Gold prices advance after hitting 9-month low as dollar declines
London (Nov 28) Gold futures sprang higher Monday, with a pullback in the U.S. dollar helping the precious metal regain strength after hitting its lowest since February.
Gold futures for December delivery GCZ6, +0.76% rose $14.50, or 1.2%, to $1,192.80 an ounce.That follows Friday’s session when the lead contract fell 0.9% to $1,179 an ounce. Prices last week lost roughly 2%.
Gold prices on Monday “are attempting a recovery after touching a nine-month low in Friday’s trade. The move is accompanied by a parallel decline in the U.S. dollar and U.S. front-end yields as implied in 2-year Treasury futures,” said Ilya Spivak, senior currency strategist at DailyFX, in a blog post Monday.
“This hints at moderation in the Fed rate hike outlook as the catalyst behind the returning appeal of anti-fiat and non-interest-bearing assets, including the yellow metal,” he said.
The ICE U.S. Dollar Index DXY, +0.11% , a measure of the dollar against six rivals, was down 0.4% at 101.08 on Monday. The buck’s strength can cut into dollar-denominated prices for gold and other commodities. As well, higher interest rates are typically negative for gold and other metals as they don’t pay interest.
The dollar index has recently been on a run that’s propelled the gauge to its highest level since April 2003, which, in turn, has hurt gold prices. The greenback’s move has stemmed largely from expectations the Federal Reserve will raise rates at its meeting on Dec. 13-14 and that it will continue raising rates if spending plans by the incoming Trump administration result in inflationary pressure on the U.S. economy.
Gold prices on Monday also benefitted from haven bids as oil prices CLF7, +0.80% LCOF7, +0.78% had fallen sharply before turning slightly higher. Oil is in focus as Saudi Arabian officials signaled they won’t attend a meeting Monday with their Russian counterparts. Oil producers are working behind the scenes before the Organization of the Petroleum Exporting Countries meets Wednesday in Vienna to try to finalize a deal to reduce output.
Read: How an OPEC output deal could catapult U.S. producers back to stardom
But gold’s gain may be short-lived, as “momentum indicators remain negatively configured and there is little to suggest that a recovery will be any more than another opportunity to sell,” said Richard Perry, market analyst at Hantec Markets, in a note.
In other Monday action, December silver SIZ6, +0.97% rose 20 cents, or 1.2%, to $16.67 an ounce. Last week, silver pushed into a bear market.
Read: Silver prices have slumped into a bear market
January platinum PLF7, +0.52% was up $8.70, or 1%, $917.310 an ounce. December palladium PAZ6, +1.04% gained $12.35, to 1.7%, to $753.40 an ounce.
Source: MarketWatch
