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Gold prices scaled a more than one-week peak on Thursday, as the dollar slipped after dovish remarks from the U.S. Federal Reserve Chairman Jerome Powell boosted the case for an interest rate cut later this month.

Spot gold still going up after 24 hours now at $1,424.50 per ounce. 

Last night’s move from the Fed is pretty convincing that they are going towards more of a risk management overview policy which is dovish and also dollar trading lower is a huge support for gold. Fed not only focused on concerns within the U.S. economy, but also took into consideration the global economy, negative impact from trade wars and basically creating a best case senerior for gold bulls.

In his testimony to Congress, Powell pointed to “broad” global weakness that was clouding the U.S. economic outlook amid uncertainty about the fallout from the Trump administration’s trade conflict with China and other nations.

Adding to a generally dovish tone in his testimony, the minutes from the Fed’s previous policy meeting showed many policymakers thought more stimulus would be needed soon, reviving speculation of an aggressive rate cut. Powell’s testimony reassure there is a rate cut on the cards this month. The Fed Chair has provided a loser monetary policy base for gold prices gain further.

In the wake of Powell’s comments, the dollar drop moving further away from a three-week peak, while the U.S. Treasury yield curve steepened.

Lower interest rates decrease the opportunity cost of holding nonyielding bullion and weigh on the dollar, making gold cheaper for investors holding other currencies.

The Fed chair’s cautious stance on the world’s largest economy helped revive some bets on heftier easing at its next policy meeting on July 30-31 - chance of a 50 bps cut rose to 27.6% from 3.3% on Tuesday, according to CME Group’s FedWatch tool.

Prospects of a U.S. interest rate cut also spurred investors towards riskier assets, with the S&P 500 briefly crossing the 3,000-point mark for the first time.

When we see this correlation where gold is going up and equity markets are also going higher this is very bullish signal for gold. Gold is looking at a bigger picture which is global risk, growth sentiment, escalations in the middle East.

source: Rueters