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Gold ends lower as Trump tweet raises optimism that trade deal with China near

Gold prices ended lower on Thursday as President Donald Trump's tweet that a trade deal with China is near rallied the stock market, dulling demand for the haven metal. Gold prices had been trading higher early Thursday, with uncertainties surrounding a U.K. election and dovish stances by the Federal Reserve and the European Central Bank helping to provide support. February gold  fell by $2.70, or 0.2%, to settle at $1,472.30 an ounce, down significantly from the day's high of...

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What happens to the gold price when Fed cuts rates this week?
Monday, 28 October 2019 11:28 WIB | GOLD CORNER |Gold CornerGold Outlook

With the Federal Reserve rate cut already priced in for this week, what will actually happen to the gold price once the central bank cuts for the third time this year?

Analysts sounded positive as gold's new technical momentum took prices temporarily to $1,520 an ounce, hitting a two-week high. Since then, prices retreated, but not below the key psychological $1,500 an ounce level.

"You have demand now from momentum traders. We have options expirations on Monday on the Comex. I talk about the fact that price makes the news. Prices got the attention of global traders. We are going to lose a lot of open interest from short-covering," RBC Wealth Management managing director George Gero told Kitco News on Friday.

Chart-based buying was giving prices a boost, Kitco's senior technical analyst Jim Wyckoff pointed out. "Both gold and silver have seen their near-term technical postures improve markedly last week--near-term price downtrends on the daily charts were negated, which is inviting chart-based buyers into the markets," Wyckoff said.

Also, weaker economic data has helped gold move above $1,500 an ounce as traders were starting to price in more cuts as they worried about slower economic growth.

"We bounced off $1,480 level, which has been a bit the support recently. We continue to see weaker economic data from the U.S. in particular and that has helped strengthen the case for a cut this week," said TD Securities commodity strategist Ryan McKay.

Blue Line Futures president Bill Baruch described last Friday's move up as very technical in nature.

"The market could not go lower. The profile was exhausted to the downside and the bears could not do anything. We are seeing moves above technical levels that are gathering additional tailwinds," Baruch said. "I've been upbeat on longer-term gold. Earlier this week, we've gone bullish in the near-term as well.

It is advisable to get a bit more defensive in your portfolio, said RJO Futures senior market strategist Phillip Streible.

"Fresh weak economic data is really increasing expectations that the Fed is going to do that cut this week. Weaker durable goods versus expectations for the second month in a row got traders scratching their heads about the health of the economy," Streible said. "We also saw weaker data come out of tech stocks, which is a big growth sector. Those kinds of concerns really got people slightly worried.

Now, many are eyeing the $1,525 level as the key resistance that the yellow metal needs to break to move significantly higher.

"Gold has to get above $1,525 and then we can clear the way. If we can close the month anywhere near $1,550, those expectations of the $1,600 year-end target actually have a chance," Streible said.

The Fed might disappoint with a more hawkish tone

The Federal Reserve announcement on Wednesday is the key event to watch this week, according to analysts, who are cautious that the market might be expecting an unrealistically dovish tone from the central bank's Chair Jerome Powell.

"In the last couple days ” the hawkish Pence speech and the weaker U.S. data ” markets are getting more convinced that Powell will strike a dovish tone at the next meeting," said McKay. "But, this might be a little premature. We are skeptical that Powell is going to signal more cuts after a cut this week. The Fed is likely to put rate cuts on pause for at least near-term to assess the impact of the potential three cuts they do this year."

Lack of dovishness from Powell could weigh on gold this week as markets are disappointed, McKay added.

Also, the Fed's rate cut has largely been priced in by the gold market, which means any hawkish hints could push gold lower, Baruch pointed out.

"What matters is the narrative they speak of and how they plan on moving forward. So it's not so much the cut but future cuts. Will they be as dovish as the markets are anticipating?" he Baruch. "Also, don™t underestimate Brexit and the U.S.-China talks."

At the time of writing, the markets were estimating a 93.5% chance of a 25-basis-point cut, according to the CME FedWatch Tool.

Data to watch this week

Some key macro releases this week include Friday's U.S. employment report, which is estimated to show that an additional 90,000 jobs have been created in October.

Another important dataset will be the preliminary Q3 GDP figure on Wednesday, which is projected to come in at 1.7%.

Other items to keep a close eye on are CB consumer confidence report and U.S. pending home sales on Tuesday, as well as, personal spending on Thursday and ISM manufacturing PMI on Friday.

Source: Kitco News

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POPULAR NEWS
Gold ends lower as Trump tweet raises optimism that trade deal with China near

Gold prices ended lower on Thursday as President Donald Trump's tweet that a trade deal with China is near rallied the stock market, dulling demand for the haven metal. Gold prices had been trading higher early Thursday, with uncertainties surrounding a U.K. election and dovish stances by the Federal Reserve and the European Central Bank helping to provide support. February gold  fell by $2.70, or 0.2%, to settle at $1,472.30 an ounce, down significantly from the day's high of...

Gold Extends Decline After Trade Breakthrough, U.K. Election

Gold headed for a back-to-back decline as President Donald Trump signed off on a so-called phase-one trade deal with China and an exit poll indicated a comfortable majority for the governing Conservative Party in the U.K.'s national election. Bullion for immediate delivery fell as much as 0.5% in early trading Friday and was 0.3% lower at $1,465.53/oz as of 7:48 a.m. in Singapore. The metal declined 0.3% Thursday. Traders pulled $275 million from the VanEck Vectors Junior Gold Miners...

Oil rises on US-China trade deal optimism

Oil prices rose nearly 1% on Thursday after U.S. President Donald Trump said Washington was œvery close to nailing down a trade deal with China. Brent crude futures rose 67 cents, or 1%, to $64.39 a barrel. West Texas Intermediate crude futures gained 42 cents, or 0.7%, to settle at $59.18 a barrel. Oil prices received a fresh boost after Trump™s tweet saying the United States was very close to a big deal with China amid reports that the country was considering a delay or possible...

Hong Kong Stocks End Sharply Higher (Review)

Hong Kong stocks surged more than one percent Thursday after the Federal Reserve indicated it would leave interest rate unchanged next year, while investors are keeping tabs on the China-US trade talks. The Hang Seng index climbed 1.31 percent, or 348.71 points, to 26,994.14. But the benchmark Shanghai Composite Index fell 0.30 percent, or 8.72 points, to 2,915.70 and the Shenzhen Composite Index, which tracks stocks on China's second exchange, dropped 0.19 percent, or 3.17 points, to...

Dollar Hits Lowest Since July as Havens Retreat, Pound Rallies

The Bloomberg Dollar Spot Index drops a second week as riskier assets gain after U.S.-China agree on a phase-one trade deal and the U.K.™s Conservative Party wins a crushing majority in Thursday™s election. USD/JPY up 0.3% to 109.63 GBP/USD rallies by 2.7% to 1.3514, strongest since May 2018 before paring the advance; flows are nearly 10 times the average for the past month, as they now come two-way with a slight preference to fade dips, according to two traders in...

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