Gold price falls from three-month high as dollar regains some footing

London (Jan 8)  Gold dipped on Monday, retreating from last week’s three-and-a-half month high, as the dollar clawed back some ground against the buoyant euro and traders bet on further US rate hikes in 2018 after Friday’s jobs data.

Dollar weakness, which continued into early January after it posted its biggest drop since 2003 in 2017, had helped lift assets priced in the US currency, with gold posting a fourth straight weekly rise last week for the first time since April. Spot gold was down 0.1% at $1,318.31 an ounce at 10.35am GMT, while US gold futures for February delivery were down $2.70 an ounce at $1,319.60.

"From my point of view this is just a correction, with the market back in full swing today," said Afshin Nabavi, head of trading at MKS. "I think it would be healthy to see a further correction before testing $1,325. If market participants maintain their high risk appetite and if, for example, stock markets continue to soar, we could see profit-taking.”

 

- Commerzbank

"The US dollar is a touch firmer and the euro slightly lower," he added, saying he expected trading to be rangebound between $1,305 an $1,325. The dollar rose 0.3% against the euro in early trade.

After mixed US payrolls data on Friday, traders of US short-term interest-rate futures continued to bet the Fed would lift rates twice in 2018, including a probable hike in March.

San Francisco Fed president John Williams said on Saturday that the Fed should raise rates three times in 2018 given that the already strong economy would get a boost from tax cuts, and could tighten more or less aggressively if needed.

Gold is highly sensitive to rising US interest rates, as these increase the opportunity cost of holding nonyielding bullion, while boosting the dollar, in which it is priced. Meanwhile US Commodity Futures Trading Commission (CFTC) data showed on Friday that hedge funds and money managers raised their net long positions in Comex gold in the week to January 2.

"In the three weeks to January 2, speculative financial investors nearly doubled their net long positions to 148,200 contracts," Commerzbank said in a note.

"This also means that correction potential has built up again," it added. "If market participants maintain their high risk appetite and if, for example, stock markets continue to soar, we could see profit-taking."

Among other precious metals, silver was 0.2% lower to $17.17 an ounce, after having hit a one-and-a-half-month high on Friday at $17.29. Platinum was down 0.1% to $968.20 an ounce, after hitting a more than three-and-a-half-month peak at $970.50 earlier in the session. Palladium was 0.5% higher at $1,095.10 an ounce, off last week’s record high of $1,105.70.

Reuters

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