Wednesday, 20 March, 2019

Gold holds steady as Fed rate pause bets weigh on dollar

U.S. Dollar U.S. Dollar
Priscilla Morrison | 09 January, 2019, 08:25

Spot gold XAU= was up 0.27 percent at $1,288.25 per ounce.

Even after last week's strong U.S.jobs data for December, market watchers believe the world's biggest economy is losing momentum.

The Aussie. gained 0.28 percent to $0.7123.

"If, as we expect, global economies slow down in 2019 but avoid recession, and USA interest rates peak, there is likely to be a risk rally", they said in a note.

The dollar index stood near 2-1/2-month lows as investors grew increasingly convinced that the Federal Reserve will not raise interest rates this year amid uncertainties over the U.S. economy.

Trump in the final months of 2018 repeatedly attacked the Fed, blaming market volatility on the central bank's steady and gradual interest-rate increases and calling it the "only problem" for the USA economy.

On Friday, Fed chief Jerome Powell told the American Economic Association the Fed is not on a preset path of rate hikes and it will be sensitive to the downside risks markets are pricing in. The dollar index was 0.2% higher against its peers, having dropped to its lowest since October 22 the previous session.

BofAML saw upside in Chinese and German stocks; US small cap stocks; semi-government debt; energy stocks; USA dollar and euro high-yielding bonds and emerging market currencies.

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U.S. officials are meeting their counterparts in Beijing this week for the first face-to-face talks since U.S. President Donald Trump and China's President Xi Jinping agreed in December to a 90-day truce in a trade war that has roiled global markets.

As Washington and Beijing resumed talks, United States commerce secretary Wilbur Ross said on Monday that the two biggest economies could reach a trade deal.

European stocks were slightly lower across the board, though mining stocks .SXPP were up 0.7 percent after the reserve requirement ratio cut from China boosted metals prices, especially steel and iron ore.

Elsewhere, the Australian dollar was lower by 0.07 per cent at US$0.7141.

Yields on two-year Treasuries rose to 2.49 percent, from a trough of 2.37 percent, but were still below those on one-year paper.

"Clearly markets are now pricing in the risk of a cut in 2019", said Shaw of Investec.

Brent crude oil LCOc1 was up $1.66 at $58.72 a barrel. The U.S. dollar was down to 0.9794 Swiss franc from 0.9864 Swiss franc, and it decreased to 1.3296 Canadian dollars from 1.3394 Canadian dollars.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. This article is strictly for informational purposes only. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

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