Gold prices on Tuesday were on track to settle at a four-month high, after briefly tapping their highest intraday level in more than a year, as comments made in Portugal by European Central Bank President Mario Draghi ahead of a meeting of the Federal Reserve was seen as setting the stage for lower interest rates.
August gold GCQ19, +0.64% jumped $3.20, or 0.2%, to $1,346.10 an ounce, poised for the highest most-active contract settlement since Feb. 20, when prices finished at $1,347.90, according to FactSet data. It traded as high as $1,358.50, the highest intraday level since April 2018.
At an annual conference in Sintra, Portugal on Tuesday, Draghi said the ECB could roll out fresh stimulus as soon as its next policy meeting in July, which sent the U.S. dollar lower against the euro and boosted most major equity benchmarks, because investors have been betting that central banks would ease monetary policy in the face of stubbornly low inflation, and a global economic slowdown that is being exacerbated by a tariff battle between the U.S. and other countries.
Draghi’s comments come ahead of the Fed’s monetary policy statement due Wednesday. Markets are widely anticipating that it will at least set the table for a rate cut in the coming month.
Read: Five things to watch in the pivotal Fed meeting
“The critical tenet of our bullish gold outlook is “Doves to the Rescue” referring to the chorus of central banks that are on the threshold of signalling even looser monetary policy while trade and geopolitical risks remain eye-catching and on the rise,” said Stephen Innes, managing partner at Vanguard Markets.
“If the Fed comes out anywhere near as dovish as the markets lean, gold will continue to march higher on the path paved with glittering gold bars,” he said.
Signs that central banks may support rate cuts pushed yields on global debt lower which is bullish for gold which doesn’t offer a yield. The yield on the 10-year Treasury note TMUBMUSD10Y, -2.11% hit its lowest in more than 20 months at 2.03% while the comparable German debt TMBMKDE-10Y, -33.62% known as the bund, was at a record low at negative 0.322%.
Those factors helped gold gain, even as the Dow Jones Industrial Average DJIA, +1.28% the S&P 500 index SPX, +1.12% the Nasdaq Composite Index COMP, +1.74% and European benchmark, the Stoxx Europe 600 Index SXXP, +1.78% all rally.
Uncertainty about the global economy and the trade conflict have helped to drive appetite for precious metals. On Tuesday, however, U.S. President Donald Trump hinted at progress in trade talks with China.
In other metals dealings, July silver SIN19, +1.32% gained 9.1 cents, or 0.6%, at $14.920 an ounce, while July copper HGN19, +2.46% traded at $2.701 a pound, up 5.5 cents, or 2.1%.
July platinum PLN19, +0.84% added 0.5% to $798.30 an ounce after a 1.2% decline a day earlier, and September palladium PAU19, +1.84% rose 1.5% to $1,477.40 an ounce.
Among exchange-traded funds, SPDR Gold Shares GLD, +0.71% added nearly 0.2%.
Add Comment