Gold price drifts near 2-week high as stocks churn, dollar slips

December 21, 2017

New York (Dec 21)  Gold prices slipped but still churned near a two-week high Thursday, reflecting a pause for stocks and the dollar as markets looked past a new U.S. tax bill.

Financial markets around the globe largely put up a muted response on Thursday to the passage a day earlier of U.S. tax cuts with potential benefits to company bottom lines. The long-anticipated tax change was mostly priced in.

A flurry of economic data lies ahead Thursday, including revised GDP figures, jobless claims and regional growth snapshots, all are reports that could fill in some forecasting gaps as markets look ahead to an expected string of gold-negative interest-rate hikes next year.

Ahead of the data, February gold GCG8, -0.17% the most active contract on Comex, fell $1, or less than 0.1%, to $1,268.70 an ounce. Breaking with futures, the SPDR Gold Trust GLD, -0.12%  was up modestly premarket after hitting its lowest level since early September earlier this week. The VanEck Vectors Gold Miners ETF GDX, +1.40%  was flat.

The ICE Dollar Index DXY, +0.16%  slipped earlier but had clawed back with a less than 0.1% gain to 93.40. News that the Bank of Japan had left its expansionary monetary policy unchanged supported the U.S. currency versus the yen, however, kept the dollar index in a narrow range. Gold, which is priced in dollars, is highly sensitive to moves in its exchange rate. The yield on the 10-year U.S. Treasury note TMUBMUSD10Y, -0.65% meanwhile, slipped just below 2.49%. Yields had hit their highest in nine months, boosted by expectations the U.S. tax overhaul could accelerate economic growth. Rising bond yields tend to lift the dollar and dull the attraction of non-yielding bullion.

Gold ended with a modest gain Wednesday, notching its fifth daily rise in six sessions, with the dollar softening as lawmakers approved a sweeping tax overhaul. The House on Wednesday passed the Republican-backed tax bill, sending the legislation to President Donald Trump for his signature and marking his administration’s first major legislative victory.

Tax changes offer a mixed bag for the metal. Some analysts have noted the increased risk of inflation, against which gold can act like a hedge, if the law supercharges the economy and forces the Fed to ramp up its rate-tightening efforts. On the other hand, tax-fueled gains in U.S. stocks and other risk-on markets had helped to drive gold to five-month lows earlier this month.

Gold has been on the rise since putting in its settlement low of the month on Dec. 12 at $1,241.70. Gold futures are up some 10% for the year, a gain largely accumulated by the precious metal’s surge in the early months. In fact, data show that prices have been confined to their narrowest trading range of any quarter in a decade in the last three months of 2017. Indeed, gold is still more than 7% off its intraday high for 2017 above $1,360 set in early September.


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