Gold and oil prices rose after the US Federal Reserve cut interest rates late on Tuesday, ending a two-and-a-half-year monetary tightening cycle and starting a global wave of lending rate cuts.
gold
Spot gold prices rose about 1% to $2,584 an ounce, after hitting a record high of $2,599.92 on Wednesday.
US gold futures rose 0.33% to $2,607.5.
The US Federal Reserve began its monetary easing cycle yesterday with a larger-than-usual cut of 50 basis points (0.5%), with Bank Chairman Jerome Powell saying the move was aimed at demonstrating policymakers’ commitment to keeping unemployment low after inflation fell.
But Powell said the economy remains solid, with many labor market indicators, such as jobless claims and even the current unemployment rate of 4.2%, not reaching worrying levels.
The non-yielding yellow metal tends to be a preferred investment during low interest rates and geopolitical turmoil.
According to the CME Group’s FedWatch tool, traders currently expect a 25 basis point rate cut at the Fed’s next meeting in November, compared with 34% who expect a 50 basis point cut.
The market is also awaiting the US unemployment claims data, which is due out today.
As for other precious metals:
- Spot silver rose 3.56% to $31.14 an ounce.
- Platinum rose 2.45% to $992.40.
- Palladium rose 2.33% to $1,086.
Oil
Oil prices rose today after the US interest rate cut, which is a driver for increasing dollar-denominated commodities, including oil, but ongoing concerns about global demand limited the gains.
Brent crude futures for November delivery rose 1% to $74.43 at the time of writing, while US West Texas Intermediate crude futures for October delivery rose 0.92% to $71.56 a barrel.
Both benchmarks recovered after falling in early Asian trading.
The US Federal Reserve cut interest rates by half a percentage point yesterday. Lowering interest rates usually boosts economic activity and increases demand for energy, but the market received this cut as a sign of a tight labor market, which could lead to a slowdown in the economy.
“While the 50bp rate cut signals significant economic challenges ahead, bearish investors were not satisfied after the Fed raised its medium-term rate forecasts,” analysts at ANZ said in a note.
Weak demand in China due to the economic slowdown also continued to weigh on markets.
China’s refinery output fell for a fifth straight month in August, data from the country’s statistics bureau showed, while industrial output growth slowed to a five-month low last month and retail sales and new home prices continued to decline.
Analysts at Citibank say they expect an oil market deficit of about 0.4 million barrels per day to support Brent crude prices in the $70-$75 per barrel range over the next quarter, but that will be temporary.
Source : Reuters + cnbc + Websites
