By Barani Krishnan
Investing.com - It’s always a question of semantics with the Fed chiefs, what they said or did not say. And that's taken some of the momentum off the gold rally on Tuesday.
Bullion and futures of gold remained in positive territory of $1,300 per ounce after Federal Reserve Chairman Jerome Powell assured in a speech that the central bank will do what it takes to retain the near-record expansion of the U.S. economy, amid President Trump’s trade wars with China and Mexico.
But what was good for the goose apparently wasn’t as good for the gander. Wall Street’s S&P 500 and global crude oil benchmark Brent recovered about 1% each from the beating they had taken in recent days after the hints from Powell and another senior Fed banker that lower rates might be coming after all.
But gold just rose marginally. Reason: Powell only pledged that the U.S. central bank would “act as appropriate” in response to current developments.
Spot gold, reflective of trades in bullion, traded at $1,326.18 per ounce by 2:30 PM ET (18:30 GMT), up $1.40, or 0.1%, on the day.
Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled up 80 cents, or 0.1%, at $1,328.70 per ounce.
The Dollar Index, which measures the greenback against a basket of six currencies, dipped 0.1% to 96.94. A weaker dollar boosts gold.
“The markets are betting we’ll get a rate cut because we just have too many irons in the fire really, in terms of all these trade conflicts from China to Mexico and Canada, and even Europe, which may be coming next,” said Philip Streible, market strategist for precious metals at RJO Futures in Chicago.
“But of course, the Fed will not explicit say it at this point. It nevers does anyway, until it does the cut.”
Powell was the second senior U.S. central banker, after St. Louis Fed President James Bullard, to hint this week at a rate cut to help the economy maintain its near decade-long expansion.
Powell said “recent developments involving trade negotiations and other matters” in a prepared speech in Chicago on Tuesday.
“We do not know how or when these issues will be resolved,” the Fed chairman said. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective.”
Bullard was more direct in suggesting on Monday that the central bank might need to cut rates due to low inflation and threat to economic growth from Trump’s tariffs battles with some of the most important trading partners of the United States.
Bullard said the case for a rate cut was also strengthened by persistently low inflation below the Fed’s 2% target. He contended that a recent inversion in the Treasury yield curve suggests the current level of interest rates was “inappropriately high.”
Gold has rallied nearly $55, or 4%, over the past five sessions after Trump declared his trade war on Mexico.
With the yellow metal trading above all key daily moving averages, from the 5-DMA through 200-DMA, many analysts think it may pierce the key $1,350 resistance next if its momentum holds. The last time gold traded above $1,350 was in February.
And the advantage for gold as a safe-haven is that it profits from both monetary easing as well as political and economic troubles.
Trump said he was going ahead to put the first 5% tariff on Mexican imports on Monday, even as a delegation from that country was in Washington holding talks with U.S. officials.
A Mexico tariff could be the catalyst to getting $1,350 gold.
Elsewhere in metals, palladium rose again to retain its mantle as the world's costliest traded metal.
Spot palladium jumped $16.30, or 1.2%, to $1,347 an ounce. The silvery-white metal, used for purifying gasoline emissions, traded above $1,600 at one point in early March. But it has lost about 20% since on concerns that it may have rallied too, too soon on talk of tight supply.
Trades in other Comex metals as of 2:30 PM ET (18:30 GMT):
Palladium futures up $25.50, or 2%, at $1,340.50 per ounce.
Platinum futures down $1.10, or 0.1%, at $819.80 per ounce.
Silver futures up 6 cents, or 0.4%, at $14.80 per ounce.
Copper futures up 2 cents, or 0.7%, at $2.70 per pound.