Gold’s $1,400 Dream Rests on Fed as Trump Resumes Trade Talks

By Barani Krishnan

Investing.com - Gold bulls’ hopes of getting to $1,400 rests squarely on how much the Federal Reserve signals a rate cut in its policy statement tomorrow (assuming it keeps rates on hold as expected). Tuesday’s surprise news that U.S.-China trade talks will resume took some momentum off the precious metal’s rally.

Bullion and futures of gold were still higher in New York’s late-afternoon trading on Tuesday, although off the session’s peaks after President Donal Trump unexpectedly tweeted that he was meeting China President Xi Jinping at the G-20 next week.

Spot gold, reflective of trades in bullion, traded at $1,349.95 per ounce by 2:30 PM ET (18:30 GMT), up $7.05, or 0.5%, on the day. The session high for bullion was $1,358.35.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled up $7.80, or 0.6%, at $1,350.70 per ounce.

Many in the markets expect the FOMC to issue a policy statement tomorrow tilted toward a future rate cut to preserve the U.S. economy’s near-decade-long record growth. Fed Chairman James Powell is scheduled to hold a press conference at 2:30 PM ET, with the central bank’s statement due at 2:00 PM.

The Fed aside, European Central Bank President Mario Draghi also vowed on Tuesday to cut interest rates if necessary to support the eurozone economies.

Lower interest rates make safe-haven assets such as gold, which does not yield interest, more attractive while weighing on the U.S. dollar. But in Tuesday’s session, the dollar index, weighed against a basket of six currencies, was up along with gold as some forex traders bet against a decisive Fed move to drop rates.

Both U.S. and global economic growth have been under threat in recent months from the U.S.-China trade war that sent risk-averse investors toward gold and other safe havens.

Gold has rallied with few stops since April, gaining about 5% over the past two months, as the tariffs battle between the two superpowers escalated.

But Trump tweeted Tuesday that he “had a very good telephone conversation with President Xi of China”.

“We will be having an extended meeting next week at the G-20 in Japan,” the president added. “Our respective teams will begin talks prior to our meeting.”

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