Gold prices zoom on firm global cues

Galtero Lara
Julio 12, 2019

While trade war concerns and US Fed's expected decision to cut rates alongside a cautious stance on US economy prompted investors to move towards safe-haven assets like the yellow metal, in India the prices have adjusted for the Customs duty hike.

He further said weak global economic outlook and unsolved trade war tensions between the United States and China are the other positive drivers of the yellow metal.

Spot gold shed 1% to $1,404.40 per ounce as of 1:30 p.m. EDT (1730 GMT), dropping almost $15 after USA consumer prices demonstrated a pick-up in underlying inflation, increasing in June by the most in almost 1-1/2 years.

US gold futures settled 0.9% up at $1,412.50 per ounce. Gold has risen almost 0.9% so far this week.

Fed Chair Jerome Powell indicated on Thursday that a rate cut is likely at the Fed's next meeting as businesses slow investment due to trade disputes and a global growth slowdown.

US-China trade jitters also resurfaced after US President Donald Trump said China was not living up to promises it made on buying agricultural products from American farmers.

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Adding to global uncertainties, Iran's alleged attempt to block a British-owned tanker heightened tensions in the Middle East in the wake of attacks on tankers and the downing of USA drone by Iran in June.

The Federal Reserve last month downgraded its U.S. inflation projection for 2019 to 1.5 per cent from the 1.8 per cent projected in March.

However, this may probably not change expectations the US central bank will cut interest rates this month. Echoing the dovish sentiment, the minutes from Fed's June policy meeting showed many policymakers thought more stimulus would be needed soon, reinforcing the case for a USA interest rate cut in July.

On the technical side, spot gold is biased to break a support at $1,404 per ounce and retrace to the next support at $1,387, according to Reuters technical analyst Wang Tao.

As for other precious metals, silver for September delivery was down 8 cents, or 0.53 percent to close at 15.146 dollars per ounce.

"...if the higher levy were to become permanent, it could reduce long-term Indian consumer demand by slightly less than 1% per year", it said in its mid-year gold outlook 2019 report.

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