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James Hyerczyk
Gold Bars and Dollar

Gold prices are inching higher on Friday shortly after the regular session opening. Volume appears to be well below average. Nonetheless, the market is set up for its first gain in four weeks on the back of a weaker U.S. Dollar and general concerns over the lack of progress in U.S.-China trade talks.

At 12:45 GMT, December Comex gold futures are trading $1507.30, up $1.20 or +0.08%.

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Gold is being underpinned by a weaker U.S. Dollar. Gold has been supported since last Wednesday when the Fed cut its benchmark interest rate 25-basis points as widely expected, but couldn’t commit to the timing of further rate cuts.

The dollar is also posting losses against the British Pound, Swiss Franc and Japanese Yen after the Bank of England (BOE), Swiss National Bank (SNB) and Bank of Japan (BOJ) made no changes to policy. A weaker greenback tends to make dollar-denominated gold a more attractive investment.

Daily Forecast

There were no major economic reports out of the United States on Friday. However, several Fed speakers are on tap and they could move interest rates, the dollar and gold especially since the Federal Reserve was unclear about future rate cuts.

Earlier on Friday, St. Louis Fed President James Bullard said that the Federal Reserve should have cut interest rates by 50 basis points on Wednesday, expressing concerns over trade policy uncertainty, while arguing that the initial cut on July 31 appeared to have little to no impact on the economy so far.

“It is prudent risk management, in my view, to cut the policy rate aggressively now and then later increase it should the downside risks not materialize,” Bullard wrote in a blog post Friday morning.

New York Federal Reserve President John Williams is also scheduled to speak at 12:15 GMT. He voted for a rate cut on Wednesday. He is likely to defend the case for further rate cuts. Williams said in a speech in July that central bankers need to act quickly and forcefully when rates are low and growth is slowing, arguing at that “it’s better to take preventative measures than to wait for disaster to unfold.”

Boston’s Eric Rosengren preferred no rate change at all, underscoring the widening gap in Fed views on where to take monetary policy.

In August, Rosengren signaled no willingness to support further interest rate cuts, saying that U.S. economic conditions are still good and that easing policy could encourage a worrying debt build-up.

“It is a bigger risk to encourage people to take on too much more risk at this time,” Rosengren said to Bloomberg Television.

“Global conditions are weak. So I’m not saying there aren’t circumstances in which I would be willing to ease. I just want to see evidence that we are actually going into something that’s more of a slowdown,” he added.

Dovish comments could be supportive for gold. Hawkish comments could put pressure on gold. Ultimately, however, it all depends on which way the wind blows the U.S. Dollar on Friday. Low volume could hold prices in a range.

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