Gold Falls Again but Eases Losses After Hours on Fed Hopes

By Barani Krishnan

Investing.com - Gold prices fell for fourth time in five days before paring losses in Tuesday’s after-hours trade as the dollar gave back some strength on expectations of a dovish speech due over the next 48 hours from Federal Reserve Chairman Jay Powell.

Benchmark December gold futures on Comex settled down $16.10, or 0.8%, at $1,923.10 per ounce. The last time Comex rose for a day was last Tuesday, a week ago, when it settled at 2,013.10. It has lost exactly $90, or 4.5%, since. In Thursday’s play, the session high was $1,943.95 while the low was $1,919.85. 

But in a comforting sign to gold bulls, the Comex benchmark contract pulled back about two-thirds of its losses in after-hours trade, trading at  $1,933.90, or just $5.30 lower by 3:20 PM ET. Percentage-wise, the slide stood at under 0.3%.

The spot price of gold, which reflects trades in bullion, was, meanwhile, down by just $1.19, or 0.06%, at $1,927.489.

The dollar, the alternative trade to gold, gave back some of its strength after Comex’s settlement. The Dollar Index, which pits the greenback against a basket of six currencies dipped below the key 93-point handle after trading at a high of 93.347 earlier in the day. Just a week ago, the Dollar Index was hovering at the low 92s. It has rebounded since on a surge of risk appetite sparked by new coronavirus treatments announced by the Trump administration and positive U.S. housing and other data.

Still, all that could change for the greenback by Thursday, when Fed Chairman Powell makes his assessment on the U.S. economy at the central bank’s annual Monetary Policy Framework Review amid the coronavirus pandemic. Powell — who will be speaking from home instead of the typical Jackson Hole, Wyoming, venue for the speech — is expected to make the case for stronger monetary stimulus to help the economy. Such a dynamic will clearly weaken the dollar and boost gold.

“This puts all eyes on Fed Chair Powell’s Jackson Hole speech on Thursday,” said Ed Moya, an analyst at OANDA in New York. 

“Gold has had a few bad days as progress in the fight against COVID-19 and the easing of US-China tensions that took away the need for safe-havens,” Moya added.  “The risks to the global economic outlook and election uncertainty should see gold bulls defend the $1,900 level.  Until the stimulus trade is affirmed by governments and central banks, gold could remain in limbo for a while.”

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