% to 26,753.17. However, the U.S. stock markets are set to open down this morning.
Fed policymakers on Wednesday kept interest rates unchanged but, in a statement, dropped the word “patient” in describing their approach to monetary policy. In a press conference after the meeting, Fed Chairman Jerome Powell said, “Many participants now see the case for somewhat more accommodative policy has strengthened.”
The CME FedWatch Tool put the odds of a rate cut on July 31 at 100% as of Thursday. It was at 86.3% on Tuesday, the day before the latest policy decision.
The Bank of England’s Monetary Policy Committee on Thursday kept rates unchanged but cut the U.K.’s growth outlook. Earlier Thursday, the Bank of Japan joined the Fed in keeping monetary policy unchanged for now – but indicating a willingness to act if global risks affect the economic outlook.
Fears of a trade war with China have made gold attractive as a safe-haven asset in recent weeks. Tensions with Iran added to that Thursday after the U.S. confirmed a naval-surveillance drone was shot down over the Strait of Hormuz by an Iranian missile. We wake up this morning to the news that a U.S. airstrike was planned for last night, but then called off at the last minute by President Trump who said this morning “I am in no hurry” to attack Iran.
Comex Silver futures also rose 3.6% Thursday to settle at $15.49 and are currently at $15.395 for the August contracts
Spot platinum, which is sensitive to the growth of the Chinese automotive industry, was slightly lower, slipping 0.1% on Thursday. Spot palladium increased 1.2%.
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