Gold price rises higher as traders tiptoe back to safe-haven asset

November 6, 2017

London (Nov 6)  Gold edged back above $1,270/oz on Monday as a steadier tone to the dollar and a drop in bond yields tempted some buyers back to the metal after its third consecutive weekly decline.

Prices remained under pressure from the expectation that the Federal Reserve is on track to lift US interest rates for a third time this year next month.

Spot gold was up 0.1% at $1,271.32/oz at 10.30am GMT, while US gold futures for December delivery were up $2.60/oz at $1,271,80.

The dollar steadied on Monday after its biggest weekly rise this year, while Germany’s benchmark bond yield hit a near two-month low as investors awaited clues on the European Central Bank’s (ECB’s) asset purchase plans. US 10-year yields also hit their weakest in two weeks.

Gold was therefore set for another uneventful day, despite surrounding event risk linked to US President Donald Trump’s visit to Asia, Saxo Bank’s head of commodity research Ole Hansen said.

"Gold remains stuck in a $1,263/oz-$1,282/oz range, with lower bond yields being offset by a stronger dollar," he said.

"With Trump in Asia we could see North Korea talk heat up at any point," he added. "The Japanese yen was particularly weak overnight before consolidating and that is probably the key right now, given the supportive turnaround seen in bonds during the past week."

Gold has drifted lower over recent weeks, pulling back 2.5% from its mid-October peak as the expectation for a Fed interest rate increase were shored up by upbeat US data.

Gold is highly sensitive to rising US rates, as these increase the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.

Holdings of the world’s largest gold-backed exchange-traded fund (ETF), SPDR Gold Shares, declined by just more than five tonnes last week, data from the fund showed, after a 0.3-tonne outflow on Friday.

Hedge funds and money managers reduced their net long position in Comex gold contracts for the seventh consecutive week, in the week to October 31, US Commodity Futures Trading Commission (CFTC) data showed on Friday.

"Speculative financial investors are still withdrawing from gold," Commerzbank said on Monday. "Net long positions decreased by a further 2,400 to 166,000 contracts in the week to Oct. 31."

Among other precious metals, silver was 0.5% higher at $16.88/oz.

Platinum was up 0.5% at $922.80 and palladium was up 0.5% at $1,001.60/oz.


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