Gold gains over 1% as Powell comments hint at September rate cut

Gold prices gained more than 1% on Friday as the dollar and Treasury yields retreated following comments from Federal Reserve Chair Jerome Powell that signalled an interest rate cut in September.

Spot gold rose 1.2% to $2,512.63 per ounce by 01:44 p.m. ET (1744 GMT), but was off a record high of $2,531.60 hit on Tuesday. U.S. gold futures settled 1.2% higher at $2,546.30.

Powell said “the time has come” for the U.S. central bank to cut interest rates and that inflation was nearing the Fed’s 2% target, offering an explicit endorsement of an imminent policy easing.

The dollar index fell 0.8% against its rivals, while benchmark U.S. 10-year yields also declined following Powell’s speech, making gold more attractive for other currency holders. [USD/][US/]

“Asset markets are reacting well, at least initially, to Powell’s general, but somewhat open-ended comment that it’s time for policy to adjust,” said Tai Wong, a New York-based independent metals trader. “Gold will continue to grind higher ahead of the September Fed meeting and the updated dot plot which will indicate how many likely cuts this year.” Lower U.S. interest rates also generally increase the relative appeal of zero-yield bullion. Gold might be over-positioned to the long end and we could see sell offs and some profit-taking, said Bart Melek, head of commodity strategies at TD Securities.

“But longer term, gold should do well since the Fed is very much picking their game and trying to make sure employment doesn’t weaken anymore and is not worried about inflation.”

Traders are expecting a 59.5% chance of a 25-basis point cut in September, while 40.5% expect a deeper 50-bps reduction.

Silver rose 2.9% to $29.83 per ounce and was up nearly 2.7% for the week.

India’s silver imports are on course to nearly double this year due to rising demand from solar panel and electronics makers, leading importers said.

Platinum gained 1.8% to $961.01 and palladium was up 2.6% at $956.69.