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Metals Focus Upbeat On Gold But Cautions Near-Term Upside May Be Limited

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The consultancy Metals Focus said it remains upbeat on gold longer term, but cautions that near-term gains may be limited despite expectations for a U.S. rate cut on Wednesday. Analysts pointed out that an expected Federal Reserve U.S. rate cut would be the first since the financial crisis, and other central banks have signaled an accommodative stance as well. “Given this backdrop, it is no surprise that gold has been on an uptrend of late and sits near six-year highs,” Metals Focus said. Still, the consultancy looks for several factors to limited near-term upside. For starters, any monetary accommodation is expected to be “modest” since it is meant to counter a global slowdown rather than full-fledged recession. Secondly, the market has already factored a 25-basis-point U.S. rate cut into prices. Further, even if the Fed cuts, the U.S. economy is faring better than other industrialized nations, thus the dollar is likely to hold up based on interest-rate differentials, Metals Focus said. Still, the consultancy said it looks for gold’s uptrend to continue over the next two years. “We believe that the macroeconomic backdrop is turning more supportive for precious metals,” Metals Focus said. “In particular, we expect U.S. growth to slow as the positive effects of last year’s fiscal stimulus fades, while the Chinese economy will continue to be undermined by the prolonged trade war.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

TDS: Gold Momentum Indicators ‘Firing Upside Signals On All Cylinders’

Wednesday July 31, 2019 09:50

Gold is benefitting from Federal Reserve rate-cut expectations but silver and platinum may not have as much “staying power,” said TD Securities. The Fed is widely expected to cut interest rates by 25 basis points on Wednesday. “From the first moment when the Fed chair opened the door to a potential cut in interest rates, gold prices have increasingly discounted the possibility that the Fed is set to begin an easing cycle, as opposed to a ‘one-and-done’ insurance cut scenario,” TDS said. “Further, considering that the starting point for global interest rates remain low, which places a constraint on central bankers' potential response, the yellow metal's appeal has continued to grow, particularly as U.S. real rates are nearing zero and the pile of global negative yielding debt continues to expand.” TDS said it’s not surprising that momentum indicators for gold are “firing upside signals on all cylinders.” However, analysts said that “we question whether platinum and silver's rally has staying power, considering that it has in part been fueled by speculative positioning amid a noteworthy round of money-manager short covering, just as ETF [exchange-traded-fund] holdings rose and as CTAs [Commodity Trading Advisers] loaded up on the metals. That being said, gold's lack of exposure to a weakening industrial sector…is another factor that could see the yellow metal remain the complex outperformer.” Still, analysts added, there is potential for additional algorithmic buying in platinum if should prices break above the $885-per-ounce area, which could extend the rally.

By Allen Sykora of Kitco News; asykora@kitco.com

 

Commerzbank: Gold-Price Action To Hinge On Powell Comments

Wednesday July 31, 2019 09:50

The movement in gold prices after a U.S. Federal Open Market Committee meeting on Wednesday may hinge more on the comments made by Fed Chair Jerome Powell than on an expected rate cut, said Commerzbank. Analysts noted that there is considerable pressure on the Fed to cut interest rates. “Some market participants are expecting rates to be cut by more than 25 basis points, so a cut of ‘only’ 25 basis points could meet with disappointment,” Commerzbank said. “A lot will therefore depend on the tone Fed Chair Powell takes in the subsequent press conference.” In particular, traders will be watching for clues on future monetary policy. Meanwhile, Commerzbank pointed out that investor interest in gold remains high. They noted that gold exchange-traded funds tracked by Bloomberg have registered combined inflows of 12 tonnes in the last two days.

By Allen Sykora of Kitco News; asykora@kitco.com

 

BBH: Markets Expecting Fed Rate Cut

Wednesday July 31, 2019 09:50

The Federal Open Market Committee is widely expected to cut U.S. interest rates by 25 basis points on Wednesday, said Brown Brothers Harriman. Analysts noted that the meeting will not include updated staff forecasts or dot-plots showing views of individual Fed members, with this scheduled for the September FOMC meeting. “If the Fed does move, it will be the first time in this cycle that it has changed policy at a meeting without fresh forecasts,” BBH said. Analysts later added, “After the likely 25-bp cut this week, we just can't see the Fed pre-committing to any more cuts. As such, we expect a wait-and-see period that will make three cuts this year nearly impossible.”

By Allen Sykora of Kitco News; asykora@kitco.com

 

FXTM: ‘Gold Prices Could See More Upside’

Wednesday July 31, 2019 09:50

Gold, already in an uptrend, could benefit some more from worries about slowing global economic growth, said Han Tan, market analyst at FXTM. The metal remains strong despite the U.S. dollar’s resilience, with gold trading around $1,430 an ounce, the analyst said. “Gold prices could see more upside in the near term, should markets look past the Fed and focus on the waning global growth momentum, especially considering that revived U.S.-China trade talks have so far yielded naught,” the analyst added.

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