Daily Gold Update

Source:Bill Musgrave, American Gold Exchange

AustinGold slid 0.4% to close regular trading above $1,432 as traders digested yesterday's hawkish rate cut from the Fed. The metal then surged to a new six-year high above $1,450 in electronic trading after President Trump announced additional tariffs against China.

The Federal Reserve cut interest rates yesterday for the first time since 2008, hoping to insulate the economy from the shocks of escalating trade wars and slowing global growth. The quarter-point reduction disappointed traders who were betting on more aggressive easing, causing gold to slide immediately after the announcement.

In his post-meeting press conference, Fed Chair Jerome Powell compounded the disappointment by suggesting the cut was a "mid-cycle adjustment," not the beginning of a new easing cycle. Gold's slide accelerated, falling below $1,430 but holding support above $1,420 in electronic trading last night.

The metal opened today near $1,425 and rebounded in regular trade to close the session above $1,432 on bargain-hunting. Traders reconsidered Powell's comments, viewing them as an attempt to control market expectations, not a definitive statement on future monetary policy.

Lower interest rates are bullish for gold because they weaken the dollar, making gold less expensive in other currencies, boosting demand overseas.

Gold was also supported by weak US data after the ISM reported manufacturing fell to a three-year low in July, hampered by the trade conflict with China. Separately, construction spending fell 1.3% in June as the housing market cools.

Then came the big news. President Trump announced that he will impose an additional 10% tariff on $300 billion in Chinese goods, starting September 1. The new duties do not include the 25% tariffs already in place on $250 billion in goods.

Gold rocketed more than 1.2% on the trade-war escalation, pushing as high as $1,457 in after-hours electronic trading. Treasury yields plunged to the lowest level since November 2016 as investors sought safety.

The other precious metals finished lower. Silver fell 1.4% while platinum and palladium dropped 3.1% and 7.2%, respectively.

At the Comex close: December gold fell $5.40 to $1,432.40; September silver lost 23 cents, to $16.18; October platinum dropped $27.60 to $851.30; September palladium plunged $110.10 to $1,414.30 an ounce.