Gold Edges up; Traders Stay Hopeful of Rate Cuts Amid Central Banks Blackout

By Barani Krishnan

Investing.com – After weeks of cues and hints on where interest rates could go, global central banks have suddenly gone off the air, leaving gold longs that plowed headlong into the market on their own to figure out trades till the crunch time comes for rates.

Gold prices were up on Monday, with smallish gains as the Federal Reserve and European Central Bank began their respective periods of avoiding public speaking and interviews ahead of monetary policy decisions. That leaves markets without further input on policymakers’ outlook for movements for interest rates or stimulus.

{68|Spot gold}}, reflective of trades in bullion, traded at $1,426.97 per ounce by 2:00 PM ET (18:00 GMT), up 85 cents, or 0.1%, on the day.

Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, settled up 20 cents, or 0.01% to $1,426.90.

Both benchmarks for the yellow metal finished up for a third-straight week last week on bets that the Fed was on course for a 25-basis-point cut at its July 30-31 meeting, its first-ever rate reduction since the financial crisis. That would put the federal funds rate at 2% to 2.25%. Traders have also priced another 25-basis-point cut at its September meeting.

Gold bulls are betting on a rally that will take the market beyond $1,500 should the Fed deliver the cuts indicated. For the past two weeks at least, Fed Chairman Jay Powell has clearly stated his preference for easing to stimulate growth and fend off any weakening in activity that might disrupt nearly a decade of non-stop expansion.

Not at all Fed members are in agreement for a cut, though. After Friday's market close -- and just ahead of the Fed’s quiet period -- Boston Fed President Eric Rosengren said he saw no reason for the widely-anticipated quarter-point cut at the upcoming meeting. A weak GDP report, due Friday, might change his mind, he said.

Rosengren insisted that the U.S. economy was in a much more solid position than that of the euro zone or Japan, where central banks are also widely expected to pursue policy easing.

“I don’t want to ease if the (U.S.) economy is doing perfectly well without the easing,” he said in an interview with CNBC.

Central banks worldwide have been taking an increasingly dovish stance on monetary policy to the benefit of non-yielding gold.

The European Central Bank is expected to give signs of further easing this week, with market odds for a cut having even surpassed 50% on Friday. Smaller central banks from countries such as South Korea or South Africa already took action in that direction on Thursday.

That outlook for lower interest rates on a global level has spread across the fixed income market resulting in $13 trillion worth of bonds with negative yields, increasing the appeal of gold.

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