Gold price gains on dollar weakness and trade uncertainty

October 31, 2019

New York (Oct 31) - Gold rose on Thursday as the dollar came under pressure after the U.S. Federal Reserve cut interest rates while uncertainty surrounding a U.S.-China trade deal bolstered the metal's appeal as a safe-haven investment.

Spot gold climbed 0.8% to $1,506.48 an ounce by 1115 GMT, set for a monthly gain of more than 2%. U.S. gold futures were up 0.8% at $1,509.10.

The U.S. central bank on Wednesday cut interest rates for the third time this year to help to sustain U.S. growth despite a slowdown in other parts of the world.

"While the central bank signalled a pause in further cuts for now, it also seemed to pre-commit to keep rates low for the foreseeable future," said Ilya Spivak, a senior currency strategist at DailyFx, adding that a resulting dip in U.S. Treasury bond yields and the dollar were helping gold.

The U.S. dollar fell to a more than one-week low against leading rivals. Gold is highly sensitive to any reduction in interest rates, which decreases the opportunity cost of holding non-yielding bullion.

Rate cuts also weigh on the dollar, in which gold is priced. Uncertainties on the trade front also supported bullion, with the cancellation of an Asia-Pacific economic cooperation summit in Chile next month, at which the United States and China were expected to sign an interim deal to ease hostilities in their long-running trade war.

"China said that, most probably, a long-term trade deal is not really possible with Trump; so all that is really helping gold prices higher," said Afshin Nabavi, senior vice president at precious metals trader MKS SA.

"Underlying momentum is still positive for gold. For prices to accelerate, we need to break above $1,515, and if that is done, we should be able to get more fresh blood coming into the market."

However, news that Beijing could remove extra tariffs imposed since last year on U.S. farm products fanned hopes that a trade deal remains possible. Elsewhere, palladium was steady at $1,805.77 an ounce, having hit a record high of $1,824.50 on Wednesday. The autocatalyst metal was set for a third straight monthly gain, up almost 8% in October alone.

"There is so much demand but not enough supply, that's why a lot of backwardation is still continuing and for the time being it looks like $1,900 is on the cards," Nabavi said.

Silver rose 1.3% to $18.09 an ounce while platinum firmed by 0.4% to $929.40, with both metals set for monthly gains.


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