Gold futures ended higher Wednesday for a third session in a row, then moved lower in electronic trading after the Federal Reserve announced a quarter-percentage point cut to a key interest rate, lifting the dollar and pressuring prices for the dollar-denominated yellow metal.
Gold pulled back somewhat as the quarter-point rate cut offered “no assurance” of more cuts “down the road,” said George Gero, managing director at RBC Wealth Management, adding that the rise in the dollar index also contributed to the current “short-term gold pullback.”
Ahead of the Fed news, December gold
on Comex rose $2.40, or 0.2%, to settle at $1,515.80 an ounce — the tallying a third straight session climb and highest finish since Sept. 5, according to FactSet data. Prices for the most-active contract traded about 1% higher week to date.
Shortly after the Fed decision, gold futures edged down to $1,506.40 in electronic trading.
Gold futures had already settled when the Federal Open Market Committee announced a widely anticipated quarter percentage point cut to the fed funds interest rate to 1.75%-2%.
Against that backdrop, the ICE U.S. dollar index
a gauge of the greenback against a basket of six rival currencies, was up 0.3% in Wednesday dealings. Strength in the dollar often weighs on dollar-denominated gold prices.
“The U.S. economic numbers have been great and I don’t think they needed to cut rates at all in respect to our economy,” said James Hatzigiannis, senior strategist at Long Leaf Trading Group. “However with global economy continuing to slowdown, U.S./China trade deal still not official, and geopolitical uncertainty around the globe, this is more of insurance rate cut again.”
He expected gold to see an initial drop following the 25 basis point rate cut, noting that the gold market was pricing in a 50 basis point cut.
“There are still numerous long-term bullish factors in play,” Hatizigiannis gold MarketWatch. Those include “geopolitical uncertainties (U.S./China and Iran), central banks around the world continuing to cut rates, over-valued equities, central bank purchasing gold at an increasing pace, and record amounts of sovereign debt.”
Fed Chairman Jerome Powell was set to host a news conference at 2:30 p.m.
“The FOMC decision today creates uncertainty about the amount of future rate cuts this year into next, but with global rates falling, it is likely that the Fed will continue to face pressures to cut rates in a steady manner over the coming year,” Peter Spina, president and chief executive of GoldSeek.com, told MarketWatch.
“This will further benefit gold as longer-term rates march lower and I expect rates to eventually move towards 0%,” he said. “Once we see longer-term yields in the U.S. approach 0%, that will really ignite the gold prices to record highs.”
Other metals on Comex settled lower, with silver for December delivery
meanwhile, down by 22.1 cents, or 1.2%, at $17.919 an ounce, after a 0.6% gain on Tuesday.
fell 1.4 cents, or 0.5%, at $2.613 a pound. October platinum
shed $9.60, or 1%, at $934.60 an ounce and December palladium
lost $15.50, or 1%, to $1,582.20 an ounce.
The SPDR Gold Shares exchange-traded fund
was up 0.4%.