Gold price pushes above $1,300 as dollar wavers in Harvey’s wake
London (Aug 28) Gold futures pushed above the closely watched $1,300-an-ounce line in Monday trading as the still unfolding devastation—including the economic toll—from Hurricane Harvey pressured the dollar and stocks.
Gold for December delivery GCZ7, +0.47% rose $4.80, or 0.4%, to $1,302.70 an ounce. The contract settled Friday at $1,297.90 an ounce, the highest settlement for a most-active contract since June 5, according to FactSet data.
The greenback, as measured by the ICE U.S. Dollar Index DXY, +0.15% , traded in mixed fashion but remained near its weakest level of 2017. U.S. stock futures eased, with energy shares set for scrutiny as Harvey hits refineries.
The moves for gold and the greenback—which often trade inversely as changes in the U.S. unit‘s value can influence the attractiveness of gold to holders of other currencies—came on the heels of a speech by Federal Reserve Chairwoman Janet Yellen last week devoid of clues on the central bank’s near-term monetary policy intentions. Markets continue to put some odds on the chance for another rate hike yet this year but have pared back more aggressive policy expectations priced in earlier this year.
European Central Bank head Mario Draghi also showed restraint, and because he opted not to talk down the euro, it rose to a near 2 1/2-year high.
“Now that we know where both the Fed (dovish) and the ECB stands (tapering on the horizon), gold traders are going to focus on the momentum, which would primarily be driven by the dollar weakness,” said Naeem Aslam, chief market analyst with ThinkMarkets.
Nonfarm payrolls data, due for release on Friday, likely remain the key indicator for the gold market, he said, “although the geopolitics are very much playing in the background. In fact, traders aren’t going to let the recent missile test by North Korea (over the weekend) go unnoticed [and] it would provide more tail wind for the gold price.”
Gold is sensitive to rising U.S. interest rates, which increase the opportunity cost of holding nonyielding bullion. Higher rates could also boost the dollar. Trade data is the sole major economic release on Monday’s calendar.
Aslam said he looks for gold’s price to not only break the 1300 line, but stay above it.
MarketWatch
