Gold Prices Rally on Renewed Iran Tensions and Rate Cut Expectations

A technical breakout in gold prices came after rhetoric from Fed member Williams was more dovish than expected.

Gold Price Breakout

Gold prices dropped slightly on Friday after surpassing the $1,450/ounce level for the first time since May 2013. The minor price drop was caused by the renewed tensions in Iran and the U.S. Federal Reserve’s dovish signals on interest rate reduction.

Spot price was down by 0.5% to $1,439.41 per ounce, while gold futures rose by 1% to $1,440.50 an ounce. The yellow metal is likely to post a second consecutively weekly gain. Spot prices reached a six-year high of $1,452.60 per ounce in the early trading session.

In a recent statement, Federal Reserve Bank of New York President John Williams called on the government to address the issues of lower inflation, interest rates, and potential economic disaster. The statement sent the dollar down close to its lowest valuation in two weeks. It also fueled expectations for a possible 50 basis point interest rate cut by the Federal Reserve.

Vanguard Markets managing partner Stephen Innes considers Williams’ statement as dovish. But he expects gold to continue to go higher than its current trading price above $1,400.

ABC Bullion global general manager Nicholas Frappell thinks the statement is implying an aggressive interest rate reduction, which helped push gold prices up. The price of the yellow metal was further boosted by the report about a U.S. Navy ship destroying an Iranian drone and about the Iranians’ seizure of a tanker in the Straits of Hormuz.

In a related development, the holdings of the world’s largest gold-backed exchange-traded fund SPDR Gold Trust increased by 1.42% to 814.62 tons.

Reuters technical analyst Wang Tao believes that the spot prices of gold may hit $1,461 an ounce since it has already passed the resistance level at $1,439.

For the price movement of other precious metals, palladium dropped by 0.3% to $1,520.97 per ounce while platinum rose by 0.8% to $855.35 an ounce. Silver gained 0.5% to $16.42 an ounce and is on track to hit its best week since July 2016.

Fed member Williams full speech can be found on the Federal Reserve Bank of New York’s website and is titled – Living Life Near the ZLB.