Metals Stocks: Gold poised to extend advance on Fed rate-cut view, geopolitical ripples

Gold prices advanced Thursday as demand for the metal rose on expectations for an interest-rate cut by the Federal Reserve this summer.

Nagging trade tensions between the world’s top two economies and intensifying Middle East unease also lured investors into the haven asset, analysts said. U.S. stocks were called higher on Thursday after back-to-back losses and oil prices surged after two oil tankers were reportedly attacked in the Gulf of Oman, leaving one with a damaged hull and the other on fire and adrift.

Against this backdrop, gold for August delivery on Comex GCQ19, +0.31%  rose $2.80, or 0.2%, to $1,339.70 an ounce. Futures prices, which are on their way to an 11th gain out of 12 sessions, are up roughly 2% month to date. The SPDR Gold Shares exchange-traded fund GLD, +0.52%  was trading up 0.2% Thursday.

Save for Monday’s retreat, which was strong enough to leave the metal slightly lower on the week, gold has gained almost uninterrupted for two weeks. The metal is inversely following a lower dollar DXY, -0.02% The soft buck can be a tailwind for commodities priced in the unit as it makes them less expensive to users of other currencies, and vice versa.

Gold has benefited from a sharp slide in U.S. Treasury yields TMUBMUSD10Y, -0.21% as investors increasingly bet the Fed will move later this year to cut interest rates, a prediction they believe was supported by a soft inflation reading in Wednesday data. Lower yields can be a positive for gold, reducing the opportunity cost of holding the metal.

In addition to a safety bid, “the yellow metal is in line for even steeper gains and could attempt to break above $1,350 should the Fed next week signal that rate cuts are on the way,” said Raffi Boyadjian, strategist with broker XM.

Global political and market volatility also kept a floor in for the haven asset.

The Associated Press and other media outlets said the U.S. Navy was assisting two oil tankers in the Gulf of Oman, near the strategic Strait of Hormuz. One was reportedly adrift and on fire, and the Iranian media reportedly said earlier that they had been targeted, without offering evidence. A third of all oil traded by sea passes through the strait, which is the narrow mouth of the Persian Gulf.

Japan’s trade ministry said the two vessels had “Japan-related cargo.” The reported attacks came as Japanese Prime Minister Shinzo Abe was wrapping up a high-stakes visit in Tehran aimed at easing tensions between Iran and the United States.

Analysts also continued to point to developments around U.S.-China tensions as a driver for global markets. Risk-on investors might have found some relief in remarks by President Donald Trump late Wednesday. Trump told reporters that he doesn’t have a deadline for imposing additional tariffs on Chinese goods.

Separately, attention remained on Hong Kong, where thousands of protesters clashed with police and faced rounds of tear gas and rubber bullets as they demonstrated on the streets of Hong Kong on Wednesday. Streets and sidewalks were generally clear of obstructions Thursday with a heavy police presence, the AP reported, but students and civil rights activists pledged to keep protesting the extradition bill they fear would harm the Chinese territory’s legal autonomy.

In other metals trade, July silver SIN19, +0.35% which serves as both a haven asset and has industrial purpose, gained 3 cents, or 0.2%, to $14.79 an ounce. July copper HGN19, -0.43%  eased 1 cent, or 0.5%, to $2.64 a pound.

July platinum PLN19, +0.21%   was up 40 cents, or 0.1%, at $810.90 an ounce, while September palladium PAU19, +1.44%  rose $17.90, or 1.2%, to $1,423.50 an ounce, headed for its best closing level in roughly a month.

“Palladium has exceeded the psychologically important $1,400 per troy ounce mark and is now trading at the technically important 100-day moving average,” said Daniel Briesemann, commodities analyst at Commerzbank.

“The platinum and palladium market may soon be facing a strike in South Africa,” he added. “The radical AMCU union plans tomorrow to present its wage demands for the upcoming collective negotiations – they are likely to be more than the mining companies can afford.”

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