Gold price posts modest gain as stocks and dollar fall
San Francisco (Dec 8) Gold futures settled with a gain on Tuesday, as declines in global equities and a weaker dollar offered haven-related support for the metal.
But the climb was modest, as a recent drop in oil prices to a nearly seven-year low dulled the metal’s appeal as an inflation hedge.
February gold tacked on a dime to settle at $1,075.30 an ounce, after closing 0.8% lower Monday.
Gold’s latest moves came as the dollar weakened and U.S. stocks were sharply lower in what is part of a global selloff. That eventually provide a modest haven-related boost to gold.
“Gold is trading in $1,060-$1,080 range,” said Chintan Karnani, chief market analyst at Insignia Consultants. “Big moves in gold will be there only if gold breaks either of these prices.”
But, “momentum is still bearish for gold,” he said. “There are sellers on every rise.”
Gold prices have been volatile in the run up to the U.S. Federal Reserve’s two-day meeting which concludes on Dec. 16. Markets are pricing in an 83% probability that the central bank will lift interest rates at that meeting, according to CME Group’s FedWatch Tool.
Higher rates lower the opportunity costs of holding gold because the metal provides no yield, and entices investors to rotate into riskier assets like stocks. Higher rates may also boost the value of the dollar which usually trades in the opposite direction of gold prices.
Meanwhile, oil prices have traded at their lowest levels since February 2009 in the wake of a decision by key oil producers to keep oil output high, despite a plunge of around 30% year to date for West Texas Intermediate crude
“Lower crude oil prices can be a big drag on gold prices…as it reduces inflation-related” hedging of gold, said Karnani.
And while China has been a big buyer of gold this year, “there are concerns that there can be a slowdown in Chinese gold and silver demand in the first quarter of next year,” he said.
Early Tuesday, gold moved firmly lower as China’s exports fell in November for the fifth consecutive month, although imports at the world’s second-largest economy proved better than expected.
Among other metals, March copper tacked on less than half a cent to $2.054 a pound, but March silver ended 21.6 cents, or 1.5%, lower at $14.116 an ounce, after shedding 1.4% Monday. January platinum fell $16.70, or 1.9%, to $846.50 an ounce and March palladium settled at $547.90 an ounce, down $7.55, or 1.4%.