Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinExtending yesterday's 3.6% rally, gold rose another 0.2% to close above $1,400 for the first time since September 2013. The metal surged 4.1% for the week as rising tensions with Iran and a dovish rate view from the Fed drove investors away from the dollar and into alternative stores of value.

Reacting to the downing of a surveillance drone this week, the US was reportedly on the verge of a military strike against Iran before President Trump called it off, deciding that the resulting loss of life would be disproportionate. Tensions between the two nations remain extremely high following a series of attacks on oil tankers in the Gulf of Hormuz, for which the US blames Iran.

Oil prices continued to rise in response to worries that the conflict may interrupt global supplies. WTI crude gained nearly 1% for a weekly surge of almost 10%, the most in 30 months. Gold often trade in sympathy with oil as a hedge against energy-related inflation.

The dollar weakened again, losing 0.4% against major rivals on speculation that the Federal Reserve will cut interest rates in coming months. The buck fell 1% on the week to reach a three-month low. A weaker dollar supports gold and other commodities by making them less expensive in other currencies.

The big driver for gold this week was the Fed. At the end of its two-day meeting on monetary policy, the central bank held rates unchanged but signaled its intention to "sustain the expansion" in the face of growing economic "uncertainties." The Fed's new dot-plot showed half of the committee members penciling-in one or more rate cuts this year. CME FedWatch places the odds of a reduction at the July meeting at 99%.

The Fed's consistent program of raising interest rates over the past three years has kept the dollar strong and created substantial headwinds for the gold price. Lower interest rates would reverse those trends and create a bullish environment for gold.

Analysts at Citigroup said gold could rally to between $1,500 and $1,600 over the next 12 months, driven by global central banks cutting interest rates to offset slowing growth. They project a price of $1,450 within the next three months. The metal rose as high as $1,415 today before receding on profit-taking.

The other precious metals were mixed for the day and higher for the week. Silver dropped 1.3% but held a weekly rise of 3.3%. Platinum rose 0.7% today and 0.8% this week. Palladium gained 1.3% on the day and 2.6% on the week.

At the Comex close: August gold added $3.20 to $1,400.10; July silver dropped 20 cents to $15.29; July platinum rose $5.40 to $811; and September palladium climbed $19 to $1,499.60 an ounce.