Gold breaks through $1,400 with Fed statement the ‘last match the bonfire needed’ – by Victor Ferreira (Financial Post – June 25, 2019)

https://business.financialpost.com/

It’s taken six years for gold investors to put their mallets down, as George Milling-Stanley puts it.

Each time the price of gold poked its head above a technical level of US$1,350 an ounce, speculators would immediately take profits and slam it back down, he said. The last three times prices hovered above that level in intraday trading, they couldn’t hold it until close.

“(Investors) have effectively been playing whack-a-mole with gold,” said Milling-Stanley, head of gold strategy at State Street Global Advisors. “They didn’t do that this time because they probably were very impressed by (Jerome) Powell’s statement.”

For the first time since 2012, gold isn’t just hovering around the US$1,350 level — it has shattered it, trading as high as US$1,421 on Monday. Gold rose further on Tuesday morning to US$1430.39. The surge began immediately after Powell, the Fed chairman, opened the door for an interest rate cut in the U.S. on Wednesday.

Gold has historically moved in the opposite direction of U.S. interest rates. When rates are cut, the U.S. dollar weakens and investors turn to gold instead. The precious metal has also historically acted as a safe haven, and amid uncertainty over the U.S.-China trade war and the possibility of a physical confrontation between the U.S. and Iran, all the boxes but one were checked for a rally.

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