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Gold Prices Hit Highest Level Since 2013 on Fed Rate Cut Hopes

20/06/2019 14:43:26 Commodities
Gold prices surged to more than a five-year high on Thursday after the Federal Reserve opened the door to interest rate cuts later in the year and the dollar dropped to a three-month low.Spot gold rose $20.89, or 1.5%, to $1,381.28 by 10:27 AM ET (14:27 GMT), after hitting an intraday high of $1,393.27, its most expensive level since September 2013.Gold futures for August delivery on the Comex division of the New York Mercantile Exchange, jumped $36.15, or 2.7%, at $1,384.95 a troy ounce. Their intraday high of $1,395.35 is the highest level since March 2018.“The driver for the surge is obviously the Fed delivering the dovish tilt that the market was looking for,” Ole Hanson, head of commodities at Saxo Bank, said.The U.S. central bank dropped a reference to being “patient” on interest rates and also forecast a larger miss of its 2% inflation target this year, prompting fed funds futures to raise the odds of a hike in July to 100% and place the probability of two additional cuts by the end of the year above 60%.Not only does non-yielding gold benefit from lower rates, but the Fed’s dovish stance pressured the dollar to three-month lows, raising the appeal of the dollar-denominated metal for holders of foreign currencies.Adding to gold’s surge, Mark O’Byrne, founder of Gold Investments, said that short covering was a primary factor in the rise.“Large hedge funds globally are going long gold due to increasing worries about the U.S. and global economy,” he added.In other metals trading, silver futures surged 2.6% at $15.352 a troy ounce by 10:40 AM ET (14:40 GMT).Palladium futures traded down 1.3% at $1,472.75 an ounce, while sister metal platinum rose 0.6% at $810.55.In base metals, copper gained 1.2% to $2.713 a pound.-- Reuters contributed to this report.