Gold price eases from multimonth high as focus turns to U.S. presidential debate

London (Sept 26)  Gold prices churned between narrow gains and losses early Monday, tracking a weaker dollar and lower stocks, as financial markets braced for volatility that could be stirred by the evening debate between Democratic presidential candidate Hillary Clinton and her Republican rival Donald Trump.

Gold was also choppy as investors reassessed last week’s move, a jump to two-month highs on a boost from central-bank policy updates, including the Federal Reserve’s decision to hold off on hiking interest rates in September.

December gold GCZ6, -0.09%   slipped $1, or 0.1%, to $1,340.70 on ounce. Gold settled at $1,341.70 Friday, cutting its weekly advance down to 2.4%. That was still the biggest weekly gain since the week ended July 29, according to FactSet data.

Gold and the dollar typically move inversely, but both slogged in and out of negative territory. Gold’s decline was kept in check as some hedging demand emerged while Wall Street flashed red early Monday amid nerves pinned the presidential debate.

Citi, which early last week raised its expectations for Trump to win the presidency, said in its fourth-quarter commodities update released Monday that uncertainty around the U.S. elections, along with the possibility of Fed interest-rate increase in December, will spell volatility for both foreign exchange and gold markets.

Citi said spot gold could trade sideways between $1,300 and $1,350 an ounce until the Fed decision in December, but prices could crest above year-to-date peaks in a “knee-jerk move” if Trump wins the U.S. election.

 And: The debate is just one of many sparks that could make for explosive markets this week

The ICE U.S. Dollar Index DXY, -0.12%  fell 0.1% to 95.35. The dollar’s drop was particularly strong against the yen, a currency that tends to draw demand in a risk-averse climate.

Silver for December delivery SIZ6, -1.49%   lost 31 cents, or 1.5%, to $19.51 an ounce, after posting a weekly gain of 5%. December copper HGZ6, -0.75%   eased 1 cent to $2.19 a pound; it was up about 1.9% last week.

The exchanged-traded, silver-focused iShares Silver Trust SLV, -1.16%   lost 1.2% premarket, while the SPDR Gold Trust GLD, +0.06%  fell 0.2%, and the VanEck Vectors Gold Miners ETF GDX, -2.60%   eased 0.8%.

Overall, gold has benefited from sluggishness in the global economy that has driven the Bank of Japan to adopt radical tactics to help boost stubbornly low inflation and boost economic growth. That environment and the Fed’s support of a take-it-slow approach to raising benchmark U.S. interest rates have combined to weaken the dollar and lift commodities priced in the currency, like precious metals.

“Selling pressure may re-emerge [in gold] this week as a steady stream of commentary from Fed officials bolsters reinforces a hawkish posture from [Chairwoman Janet] Yellen, who all but promised tightening in December,” said Ilya Spivak, currency strategist with Daily FX.

Source: MarketWatch