Gold Prices Down Amid Uncertainties on Further Easing

August 1, 2019

London (Aug 1)  Gold prices traded lower on Thursday in Asia after the U.S. Federal Reserve cut rates as expected but hinted that further easing might not follow.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange was down 1.1% at $1,4109.50 by 1:05 AM ET (05:05 GMT).

Overnight, the Fed announced a 25-basis point rate cut, the first since the 2008-2009 financial crisis, to preserve a record decade-long expansion of the U.S. economy.

But even so, the Fed did not immediately indicate if it would cut rates by another quarter percent point in September, as many traders hoped.

In his news conference after the rate cut announcement, Fed Chair Jerome Powell sent some mixed messages to markets saying that this isn't the start of a long easing cycle but it's not just a one-and-done cut.

He also struggled to explain the need for a cut when the domestic economy is performing well, but stressed that rising trade tensions have caused many businesses to hold off on investment decisions.

At the end of the conference, he indicated more cuts were on the table. He wouldn't say how many.

Meanwhile, a rising U.S. dollar was also putting pressure on the yellow metal. The U.S. Dollar Index that tracks the greenback against a basket of other currencies was up 0.3%.

Phillip Streible, senior market analyst at RJO Futures, told Kitco News that gold prices might remain volatile as traders digest all the comments from the Fed.

“If you are going to trade gold around the Fed you better strap in with a five-point harness,” he said, adding that the selloff today was probably because traders were expecting a more aggressive 50-basis point move.

“Everything looks fine right now but there is still a lot of fear that the global economy will get a lot worse later this year and that will support gold prices,” he said.

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