Recently, gold prices spiked in Asian trading after a conciliator US Fed (Federal Reserve) opened the gateway to further rate cuts. The spot gold prices increased to their highest point from March 2014, as reported by Reuters. It was higher by 1.33% at around $1,378.01 per ounce. The gold futures saw solid earnings to $1,382.10 per ounce. They had previously increased by 3% to $1,397.70 for every ounce, according to Reuters. After the Fed meeting—in which the U.S. central bank unchanged interest rates and opened the door for a potential rate curb in the future—the 10-Year Treasury yield also crashed under 2% for the first time ever since November 2016, infringing an important psychological level.
The standard note traded at 1.9872%. One economist said to CNBC that jump in gold prices was possibly driven by the turn downs in yields of short-duration treasuries ranging amid 3 Months and 2 Years. The earning on the 3-Month Treasury note dripped lower to 2.175% and the 2-Year note declined by 2.01% to around 1.731%. Rob Carnell—Head of Research and Chief Economist for the Asia Pacific at ING—stated that with anticipations for the U.S. Fed’s funds rate to decrease by the end of 2020, gold has become “fairly attractive” as an outcome. The shorter end of the earnings curve is inclined to move in line with interest rate movements, stating that a lower anticipated Fed funds rate would likely drive short span yields down.
On a similar note, some Fed executives believe that the case for a rate curb is strengthening. Jerome Powell—Fed’s Chairman—said that some officials think the case has reinforced for interest rate trims ahead. While speaking to the media following central bank’s meeting, Powell stated lawmakers are worried about some of the latest economic developments and see an increasing case for easier policy.
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