Gold price finds small boost on weaker dollar ahead of Fed minutes

November 22, 2017

New York (Nov 22)  Gold prices rose Wednesday with some help from a weaker dollar ahead of the latest peek into Federal Reserve thinking on upcoming interest-rate policy.

December gold GCZ7, +0.15% gained $1.50, or 0.1%, to $1,283.10 an ounce. That builds on a mild Tuesday gain after the metal suffered a loss of 1.6% Monday. The exchange-traded SPDR Gold Trust GLD, +0.16%  edged up by 0.4% premarket.

The ICE U.S. Dollar Index DXY, -0.09%  was down 0.1%. It’s down month to date and has shed over 8% so far this year. Gold and the dollar typically trade inversely as moves in the U.S. unit can influence the attractiveness of commodities to holders of other currencies.

“Gold has now spent the past two months stabilizing in a range around $1280/oz following its September selloff,” said Ole Hansen, head of commodity strategy at Saxo Bank. “During this time, support has remained firm despite several high-volume selloff attempts. The sideways trading has also coincided with calm and range-bound trading of the dollar.”

Minutes from the most recent Federal Open Market Committee meeting will be released at 2 p.m. Eastern time after gold futures settle for the session on Wednesday and before U.S. markets break Thursday for the Thanksgiving holiday.

The minutes are widely expected to show the Fed is poised to raise its benchmark short-term interest rate to a range of 1.25% to 1.5% at its Dec. 12-13 meeting. But there are doubts about what could come after that, and those doubts appear to be flattening the Treasury yield curve—which is at its lowest in a decade—and weighing on the dollar, to the benefit of gold.

Ahead of the Fed release, reports on weekly jobless claims and October durable-goods orders are slated to hit at 8:30 a.m. Eastern, with economists polled by MarketWatch forecasting 240,000 claims and 0.5% growth in orders for big-ticket items. A November figure for a consumer-sentiment index is expected to arrive at 10 a.m. Eastern, and a reading of 98.0 is anticipated.

See: MarketWatch’s Economic Calendar

The Fed remains challenged by conflicting signals, especially on inflation. In a speech Tuesday night, outgoing Chairwoman Janet Yellen said one of the “biggest challenges” to the central bank remained inflation staying below its 2% target. Inflation has remained stubbornly low even as slack in the labor market appears to have been much diminished.

Meanwhile, total holdings in exchange-traded products backed by gold, meanwhile, are steady close to a one-year high, Hansen noted.

“This move highlights one of the reasons why gold has proven to be quite resilient this year despite better performances being achieved in stocks and some bond markets,” Hansen said. “The combination of record stock markets, the risk of the bond bubble bursting and geopolitical risk indicators which have increased since Trump took office, means that investors continue to seek diversification and tail-end risk hedging.”

December silver SIZ7, +0.00% lagged the gain for gold. The white metal was down about a penny, or 0.1%, to $16.95 an ounce. The exchange-traded iShares Silver Trust SLV, +0.19%  was little changed.

December copper HGZ7, -0.16%  slipped less than 0.1% to $3.1275 a pound, while January platinum PLF8, +0.01%  stuck near $938 an ounce and December palladium PAZ7, -0.11%  rose about 0.02% to $996.65 an ounce.


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