Is Gold's Hot Trade Simply Cooling Off?
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(Kitco News) - After hitting highs last seen six years ago, is the gold market taking a pause?
The precious metal declined nearly 1% to $1,409 after hitting highs last seen in 2013. Gold prices have been under pressure since late Tuesday, after Federal Reserve members tried to manage expectations ahead of July’s monetary policy meeting. Market expectations for a 50-basis point cut next month have dropped since the Fed Chair, Jerome Powell, warned that the central bank shouldn’t overreact to a short-term swing in sentiment. August gold futures last traded at $1,413.40 an ounce, down 0.37% on the day.
"In my 45 years in the business, I have never been more uncertain. As readers of my commentary know, I have been very constructive on gold since the $1,280 low some months ago. I suggested that by summer the dollar would come under pressure because I was of the opinion the Fed would not raise rates in 2019, and were more likely to lower rates beginning in the summer," Peter Hug, global trading director said on Wednesday.
"This action would take the juice out of the US dollar and be positive for gold prices. Even if the Fed lowers by 50 basis points in July, and currently only 25 basis points are priced in, the U.S. yield are still some 2% above global central banks. So if we look at technicals, the picture becomes even more murky. If gold breaks above $1,420, there is only air up to $1,465 and after that vapor until $1,600. We are currently not in a 2008 scenario, although gold may be telling us it’s an imminent occurrence," Hug said.