The Daily Market Report: Gold Marches Higher on Safe-Haven Bid, Diminished Rate Hike Expectations

20-Aug (USAGOLD) — Gold extended to the upside on a strong safe-haven bid, after another volatile day in Chinese markets and further erosion of U.S. rate hike expectations. The yellow metal hit a 5-week high of 1151.78 in early New York trading.

The Shanghai Composite plunged another 3.4% today, which weighed on equities across Asia, Europe and now in the U.S. as well. The DJIA was down around 200 points, setting a 6-month low at 17,101. Capital coming out of the stock market is seeking safety in a risk-off environment. Some of that capital is finding its way back to the ultimate safe-haven; gold.

Yesterday’s release of the July FOMC minutes revealed a more dovish than expected Fed, seemingly not prepared to hike rates next month.

That was obviously true in July. It remains true today. It will arguably remain true when the FOMC next meets on September 16-17. While the Fed did not take a Sep rate hike off the table, the realities of the data and the tenor of the minutes suggests that there won’t be any tightening.

The unwinding of rate hike expectations is weighing on the dollar. The dollar index has fallen to a 6-week low on the premise that U.S. rates won’t be moving off the zero-bound next week after all and interest rate differentials will be maintaining the status quo for some time longer.