Gold Up as Dollar Dips on Powell; G20 Awaited

Investing.com – Gold had its biggest one-day gain in more than a month with Act One of the Fed and Act Two will follow tomorrow.

Then it will be on to the main event for gold (and pretty much all markets), the G-20 in Buenos Aires and whether a US-China trade deal will be done on its sidelines.

Benchmark February on New York’s COMEX rose $9.90 to settle at $1,229.80 per troy ounce.

Fed Chief Jerome Powell’s speech on “The Federal Reserve’s Framework for Monitoring Financial Stability” at the New York Economic Club on Wednesday gave Wall Street just the tonic needed for a mid-week bump.

Powell said the Fed’s “gradual pace of raising interest rates has been an exercise in balancing risks,” but added “there is no preset policy path.” That sent a dovish signal on the dollar that the central bank will do the much-anticipated fourth rate hike of 2018 in December, then hold off for 2019 depending on how well the U.S. economy performs.

Aside from its chairman’s speech, the central bank will also publish on Thursday minutes of its November policy meeting, another Fed diary item that will be parsed carefully for language indicative of 2019 rate hikes.

“Keep in mind that these increases are always ‘data dependent’,” said Walter Pehowich, executive vice-president at Dillon Gage Metals in Addison, Texas, and a gold bug.

The , a contrarian bet to gold, was down 0.6% by 3:00 PM ET (20:00 GMT) on Powell’s remarks. Despite the ’s consequent rally, the greenback’s decline was enough for gold to bounce 0.8%.

Investing.com data showed that to be the largest one-day gain for the front-month contract in gold since Oct. 23.

Volatility across financial markets has picked up ahead of the G20 on speculation whether President Donald Trump and his Chinese counterpart Xi Jinping will be able to strike a deal to end more than six months of bitter trade acrimony.

Trump, in an interview with The Wall Street Journal on Monday, said it was “highly unlikely” he would accept Beijing’s request to hold off on Washington’s plans to boost tariffs to 25% on some $200 billion of Chinese goods, due from Jan. 1.

Trump’s top economic adviser Larry Kudlow has since sent out a cloud of confusing smoke signals on whether an agreement was possible, saying Beijing and Washington were communicating at “all levels” but Xi still needed to “step up and come up with new ideas.”

A trade deal could go either way for gold, as Chinese physical demand for bullion could ramp up prices while an equities rally could also pull money out of the yellow metal.

“Ultimately, gold will do the opposite of what the dollar does,” Pehowich said.

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