Gold Price Dips on Day, But up on Week Ahead of Brexit Vote

October 19, 2019

New York (Oct 19)  Gold posted a weekly gain but safe-haven investors and those traditionally long the yellow metal largely sat out of Friday’s market, letting prices dip, with few leads to chase, ahead of a weekend parliament vote on the U.K. bid to leave the EU.

After early gains in the day on the prospects that Britain’s Brexit hopes and U.S.-China trade deal aspirations will be dashed again, gold dipped in later hours on signs that fewer central banks around the world might ramp up on another round of easing.

U.S. gold futures for December delivery settled down $4.20, or 0.3%, at $1,494.10 per ounce.

Spot gold, which tracks live trades in bullion, was down just 30 cents at $1,491.59 by 3:00 PM ET.

For the week, both futures and bullion posted a slight gain, although they remained just under the key $1,500 bullish line.

“If you actually trade gold you can feel the lack of emotion in the markets these days as buying interest continues to run tepid,” said Axitrader market strategist Stephen Innes. “The expectation for weaker economic data and the current level of central bank policy response seems to be all factored into the current price, suggesting gold traders need a new catalyst.”

Innes cautioned against taking major positions ahead of a “binary” Brexit event on Saturday, when the U.K. House of Commons votes on Prime Minister Boris Johnson’s EU Withdrawal Agreement.

But breaking reports suggest that opponents of the bill have crafted an amendment that would still force the government to seek a three-month extension to the Brexit deadline – a time that they hope would expose what they see as the bill’s shortcomings. A poll by research firm YouGov suggests U.K. voters support the agreement by a margin of 2:1.

Global central bankers were, meanwhile, cool on rate cut prospects.

Reserve Bank of Australia Governor Philip Lowe said recent rate cuts were working and extreme monetary policy measures – such as negative interest rates and quantitative easing – were “extraordinarily unlikely”.

Bank of England Deputy Governor Dave Ramsden put the prospect of rate hikes back on the table but only if the U.K. leaves the EU smoothly, with a transitional deal. Ramsden told Bloomberg in an interview that Brexit uncertainty has damaged the supply capacity of the British economy, lowering the rate at which it can grow without generating inflation in future.

Two officials of the Federal Reserve made clear their lack of enthusiasm just before the U.S. central bank entered its “quiet period”, where its doesn’t make public comments ahead of a policy meeting. The Fed is due to meet between Oct 29 and 30, and there are expectations it will approve a third straight quarter point cut for the year.

Dallas Fed President Robert Kaplan said on Friday the Fed’s two cuts so far this year don’t represent the start of a “full-fledged rate cutting cycle.”

Kaplan said he expected strong consumer demand to keep sustaining the U.S. economy through a soft patch in business investment caused by trade uncertainty. His sentiments were echoed more starkly at the same event Kansas City Fed chief Esther George, who had already dissented from the last two decisions to cut the fed funds rate, chimed in:

"While weakness in manufacturing and business investment is evident, it is not clear that monetary policy is the appropriate tool to offset the risks faced by businesses in those sectors, when weighted against the costs that could be associated with such action,” George said.

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