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Gold Bulls Look Beyond the Fed as Global Risks Proliferate

(Bloomberg) -- Gold bulls are betting there’s more to the metal’s rally than rates.

Bullion is on its way to a third straight monthly gain, trading near a six-year high as central banks signal easier monetary policy. The Federal Reserve is expected to cut U.S. interest rates by a quarter percentage point on Wednesday. Gold analysts and traders are looking for affirmation from Fed Chairman Jerome Powell that further reductions are in store to justify the run-up, with some saying the precious metal may have gotten ahead of itself.

“The market can easily pull back in the wake of a cut without the overall gold rally being altered, and that’s quite likely,” said James Steel, chief precious metals analyst at HSBC Securities (USA) Inc. “Trade issues are probably still going to be supportive. The general geopolitical background is supportive, and we could see some financial market volatility, which would likely be helpful for gold” on safe-haven buying.

With gold futures trading little changed near $1,443 an ounce hours ahead of the Fed’s decision, the following charts show the broader bullish case for owning bullion:

Haven Demand

Gold is benefiting as signs of slowing economies fuel demand for the metal as a haven asset. There are indications that things could get worse before they get better for global growth. The International Monetary Fund further reduced its outlook, already the lowest since the financial crisis, saying the projected pickup in 2020 is “precarious.” Singapore may underscore the IMF’s case, with economic data deteriorating in the export-reliant country, raising the risk of a recession in the former tiger economy.

A Fed Bank of New York gauge puts the risk of a U.S. recession in the next 12 months at the highest since 2008, and Societe...

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