Gold and Silver Down as Fed Moderates Rate Expectation

Gold, silver, and platinum are down on Wednesday as investors digest commentaries from Fed’s officials about rate cuts. Also, an improved market sentiment due to Mnuchin words saying that the deal between the US and China was 90% ready.

Mnuchin also commented that there is a path to complete the deal.

Other metals such as copper and palladium are moving slightly positive. At the same page, US equities are trading higher.

Powell and Bullard reduce expectations for a rate cut

Fed Chairman Jerome Powell talked on Tuesday about the necessity of a central bank independent from political actors. He complained about short-term political interests and how that could bend monetary policy.

Powell talked about the Fed’s independence after last week intense pressure from President Trump to cut interest rates. Fed’s chairman is concern about political interests going against the decision to make a sustainable economic expansion.

“The Fed is insulated from short-term political pressures — what is often referred to as our independence,” Powell said. “Congress chose to insulate the Fed this way because it had seen the damage that often arises when policy bends to short-term political interests. Central banks in major democracies around the world have similar independence.”

Later, Powell acknowledges that “the global risk picture has changed” since the Fed met early in May. It has made the Fed rethinks its policy.

On this framework, St. Louis Fed President James Bullard surprised markets saying that a 50-basis-point cut in rates “would be overdone.”

Then, US dollar index started its recovery and gold, and other metals headed south.

 

Metal prices report for June 26, 2019

Gold is trading down on Wednesday for the first time in the last seven sessions as the pair is extending its decline from highs since May 2013 at 1,440.00. The downside is now facing support at 1,400.00 and then the 1,390.00. Short term outlook changed slightly to negative.

Silver is moving down for the second day as the XAG/USD is extending losses from the 15.50 traded Tuesday to test the 15.20 area, Wednesday’s intraday low. Technical studies are mixed with the 15.10 supporting the pair on the bottom, and the 15.50 on the top.

Copper is positive for the third day on Wednesday as the unit is extending gains from June 24 lows at 2.6760 to trade as high as 2.7470 today. Copper is testing now the 50-day moving average level at 2.7400, but XCU/USD is currently trading 0.20% positive at 2.7305.

Palladium has entered in a consolidation phase just below the 1,550.00 area as the unit has been testing that level in the last three days. Now, XPD/USD is trading 0.40% positive in the day, but it is moving mostly sideways around 1,530.

Platinum is down for the second day as the unit is extending its rejection of the 820.00 area, and it is moving now at 806.80, 0.35% negative on Wednesday. 800.00 is the support to watch.

Gold down for the first time in seven sessions

Gold is trading down on Wednesday as the metal is retracing from multi-month highs at 1,440.00. A temperated Fed’s message on rate cuts and hopes for a deal with China regarding tariffs and trade fueled sentiment and the dollar.

Besides, as gold went too far too fast in the latest month, investors took Fed’s Powell commentary as an indicator for profit-taking. Short term volatility is now expected, but the long run remains intact, and the XAU/USD is positive.

XAU/USD is currently trading at 1,405.05, 1.20% negative on the day. It is the first negative day for gold in the last seven sessions.

Technical indicators are suggesting a change in the odds and a possible bearish metal in the days to come. However, the unit will have to face with significant supports at 1,390.00 and 1,360.00 and 1,345.00 before confirming a downtrend.