Gold price surges as dovish Fed weakens the Dollar
Michael Pinson, News Editor
20 Jun 2019, 1:32 p.m.
Gold has once again surged, climbing past $1,386.25 per ounce this morning - the highest Dollar price in nearly six years. The 24 hour gain of $44 (3.3%) followed yesterday’s Federal Reserve meeting, in which the stance of the Fed appears to be turning dovish.
Although the decision for now is to keep rates at their current levels, the Fed signalled that cuts could happen soon. Chair of the Federal Reserve, Jerome Powell said “Many participants now see the case for somewhat more accommodative policy has strengthened.” Analysts expect this will happen this year, with some even hopeful of cuts next month, but the general consensus is that by early 2020 rates will be reduced.
The move will likely see a confrontation between President Donald Trump, and Powell; with the former repeatedly calling for rate cuts, and criticising the latter. Trump has so far been uncharacteristically quiet, and reports suggest he may be seeking ways to remove Powell from his position as Chair of the Fed, though it is unclear if he has the authority to do so.
The announcement saw the Dollar weaken against a number of global currencies. Investors will now be watching closely for today's decision on interest rates from the Bank of England. In Sterling terms, the gold price was up to £1,091.74 per ounce this morning – the highest it's been since October 2012, and a gain of over £28 (2.65%) overnight.
Financial markets are suffering from increased volatility recently. Earlier this week, gold prices spiked as the US announced 1,000 troops were being deployed near Iran in response to the attack on two oil tankers in the Strait of Hormuz. The rise was countered however when President of the ECB, Mario Draghi, suggested financial stimulus might be needed to help the ailing Eurozone economy, a move that drew more anger from Trump.
The conflict between Iran and the US seems to be escalating further; with reports this morning that Iran has shot down an "intruding American spy drone". Combining with growing no-deal Brexit fears on the back of the Conservative leadership contest, ongoing economic slowdown, and the impact of increasing trade-war threats, it’s easy to see gold making further gains in the near future.