Gold Settles At A 2-Week High On Dollar Weakness And A Dovish FOMC
Dec Comex gold (GCZ20) on Wednesday closed up +4.3 (+0.22%), and Dec silver (SIZ20) closed up +0.012 (+0.04%).
Precious metals prices on Wednesday posted modest gains with gold at a 2-week high. A weak dollar spurred gains in metals prices along with lower global bond yields. Gold also rallied on dovish ECB comments Wednesday and the dovish outcome to Wednesday's 2-day FOMC meeting. Precious metals fell back from their best levels as a rally in stocks curbed safe-haven demand for metals.
Gold prices also have support on a dovish Fed. The FOMC on Wednesday kept the funds rate target range at 0.00%/0.25% and its QE program at $120 billion per month, and 13 of 17 Fed officials forecast rates on hold through 2023. The FOMC said it "expects to maintain an accommodative stance of monetary policy" until it achieves inflation averaging 2% over time and longer-term inflation expectations remain well-anchored at 2%.
Dovish ECB comments on Wednesday fueled speculation the ECB may expand stimulus measures, which is bullish for gold demand as a store of value. ECB Executive Board member Schnabel said the ECB "stands ready to act if the incoming data is not consistent with the objective of our emergency measures to close the inflation gap that has emerged as a result of the pandemic." Also, ECB Governing Council member Hernandez de Cos said the ECB will continue to monitor the euro exchange rate and can't rule out more ECB stimulus in the future.
Silver prices also garnered support Wednesday after the Organization for Economic Co-operation and Development (OECD) upgraded its global growth outlook as it forecast global 2020 GDP will contract -4.5%, less than a -6.0% forecast in June.
Gold prices still have safe-haven support on heightened U.S/China tensions and risks of no-deal Brexit.
Precious metals prices have ongoing support from the Covid pandemic that has curbed global growth prospects and prompted the world's central banks to maintain or even expand their QE programs, which is bullish for gold demand as a store of value. The Covid virus has now infected 29.788 million persons globally, with deaths exceeding 940,000.
Safe-haven demand and dovish central bank expectations have sparked fund buying of precious metals in recent months. Long gold positions in ETFs last Thursday rose to a new record high of 3,412.75 metric tons (data since 2002). However, liquidation of long silver positions has emerged with long silver positions in ETFs falling to a 1-1/4 month low Monday. Long silver positions in ETFs had risen to a new record high of 897.10 million troy ounces on Aug 25.
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