Spot Gold Flat Near 18-Month Low | August 2, 2018
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Spot Gold Flat Near 18-Month Low

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Spot Gold Flat Near 18-Month Low

Even as the precious metals inched a bit higher this morning, gold languished close to an 18-month low.

Spot gold was just above unchanged at $1,216.50 an ounce.

The metals lost some ground yesterday after the Fed revised its outlook for the U.S. economy to "strong."

The silver price gained 0.2% to trade near $15.40/oz.

Palladium was up 0.4% to $917/oz. Meanwhile, platinum surged almost 2.0% (+$16) to move above $830/oz for the first time in more than a week.

Bank of England Hikes Rates

Yesterday's statement by the FOMC simultaneously held some appeal for both doves and hawks. The central bank offered a more optimistic forecast for economic growth, raising the likelihood of future interest-rate hikes, but still left rates unchanged at its August meeting.

After estimates of second-quarter GDP growth came in above 4.0%, the early indications for U.S. GDP in the third quarter are around a blistering 5.0%.

The Fed wasn't the only central bank in the spotlight this week. The Bank of England unanimously chose to increase its target interest rate by 25 basis points to 0.75%. It's only the second time the BOE has raised rates in the past decade.

Nonetheless, the British pound didn't budge against the USD. Sterling was off 0.5% against the dollar to $1.305.

Uncertainty still dominates the outlook for the U.K. With the deadline for Brexit to commence less than eight months out, there is a distinct possibility of a disorderly "no-deal" breakup between Britain and Europe.

There was a sea of red across European bourses this morning. The DAX index in Germany sank 1.6%, ranking among the worst performers in the eurozone.

Tariffs Going Up?

In what has become an almost daily occurrence over the past five months, trade war fears once again gripped investors' attention. The Trump administration announced plans to increase tariffs to 25% on $200 billion of Chinese goods.

Negotiations between trade officials from the U.S. and China are expected to resume shortly—even as both sides increase the pressure in the dispute. Various Chinese officials have reiterated Beijing's willingness to meet each escalation in tariffs with retaliation measures of its own.

Some keen analysts have also noted that purposely devaluing the yuan may be one of China's tactics in mitigating the effects of U.S. tariffs. The yuan has shown an uncanny positive correlation to the gold price this year, which has led to speculation that the country is using its large presence in the global gold market to influence (i.e. manipulate) foreign exchange rates.

However, Secretary of Commerce Wilbur Ross has characterized the possible increase in tariffs as "not cataclysmic," as some analysts have been suggesting.

Foreign Currencies Slip

The dollar posted gains against most other currencies in forex trading, lifting the dollar index by 0.3% to 94.9.

This caused the euro and yen to each fall by 0.3%. The Turkish lira also hit a new all-time low.

Bitcoin fell modestly in early trading after recovering back above $8,000 again earlier this week.

Ahead of the reimposition of sanctions against Iran, demand for gold in the country has jumped to a four-year high.

Treasurys saw a slight uptick in demand. The 10-year T-note yield dipped back below 3% at 2.985%. Government bonds were down elsewhere.

Wall St traded down as much as 0.75% when markets opened. U.S. stocks ended mixed Wednesday. Chemical company DowDuPont was the only gainer on the eponymous 30-share index this morning thanks to better-than-expected earnings.

Asian equities were down big overnight, erasing $220 billion in market cap across the region. The two main indices in Tokyo, the Nikkei 225 and Topix, each lost 1.0% while the Shanghai Composite and Hang Seng (Hong Kong) both tumbled 2.2%.

The crude oil market staunched its recent bout of bleeding: Brent crude dipped 12¢ (-0.2%) to about $72.25/bbl and WTI crude shed 20¢ (-0.3%) to $67.45/bbl.

Like gold, copper continues to slump near its lowest in roughly a year. The bellwether industrial metal traded at just $2.72 per pound.

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

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