Spot Gold Spikes to 6-Year High on Prospect of Lower US Interest Rates

The U.S. Dollar plunged against a basket of currencies, helping to drive up demand for the dollar-denominated asset. Meanwhile, 10-year U.S. Treasury yields hit their lowest level in nearly two years as investors increased bets on a Fed rate cut in July. U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are trading higher early Thursday after a lack luster performance the previous session. Natural gas futures plunged on Wednesday to a multi-year low as weather models remained somewhat bearish and relatively cheap prices failed to attract enough major buyers to stop the price slide.
James Hyerczyk
Gold Bars and Dollar

Spot gold prices are trading sharply higher after hitting a six-year high earlier in the session. The rally is being fueled by another plunge in U.S. Treasury yields and a weaker U.S. Dollar. Gold surged after the U.S. Federal Reserve signaled possible interest rate cuts later this year at the conclusion of its June monetary policy meeting on Wednesday afternoon.

At 02:43 GMT, August Comex gold futures are trading $1382.60, up $34.00 or +2.52%. This puts it within striking distance of its January 25, 2018 contract high at $1413.30.

The U.S. Dollar plunged against a basket of currencies, helping to drive up demand for the dollar-denominated asset. Meanwhile, 10-year U.S. Treasury yields hit their lowest level in nearly two years as investors increased bets on a Fed rate cut in July.

Although Fed policymakers voted 9 to 1 against a rate cut in June, the language in the monetary policy statement and post-meeting comments from Federal Reserve Chairman signaled possible interest rate cuts later this year.

The Fed held rates steady as forecast, but said it “will act as appropriate to sustain” the country’s economic expansion and dropped a promise to be “patient” in adjusting rates.

Perhaps the most bullish comment for gold prices came from Powell. He said, “Many participants now see the case for somewhat more accommodative policy has strengthened.”

Crude Oil Recovering

U.S. West Texas Intermediate and international-benchmark Brent crude oil prices are trading higher early Thursday after a lack luster performance the previous session. Helping to support the markets are Wednesday’s better-than-expected government inventories report and positive steps toward approving an extension of the OPEC-led program to reduce production, trim the excess inventory and stabilize prices.

On Wednesday, the U.S. Energy Information Administration reported that U.S. crude stocks fell by 3.1 million barrels the week-ending June 14. Traders were looking for a draw of 1.1 million barrels.

Natural Gas Falling Apart

Natural gas futures plunged on Wednesday to a multi-year low as weather models remained somewhat bearish and relatively cheap prices failed to attract enough major buyers to stop the price slide.

Traders are saying that although some technical indicators are oversold, the weather data is having a hard time convincing real buyers, other than speculators, that late June heat is hot enough to impress.

Although contributing to the bearish outlook is the forecast for another 100 Bcf weekly storage injection. A storage build of this size would be greater than last year’s 95 Bcf injection and the five-year average of 84 Bcf.

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