Gold slips in early morning trading after Tuesday’s advance as investors awaited the release of the minutes of the Federal Open Market Committee’s July meeting. U.S. equity futures rose and Treasury yields jumped, reducing a bit of gold’s luster as a hedge against uncertainty.
December futures increased 0.3% Tuesday to settle at $1,515.70 an ounce on Comex. But prices remain down for the week after a 0.8% drop on Monday. Currently, the December contracts are at $1510.80, down $4.90.
Speculation is increasing over whether the Fed will follow July’s first interest-rate reduction in a decade with another in September – and how large it may be. The CME FedWatch Tool put the odds of a Sept. 18 rate cut at 98.1% early Wednesday, with the same percentage projecting a 25-basis-point reduction. Expectations of a rate cut had been at 100% since the meeting last month. The tool put the likelihood of no rate reduction at 1.9%.
U.S. President Donald Trump on Tuesday renewed his call for a “big” Fed rate cut. He also floated the idea of a tax cut before saying it wasn’t needed.
Investors are also hoping to get a more current idea of the Fed’s thinking on both the global economy and monetary policy from a speech Friday by Fed Chairman Jerome Powell, who is scheduled to address the Fed’s annual Economic Policy Symposium in Jackson Hole, Wyoming. The event Thursday through Saturday will gather dozens of central bankers, policymakers, academics and economists from around the world. A Group of Seven summit this weekend in France may also lend clues to policymakers’ intentions.
Central bank speculation, equity-market turmoil, fears of an economic recession and negative bond yields helped send gold to a six-year high last week as investors fled to safety. The U.S.-China trade war and global unrest have also spurred the precious metal’s rally in recent months.
Veteran investor Mark Mobius told Bloomberg TV that buying gold will lead to long-term rewards as central banks loosen monetary policy and the rise of cryptocurrencies bolsters demand for hard assets: “Gold’s long-term prospect is up, up and up, and the reason why I say that is money supply is up, up and up,” he said. “I think you have to be buying at any level, frankly.”
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 0.21% Tuesday to 845.17 metric tons, Reuters reported.
Silver futures retreated along with gold early Wednesday. September futures advanced 1.2% Tuesday to settle at $17.148 an ounce on Comex, outpacing gold’s gain. Currently, the September contracts are at $17,060, down $0.088. Both spot platinum and spot palladium were down early Wednesday. Platinum rose 0.2% Tuesday, while palladium increased 0.7%.
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