Gold Price Dips on Day, but up 1%+ for the Week on Fed Hike Worries

December 22, 2018

New York (Dec 22)  Gold fell on Friday, taking a breather after capitalizing on the Fed worrying the stock market earlier in the week. But a second week of gains in three and the potential of more economic troubles ahead is inspiring gold bugs to target the $1,300 level last seen in June.

"Speculators have accumulated some additional long positions and the holders of short positions have started to head for the exits as the market picks up some steam," Walter Pehowich, executive vice president at Dillon Gage Metals and a regular commentator on precious metals, said in an outlook published on Friday.

"I believe the price of gold will continue to head higher. But I expect it to trade in a two step forward and one step back process."

Benchmark COMEXgold futures for February settled down $9.80, or 0.7%, at $1,258.10 per troy ounce, after hitting a six-month high of $1,270.20 in the previous session. For the week it rose 1.4% after a 2% gain two weeks earlier.

The Federal Reserve raised rates as expected by a quarter point at its December meeting Wednesday. But it also sent out confusing signals to the market by lowering its economic forecast for 2019 while hinting it would continue raising rates, only at a slower pace. Most Fed governors said they anticipated only two rate hikes next year, versus previous expectations for three.

But fed funds futures after the rate hike showed traders adding to bets that the central bank will hold on further increases from January. Increasingly, many economists are also talking about the prospects of a global recession. All these could potentially weaken the dollar, adding to gold's allure.

The dollar index, measured against a basket of currencies, was up 0.8% at 96.52 on Friday. But a day earlier, it hit a two-month low of 95.63, reacting to the speculation of the Fed not raising rates further in 2019.

In the trade of other precious metals on COMEX, silver fell 1.2% to $14.69 per ounce.

Palladium lost 2.8% to $1,159.10 per ounce, while sister metal platinum shed 0.9% to $789.

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