Audio By Carbonatix
Gold’s bullish momentum has rolled into a new week.
Prices extended their advance above $1,400 an ounce, near the highest level since September 2013, after the Federal Reserve and other central banks turned more dovish on monetary policy.
This, combined with planned U.S. sanctions against Iran, as well as the coming meeting between the U.S. and China’s presidents, is creating a raft of bullish factors for the precious metal.
Bullion has regained its luster after the Fed signaled it was ready for looser policy and the European Central Bank hinted at possible stimulus, which would keep real rates low, while geopolitical risks boosted demand for havens. Gold could end the year higher, according to Russ Koesterich, portfolio manager at the $27 billion BlackRock Global Allocation Fund, adding that there is likely to be some pullback and consolidation in the near-term.
“Gold bulls are back in control,” Edward Moya, senior market analyst at Oanda Corp., said in a note, adding the metal remains supported by rising expectations of a 50 basis point cut at the Fed’s July meeting. “The question is no longer will the Fed ease, but by how much? The Fed historically likes to kick on an easing cycle with a bang and a 50 basis point cut should become the base case.”
Minneapolis Fed President Neel Kashkari said Friday he called for a 50 basis point reduction in interest rates at the central bank’s June 18-19 meeting. Fed Chairman Jerome Powell is due to speak at the Council on Foreign Relations in New York Tuesday where he’ll discuss the challenges facing the U.S. economy.
Spot gold climbed as much as 0.8% to $1,411.23, and traded at $1,404.92 at 7:31 a.m. in London. Prices soared 4.3% last week, the biggest gain since April 2016. A gauge of the greenback was near a three-month low.
Recent U.S. dollar weakness and more speculative money moving into bullion are among the factors that suggest gold has more upside than downside, Martin Lakos, division director at Macquarie Wealth Management, said in a Bloomberg TV interview. The bank forecasts $1,450 by the first or second quarter of next year, he said.
Hedge funds and other large speculators boosted their net long positions in U.S. gold futures and options to the highest since February 2018 in the period ended June 18, the day before the Fed signaled it may soon start to cut interest rates. Holdings in bullion-backed exchange-traded funds expanded to the highest level since April 2013 as of Friday.
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