Gold Prices Are Glittering as Fed Talks Interest Rate Cuts
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What is the main topic discussed in this episode?
Here's your Money Briefing. I'm J.R. Whalen at The Wall Street Journal in New York. The likelihood of the Federal Reserve lowering interest rates is pushing up the price of gold. Way up. But that rally is not extending to all precious commodities. We'll check in with a journal reporter in a moment to explain. First, these money and market stories you should know. The Labor Department's annual Time Use Survey reveals that working women put in about 7 hours and 20 minutes during the average workday last year.
Why are gold prices surging to six-year highs as the Fed mulls rate cuts?
That's the most time spent on the job since the survey began in 2003. Men spend slightly less than 8 hours a day on the job. And the gap between the average workday for women and men has fallen to its smallest on record. Also, working women who care for a child spent on average two hours a day doing that in 2018. That's an increase of about 15 minutes from the year before. Meanwhile, employed men with children spent less than an hour and a half. on child care on an average day, down from 2017. But overall, the share of workers who take care of children dropped to 22.2% in 2018, down from nearly 25% back in 2003. And that's mainly due to the decline in fertility in the U.S. And if you found a wallet with money in it, would you return it?
Turns out people who found wallets returned them more often when they had a small sum of money, than if the wallets didn't have any money at all. The journal Science published a study by a group of international researchers who wanted to test the tension between financial self-interest and honesty of people around the world.
What quick money and labor headlines set the scene for the gold story?
They found that people on average returned 40% of wallets with no money in them, but 51% of wallets with some money. These weren't random wallets.
How did the Labor Department's Time Use Survey reveal changing work patterns for men and women?
Research assistants pretending to be tourists dropped off the wallets at the front desks of banks, theaters, museums, post offices, hotels, and public offices. The wallets had ID in them and a grocery list to look like they belonged to local residents. In some cases, they also had cash. The most money any wallet contained was about $90. And 72% of those wallets were returned. That's a much higher return rate than for wallets with no cash at all. In only two countries was a higher number of wallets with no cash returned. That happened in Peru and Mexico.
All the talk of a possible interest rate cut by the Federal Reserve has sent gold prices soaring. In fact, when word came from Fed Chairman Jerome Powell that a rate cut is on the table as an option for the balance of 2019, the price of gold hit a level not seen in about six years. Let's bring in Wall Street Journal reporter Joe Wallace for more on this. So, Joe, an assortment of metals in addition to gold are seeing prices jump as a result of the interest rate talk.
Yeah, so gold is up 3% today. That's its biggest move since October last year. As you say, it's trading near a six-year high at about $1,390 an ounce. And it's not just gold, as you say. Copper is up 1.3% in London. Nickel is up 1.5%. The Federal Reserve has really unleashed this with its talk of a possible interest rate cut last night.
Now, while the gold-related stocks and gold ETFs have risen, I guess industrial metals are not seeing the same boost in price.
Yes, you're quite right. I mean, I think that's partly because gold is more of a kind of purely financial asset, whereas industrial metals are also, while they are bought by investors, they're also bought and sold a lot by actual construction companies and people who use them in business. And that means that, firstly, they don't react quite as much to central bank talk. And secondly, it means that there are all sorts of other headwinds for the sector right now, primarily arising from the U.S. China trade tensions and concerns about growth in China and the world economy.
And just to dive into the mechanics of gold a bit, the lower interest rates make gold a more attractive asset. It also causes many investors to turn away from assets like government bonds.
Yes. So it's no coincidence that this rally is taking part as the Fed is talking about lowering interest rates for the first time since the financial crisis.
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Chapters
5 chapters
1
What is the main topic discussed in this episode?
0:05–0:33
2
Why are gold prices surging to six-year highs as the Fed mulls rate cuts?
0:33–1:42
3
What quick money and labor headlines set the scene for the gold story?
1:42–1:51
4
How did the Labor Department's Time Use Survey reveal changing work patterns for men and women?
1:51–6:48
5
What did the wallet-return study reveal about honesty and cash incentives worldwide?
6:48–6:53
Speakers
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