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Gold’s rally gets booster shot as Trump picks doves for the Fed

Gold shines in its biggest one-day gain in three years.

Gold held its rally above $1 400 an ounce on a cocktail of positive drivers, with Treasury yields hitting a two-year low and the US president seeking to reshape the Federal Reserve board with two picks seen as doves.

Bullion steadied after its biggest one-day gain in three years ahead of a US holiday Thursday, as investors weighed a run of poor economic data from Asia and Europe, which fed expectations for fresh easing from central banks. Holdings in gold-backed exchange-traded funds slipped to snap 14 days of gains Tuesday, but are still near the highest since 2013.

Read: Gold resumes trek higher as weak economic data point to stimulus

“The longer-term picture looks positive for gold,” Georgette Boele, coordinator of FX and precious metals strategy at ABN Amro Bank, told Bloomberg Television. Still, she suggested prices are probably overshooting at the moment. “The market has been too aggressive pricing in rate cuts” both from the Fed and other central banks, she said.

Gold is trading near a six-year high as simmering geopolitical and trade tensions boost demand for havens. Adding momentum to the upswing were the nominees to the Fed’s board who are expected to support Donald Trump’s call for lower interest rates.

Trump is “trying to shift the balance on the FOMC to super dove,” said Stephen Innes at Vanguard Markets, referring to the rate-setting Federal Open Market Committee. Both picks require Senate confirmation.

Spot gold climbed as much as 1.4% in early trading before paring gains to $1 419.54 by 12:51 pm in London. Prices surged 2.5% on Tuesday, the most since June 2016. A gauge of the dollar held Tuesday’s losses, while Treasury yields sank to the lowest since November 2016.

Investors will be watching data for US private hiring, factory orders and the services sector later on Wednesday, as well as jobs data on Friday, for more clues on Fed’s moves this month.

Gold prices trading above $1 400 again suggest that demand remains strong, said Howie Lee, an economist at Oversea-Chinese Banking Corp. in Singapore. “It’s a rollback to the yesteryears of loose monetary policies, which whetted the appetite of gold bulls consistently.”

Other precious metals were mixed, with silver and palladium seeing losses while platinum gained.

© 2019 Bloomberg L.P.
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