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Gold Prices Rise as Trump Piles More Pressure on Fed; Central Banks Still Buyers

Investing.com - Gold prices rose as U.S. President Donald Trump stressed that the Federal Reserve should lower rates and a survey showed that central banks worldwide were planning to increase reserve holdings.

Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, rose $5.85, or 0.4%, to $1,433.95 a troy ounce by 10:26 AM ET (14:26 GMT).

In several tweets, Trump reiterated his call for lower interest rates and accused the Fed of sticking to a “faulty thought process” as markets contemplate the possibility of a 50-basis-point cut at the July 30-31 policy meeting.

Although Fed Chairman Jerome Powell has repeatedly shrugged off Trump’s attacks, citing the central bank’s independence and a lack of necessity to responding to short-term political pressure, markets are convinced there will be at least a quarter-point cut and there's a 60% chance rates will be 50 basis points lower after the September policy meeting, according to Investing.com's Fed Rate Monitor Tool.

Beyond the Fed, central banks worldwide have been taking an increasingly dovish stance with regard to monetary policy to the benefit of non-yielding gold.

The European Central Bank is widely expected to give signs of further easing next week, with market odds for a cut having even surpassed 50% on Friday, while smaller central banks such as South Korea or South Africa already took action on Thursday.

The outlook for lower interest rates has spread across the fixed income market resulting in $13 trillion worth of bonds with negative yields, increasing the appeal of gold.

John Reade, chief market strategist at the World Gold Council, compared the performance of gold to bond yields in a series of tweets and reminded his followers that “zero is just a level, not a floor”.

In another bullish factor for the outlook, the “hoarding” of gold by central banks looked set to continue for the following year, according to a survey conducted by the World Gold Council and YouGov.

According to the poll of central banks, 54% of respondents expect global holdings to climb in the next 12 months amid concerns about risks in other reserve assets.

In other metals trading, silver futures rose 0.6% at $16.293 a troy ounce by 10:28 AM ET (14:28 GMT).

Palladium futures fell 0.4% to $1,506.00 an ounce, while sister metal platinum gained 0.5% to $854.40.

In base metals, copper traded up 1.9% to $2.762 a pound.

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