Gold price rises for third day ahead of US inflation data

November 15, 2017

London (Nov 15)  Gold prices rose on Wednesday for a third day, helped by a weaker dollar and falling US bond yields ahead of inflation data later that could influence how quickly the Federal Reserve will raise interest rates.

The outlook for US tax cuts that could stimulate economic growth was also clouded after US Senate Republicans created new political obstacles, by linking the repeal of a key component of Obamacare to the tax reform plans.

"The biggest factor right now shoring up gold is the weaker dollar," said Robin Bhar, head of metals research at Societe Generale. "Also there’s speculation that tax cuts could be a long time coming, meaning the Fed will not have to be as aggressive as it might have been."

A weaker dollar makes gold cheaper for holders of other currencies, which can stimulate demand, while lower bond yields make gold more attractive by reducing the opportunity cost of owning nonyielding bullion.

Higher interest rates, meanwhile, push bond yields higher and tend to boost the dollar. Spot gold was up 0.4% at $1,285.62 an ounce at 11.13am GMT, taking gains this week to 0.7%. US gold futures for December delivery were 0.2% higher at $1,285.80.

ANZ analyst Daniel Hynes said investors needed a trigger to break gold from a range of between $1,265 and $1,290, in which it has traded since mid-October. The market was looking ahead to US consumer price inflation after data on Tuesday showed producer prices rose more than expected in October.

"This could dictate sentiment leading into the next Fed meeting [in December]," Hynes said. St Louis Fed president James Bullard said on Tuesday that the Fed should keep its benchmark interest rate at current levels until there was an upswing in inflation.

Raphael Bostic, one of the newest Fed policy makers, said he backed a December rate rise and would need to see further weakness in inflation and local signs of economic weakness to shelve expectations of gradual policy tightening.

On the technical side, resistance was at the 50-day moving average at about $1,292 and a Fibonacci level at $1,297.70, said analysts at ScotiaMocatta.

In other precious metals, silver was up 0.7% at $17.13 an ounce. Platinum was 0.3% higher at $928.50 and palladium was down 1% at $975.50 an ounce after touching a two-week low of $974.25.


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