Gold to Highs Since 2013 on Fed 100% of Probabilities of a Rate Cut
23 June, 2019, 15:53
Spot gold prices had added 0.4 percent today (June 21st), and so far, it had witnessed a massive breakout of 4.1 percent this week, its best intra-week gain since February 1st 2016.
Gold prices hit a record high above US$1,900 in 2011 during the euro zone debt crisis. Gold has gained momentum thanks to expectations of a rate cut by the Federal Reserve as soon as next month. This equated to the highest gold prices in over five years.
According to CNBC, gold prices spiked during Asian trading hours on Thursday after a dovish U.S Federal Reserve opened the door to further rate cuts.
Gold prices struck near six-year highs yesterday as a weaker dollar and escalating US-Iran tensions fuelled a flight to haven assets, while oil futures built on strong gains.
"As rates fall the U.S. dollar will likely weaken as well", David Lennox, resource analyst at Fat Prophets wrote in an email adding, "the weakness in the greenback "could be amplified" by any return to easing policies". The Fed has said that economic uncertainties have increased and that appropriate action will be taken to support growth.
Gold has also been boosted by geopolitical tension with Iran after a United States drone was shot down by Iran's Revolutionary Guard this week.
Since Wednesday, bullion has risen as much as $70 after Fed's dovish comments and increased Middle East tensions, after Iran shot down a USA military drone, raising fears of a military confrontation between Tehran and Washington.
Neil Wilson, chief market analyst at Markets.com, added: "The opportunity cost of holding gold is significantly lower as real yields fall, while the rather dubious and risky outlook for the global economy, US-China trade and geopolitical tensions in the Middle East mean there is plenty of reason to be seeking shelter in gold".
US President Donald Trump on Thursday approved but then scrapped strikes against Iranian targets, The New York Times reported. The U.S. currency also traded near its lowest level since March.
As for other precious metals, silver for July delivery was up 53.4 cents, or 3.57 percent, to settle at 15.492 dollars per ounce.