Investing.com - Gold prices were trading near a three-month peak on Wednesday in Asia amid expectations that the Federal Reserve is moving closer to cutting interest rates to offset the impact of escalating global trade tensions on the U.S. economy.
Gold futures for August delivery, traded on the Comex division of the New York Mercantile Exchange, were up 0.1% at $1,330.35 per ounce.
Federal Reserve Chairman Jerome Powell said in a speech overnight that the central bank will do what it takes to retain the expansion of the U.S. economy, amid U.S. President Donald Trump’s trade wars with China and Mexico.
“We do not know how or when these issues (trade war with China and Mexico) will be resolved,” the Fed chairman said. “We are closely monitoring the implications of these developments for the U.S. economic outlook and, as always, we will act as appropriate to sustain the expansion, with a strong labor market and inflation near our symmetric 2% objective.”
His remarks sent the U.S. dollar lower, while the precious metal gained. Lower interest rates are good news for gold as they reduce the opportunity cost of holding the non-yielding metal.
“The markets are betting we’ll get a rate cut because we just have too many irons in the fire really, in terms of all these trade conflicts from China to Mexico and Canada, and even Europe, which may be coming next,” said Philip Streible, market strategist for precious metals at RJO Futures in Chicago.
“But of course, the Fed will not explicit say it at this point. It never does anyway, until it does the cut.”
Economic data released shortly after the statement raised expectations for a rate cut, as new orders for U.S.-made goods fell in April and shipments dropped by the most in two years.
Gold has rallied nearly 4% over the past five sessions after Trump announced plans to place tariffs on all imports from Mexico