Gold is firmer as weak US numbers reignite the hope of a rate cut
Spot gold on track for weekly gain of 0.5% as weak US data pushes the dollar off two-year highs
Gold prices held steady on Friday after rising above $1,280/oz in the previous session as weak US data pushed the dollar off two-year highs and reignited hopes of a rate cut by the Federal Reserve in 2019.
Spot gold was steady at $1,283.56/oz by 4.15am GMT, after rising as much as 1.1% to a one-week peak of 1,287.23 in the previous session. The metal has risen 0.5% so far this week.
US gold futures for June were down 0.2% at 1,283.10.
“Gold has found a very good support around $1,270. There was some short covering after the [weak US] data that pushed prices up. However, the upside could be limited as $1,290 is acting as a strong resistance,” said Peter Fung, head of dealing at Wing Fung Precious Metals.
The US dollar retreated after hitting its highest level in two years as weak domestic data and the potential economic fallout from the trade war with China increased expectations for an interest-rate cut this year.
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Sales of new US single-family homes fell from near an 11½ year high in April as prices rebounded and manufacturing activity hit its lowest level in almost a decade in May, suggesting a sharp slowdown in economic growth was underway.
While the expectations of a rate cut is good for gold, prices can go higher only if the metal can break above the $1,290 to $1,300 range with the dollar still being strong, Fung said.
Lower interest rates tend to lift gold as it reduces the opportunity cost of holding the non-yielding bullion.
Four Fed officials on Thursday conceded that aggravating US-China tensions could threaten economic growth, a marked deviation from chair Jerome Powell’s Monday comments where he said it was too early to ascertain the impact of trade on the trajectory of monetary policy.
However, gold has been under pressure of late as investors preferred the US dollar amid intensifying US-China trade tensions. The bullion is down nearly 5% since touching a 10-month peak in February at $1,346.73/oz.
“Gold has disappointed to the upside often in the past and we would therefore like to see a string of more consistent gains before we feel comfortable signalling an all-clear on the upside,” INTL FCStone analyst Edward Meir said in a note.
Spot gold may break a resistance at $1,286/oz and edge up to the next resistance at $1,290/oz, according to Reuters technical analyst Wang Tao.
Among other precious metals, silver was steady at $14.58/oz and palladium edged 0.6% higher to $1,318.63/oz.
Platinum rose 1% to $801.00/oz, having touched its lowest since February 15 at $791/oz in the previous session.