Gold Rebounds on ECB, Fed Rate Cut Hopes 

Gold Rebounds on ECB, Fed Rate Cut Hopes  | Sep 12, 2019 03:24

Gold Rebounds on ECB, Fed Rate Cut Hopes 

By Barani Krishnan - Gold caught a break on Wednesday from a four-day rout. Buyers flocked back to the yellow metal on expectations that the European Central Bank would cut rates and that the U.S. Federal Reserve would follow through on that action.

U.S. gold futures returned above the key $1,500 level. Futures December delivery settled up $4, or 0.3% at $1,503.20 per ounce on the Comex division of the New York Mercantile Exchange. On Tuesday, December contract hit a near one-month low of 1,494.45.

Spot gold, reflective of trades in bullion, remained under $1,500, although it bounced up $11.73, or 0.8%, to $1,497.06. On Tuesday, bullion sank to an Aug. 13 low of $1,486.59.

Gold got a bid as traders awaited the outcome of the ECB policy meeting on Thursday.

The ECB is widely expected to rejoin the global trend of monetary policy easing. But traders have also pared their bets on this in recent days after several top ECB officials voiced concern about resuming large-scale bond purchases. Others have fretted that an aggressive move now would tie the hands of incoming President Christine Lagarde.

Lagarde is due to succeed Mario Draghi as president in November.

The ECB’s meeting will be a warm-up to the Federal Reserve’s own policy meeting next week, where traders expect another 25 basis point cut to the target range for Fed funds. Fresh pressure from President Donald Trump, who tweeted earlier Wednesday that “boneheads” at the Fed should cut to “ZERO, or below”, had little impact on prices.

“Recent moves in risk markets have seen traders pare back their expectations of Fed rate cuts, which suggests that any additional downside from here should be temporary and represent a buying opportunity (in gold) given the underlying economic weakness and dovish central bank tilt still remains,” TD Securities said in a note.

Last week, it had been the turn of both China and Russia to ease monetary policy, the latter cutting its key rate to a five-year low of 7.00%, and the former cutting reserve requirements for banks.

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