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Gold Prices Tick up But Get Little Support From Weak Earnings

Published 23/10/2019, 15:34
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Investing.com -- Gold prices rose a little on Thursday but couldn’t get back above $1,500 an ounce as U.S. earnings failed to generate much additional pressure on the Federal Reserve to cut interest rates at its policy meeting next week.

In similar vein, the latest twist in the Brexit saga, in which U.K. lawmakers voted to ensure yet another extension to the deadline for leaving the bloc, triggered only a modest uptick in demand for haven assets, as the market continued to price in a relatively prompt and smooth departure.

By 10:35 AM ET, gold futures for delivery on the Comex exchange had risen 0.7% to %1,498.75 a troy ounce, while spot gold was up 0.5% at $1,495.53 an ounce.

Silver futures also rose, by 0.6% to $17.60 an ounce, while platinum futures popped 2.0% higher to $891.34 an ounce.

Platinum has badly underperformed other precious metals over the last year or so as industrial demand from the auto industry, which uses it in catalytic convertors largely for diesel engines, has buckled under tighter new emissions rules. Palladium, meanwhile, which has benefited from gasoline engines winning market share back from diesels, has nearly doubled in the last 14 months.

Prices for precious metals continue to be underpinned by the expectation of further interest rate cuts from the Federal Reserve which would reduce the yield premium for bonds over bullion. According to Investing.com’s Fed Rate Monitor Tool, investors see a 94% chance of the Fed cutting rates for the third time this year next week, with a 28% chance of a further cut in December.

ING analysts say such expectations are perfectly consistent with the slowing economy, where manufacturing weakness has recently started to spill over into consumption.

“Assuming the economy continues to soften in line with our view – we expect sub-2% 3Q19 GDP growth and sub-1.5% growth in 4Q – then the Fed will likely follow up with additional rate cuts in December and January,” said James Knightley, chief international economist with ING, in a research note earlier this week.

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